JAMBO TELECOM SEEKS TO FIND THE BUSINESS SHAPE OF TOMORROW

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Launched 3 November 2005, Jambo Telecom is the new Telkom Kenya subsidiary responsible for end-user Internet and value-added services. It sells Telkom Kenya’s dial-in access service. The user can call one national access code (9444) and simply enter the user name Jambo and the password Jambo and get connected to the Internet for the price of the call.

Jambo Telecom estimates that there are 60,000 accesses made every month and that probably represents about 30,000 regular users. It has set 20,000 dial-up ports to handle demand and it is currently doing about 3 million minutes a month. The service has been designed on a revenue share basis but as Andrew Mugambi, Manager Jambo Telecom told us:”Jambo Telecom is a Telkom Kenya subsidiary and therefore we share revenue with ourselves.” What’s the revenue split?”The agreement has not yet been concluded.”

But whilst it considers this service a success it does not really represent the new face of the business. It has launched a broadband service and is offering a numbering of value-added services for corporates including hosting and IP-based business solutions.

Its DSL broadband service has 3,000 subscribers and it estimates that all other competitors in the market have less than a 1000 subscribers, giving a total of 3,800. Its rates are currently as follows:

128/32K KS5604
256/64K KS16,008
512/128 KS35,914

Again sales are on a revenue-split basis with Jambo Telecom retaining 12% of the retail price. It has DSLAMs in 42 locations: outside of major towns, these are 120 ports but in major towns they have only 64 ports. It can upgrade its capacity fairly quickly but calculates that its basic network will take up to 50,000 users. By contrast with KDN its assessment of market potential is modest, believing that only 10,000 of the current 60,000 Internet subscribers will opt for its broadband service. It has a much more “suck-it-and-see” attitude to growth.

It is currently trialling a videophone from Huawei that will retail for less than $500. It is essentially an IP phone with a small colour screen that enables you to see the person you’re calling and vice-versa. The demonstration with a call internally within Telkom Kenya worked very smoothly. It is an IP phone that will run over a company’s existing LAN infrastructure. It also has a soft-dialer that can work on a PC but has found from internal testing that most people prefer to use the phone directly.

The regulator CCK has given them a numbering range and it can issue numbers to customers. Can it offer free calling like its competitors UUNet and Access Kenya? “Not completely. We’re selling a service over the Telkom Kenya infrastructure. We see ourselves as a value-added reseller”.

It manages the core IP network countrywide with gateways into its parent Telkom Kenya. Corporates can get flat rate charge for all calls “on-net” on this network but will pay Telkom Kenya rates if the calls break out into its parent’s network. It wants to offer a similar arrangement with VPNs but the charges have yet to be decided. It has spent $2 million upgrading the IP infrastructure with routing from Huawei and core servers from Sun.

It’s not currently responsible for Telkom Kenya’s VoIP calling card business. That is being run by its parent off of a TDM IN platform, a hybrid solution but Jambo Telecom will shortly integrate it to its server. As the only legal retail offer in the market, the VoIP calling card is doing a million minutes a month, a quarter of the international minutes total.

Jambo Telecom has a staff of 18 and in Mugambi’s words it “leverages the use of Telkom Kenya staff elsewhere, outsourcing lots of functions to them. For example, through Telkom Kenya, we have sales offices throughout the country.”

Far from being scared of competition, Mugambi is pleased to be in direct competition with the ISPs: ”ISPs used to blame Jambonet. Now we are Jambonet’s biggest customer and you can see whether that’s true or not. They don’t have Jambonet to blame any more”. He describes his ambition as:”We want Jambo Telkom to be a next-generation, multimedia services company”.

Although no-one says it, you can imagine this subsidiary becoming the IP-based replacement for a significant part of the existing Telkom Kenya business. It is almost set up in such a way as to enable a small team to “start-over” and get out into the market and find ways of making money. It may not have the breathtaking strategic reach of KDN’s plans but it has all of the incumbent’s assets to call on.

It would be easy to be cynical about what this subsidiary is doing but you have to applaud them for starting the process of re-inventing the company. That said, they have some pretty daunting steep slopes to climb. 12% of revenues from anything under 10,000 DSL subscribers will not feed a lot of mouths. And despite the continuing preference of Government departments to give business to what they see as one of their own, winning corporate business in the private sector is a much tougher task.

Mugambi points to the need for capital in order to develop this kind of business, something he feels most of the local ISPs lack. However, KDN is already several steps ahead with ADSL2 and its meshed Wi-Fi service, Butterfly. Keeping up with this level of capital spend may prove difficult for Telkom Kenya even if it has removed a considerable number of workers from its books.

However since the subsidiary’s been set up at least 4 prospective purchasers of a minority shareholding have come knocking on Telkom Kenya’s door. So will it sell a minority share? Mugambi diplomatically concludes:”There’s no decision yet.”