[UgaBYTES] Barriers to use of cell phone services

[Cleopa Timon Otieno]

Kenya’s literacy levels and low subscriber spending on mobile phone airtime
are two factors working against the widespread use and adoption of mobile
network’s value-added services (VAS).

A new market research conducted last December by Strategy Analytics titled
Operator Value Added Service (VAS) Offerings and Consumer Needs: Kenya says
various challenges impede the widespread usage of VAS, including mobile
subscribers’ spending, which is relatively low as most of the respondents in
the survey spent less that $8 (about Sh600) on airtime purchases monthly.
The other challenge, notes the study, is that Kenya’s "national literacy
rates do not seem to be increasing above the 80 per cent mark."

This is despite there being considerable interest in a wide range of
value-added services, including TV and video. The study commissioned by
Nokia notes that, "the literacy rate in Kenya has been stagnant over the
last five years at 80 per cent and is affecting the uptake of VAS, SMS and
related services."

Due to this, the researchers recommend that mobile operators target
illiterate members of the population and design services, which are easy for
them to use. It gives the example of the Voice SMS service by Safaricom,
which it says has made it convenient for illiterate people to use SMS
services.

The study, commissioned by Nokia, involved the use of operator financial and
other published data, Government sources, cell phone owner surveys among
other sources of market information.

It further says that the country’s mobile phony industry, whose penetration
currently stands at about 40 per cent, is experimenting with price cuts to
draw in new users.

Penetration levels

However, taxation of mobile services is working against further penetration
as "Kenyan consumers pay relatively high taxes for mobile services, which
makes ownership expensive for them."

It cites figures from the Global Trade Association, which show that East
Africans pay taxes of between 25 per cent and 30 per cent on mobile phone
services, compared with an average of 17 per cent across Africa. Another
interesting finding from the study, derived from the fact that all
respondents were pre-paid subscribers, is that post-paid service is
"virtually unknown in Kenya." According to Strategy Analytics’ Wireless
Network Service estimates, post-paid accounts for only 1.2 per cent of the15
million mobile subscriptions.

"Despite their business orientation, all respondents expressed positive
preference for having various new features, which allow them to place abet
or gamble as well as watch regular TV channels, on their mobile phone," says
the study. But even with the current levels of airtime spent, the revenue
generated from data services is growing dramatically.

Revenue growth

This is because Safaricom, which accounts for more than 80 per cent of
Kenya’s data revenue, has seen data and SMS revenues grow by almost 60 per
cent in the last two years. The total the total number of SMS sent in Kenya
increased from 153 million to 445 million between 2004 and 2007 due to the
increasing use of SMS. The study says the use of SMS, "is typically cheaper
than voice calling."

The report, therefore, forecasts that Kenya’s broadband data services market
is expected to grow "dramatically" between 2006 and 2011.

Initially confined to only SMS and voice mail services, other paid and free
value-added services have since been developed. These include phone ring
tones, conference call services, missed call alert, call waiting, data, high
speed internet services, international voice-over internet protocol and
downloads. Others are mobile TV services.


-- 
Cleopa Timon Otieno
www.ugunja.org , www.kenyatelecentres.org
P.O.Box 330-40606, Ugunja
Cell: +254-720-950-220
skype: timonson1