Safaricom Plans to Acquire More Internet Firms


Safaricom has set in motion plans to acquire more Internet firms as it races to reduce its reliance on the voice market. The firm has seen the bedrock of its business -- voice traffic that accounts for nearly 80 per cent of its revenues -- shaken by price wars, and is now looking at data to maintain profitability.

In the acquisitions, Safaricom seeks to gain access of crucial wireless Internet frequencies at a time when the industry is faced with a shortage. "We are actively scouting for more WiMax frequencies in order to underpin our leadership in this area. Acquisition of existing operators has become a favoured strategy as there have been challenges getting these independently," said Michael Joseph, the CEO of Safaricom.

"When we identify any other acquisition target, we shall disclose as required of us and in a tone and manner befitting our status as a listed company," added Joseph.
The announcement comes days after the firm received regulatory approvals to buy two data operators -- Instaconnect and IGO Wireless, a WiMax operator.

This brings to three the number of WiMax operators under its belt after it acquired One Communication and Packet Stream Data Networks. But Joseph said Safaricom's WiMax frequencies were not adequate to support its wireless internet and data strategy to penetrate the lucrative corporate internet market that has remained in the hands of Telkom Kenya, Access Kenya, and Kenya Data Networks.

Industry regulator Communications Commission of Kenya (CCK) said it had licensed 18 companies to hold WiMax frequencies, including the three that have been acquired by Safaricom. Other firms that posses the bulk of these frequencies are Kenya Data Networks, Wananchi Online, UUNET and AccessKenya. Analysts say that these firms are unlikely to appear on Safaricom's radar.

This means that the company is likely to acquire smaller players who are not using their frequencies to full capacity. Already, the firm has created a new department -- Strategy and New Business Development -- whose brief includes scouring for buyout opportunities, mostly in the data market, which underlines its intention to grow the data business to help cushion the firm against value erosion in the cut-throat voice segment.