There is a rising trend for governments to back shared LTE projects, creating a wholesale network to be shared by a group of cellcos which are also investors. The aim is to accelerate availability of broadband services by reducing cost and risk for individual operators, but one by one, the projects are falling apart amid politics and conflicts of interest. Russia’s once-idealistic shared network plan, based on the Yota 4G build-out, fell apart, and Yota and its infrastructure now belong to Megafon. South African initiatives have been mired in bureaucracy and in-fighting, and in Kenya, the largest mobile operator, Safaricom, has pulled out of a state-backed scheme, putting its future in doubt.
According to the country’s Business Daily, Safaricom will go it alone, claiming the government has taken too long to work out the details of the shareholder agreements and to sign up participants. It is now demanding its own LTE spectrum, having completed its roll-out of fiber, suitable for 4G backhaul, in capital Nairobi.
Although the leading cellco, which is managed and 40%-owned by Vodafone, is likely to have genuine issues with the delays surrounding the project, it has never been really supportive of it. As early as March 2012, only months after the government announced its plan, the company was threatening to withdraw support if the shared network were restricted to 2.6GHz spectrum, rather than including 700MHz too.
This week, CEO Bob Collymore said the consortium LTE plan is no longer a priority because, while it was initiated to speed up 4G deployment, it is now forcing delays on operators which are ready to roll out LTE. He asked the government to devise a plan, quickly, to allocate the spectrum earmarked for the wholesale platform to the cellcos which are ready to pursue 4G.
‘We would like to get that spectrum because we think there is a lot of need for LTE,’ he said in an interview. ‘LTE is not there yet because we need spectrum. We are asking the government to make sure there is an open, equitable and transparent allocation of ‘digital dividend] spectrum. We will increase our share when it is available because we are ready to roll LTE.’
Other operators have also become frustrated by the slow progress of finalizing agreements, since the original ownership structure of the private/public partnership was approved by the Treasury in 2012. Essar Kenya, which operates under the Yu brand and only has 2G networks, had been an enthusiast but now says the delays are too long and it is likely to invest in a 3G roll-out instead.
The operators which were signed up for the scheme last year were leaders Safaricom and Orange plus Airtel, Yu and local broadband providers Liquid Telecoms, Kenya Data Networks and MTN Business Kenya.
The government estimated that each would need to invest KES10bn ($117m) to kick off construction in 2.6GHz, focusing initially on urban and business centers, and that the total cost of the network would be $500m, some of that coming from the state. But it was criticized for not including 700MHz in the first phase, since that is better for coverage and indoor penetration, and is more cost-effective in rural areas.
The regulator, CCK, had argued that immediate surrender of broadcasting frequencies in the 700MHz band would result in disconnection of many Kenyans but now insists switchover will happen on December 13 this year, so the spectrum could be included in the wholesale plan next year. However, Safaricom and others are keen that it should be allocated to them individually.
Without Safaricom, the whole project will be in jeopardy since the firm is one of the few local companies which has the capital to roll out LTE alone, if it can secure spectrum. That outcome would reduce the viability of the wholesale venture, which would also lose a major investor, putting more pressure on public money. Three vendors are involved in the project, as equipment and services suppliers as well as investors ‘ these are Alcatel-Lucent, Nokia and Epesi Technologies.
Safaricom is in a hurry to upgrade its networks as it seeks to steal a march on its rivals in Kenya and move into the quad play market. It aims of start offering bundled internet and on-demand TV services within the next 12 months, said Collymore, and these will be delivered to mobile devices such as handsets and tablets, as well as PCs and TVs.
‘We will provide aggregation of content and delivery of content,’ the CEO said in an interview this week, as he outlined how the operator could move beyond its core voice services and rise above the intense price war in Kenya, which was opened up to increased competition in 2010.
Growth of revenue from Safaricom’s flagship service, its M-Pesa money transfer system, and from text and internet, has outpaced voice revenue for at least three years, though the traditional business still accounted for 60% of sales in 2012.
The carrier ‘s main rivals are Telkom Kenya, jointly owned by the government and France’s Orange, the local subsidiary of India’s Bharti Airtel, and another Indian-owned company, Essar Telecom Kenya. Safaricom has 66% share of the mobile market with 20.1m customers as of the end of June.