[kictanet] When the Internet consumer market bites back...

Tue Mar 23 14:24:04 EAT 2010

I like Andrea's analytical view over AK's 2009 financial results. What some of the listers missed from the report is one division (IT) recorded losses while that of "Internet" recorded profits with the net resulting into losses. Also we must recognise that the company had increased revenue by 32%, so it would appear to me that it could have charged a large protion of its investment costs to the financial year 2009, yet the benefit may accrue for more than one year. Otherwise I share the concern that the internet/data market is getting more and more competitive, competing with the same companies with ownership in fibre optic. 

Cheers,

Akich Kwach 
  ----- Original Message ----- 
  From: Andrea Bohnstedt 
  To: kwach at archway-productions.com 
  Cc: KICTAnet ICT Policy Discussions 
  Sent: Tuesday, March 23, 2010 11:05 AM
  Subject: Re: [kictanet] When the Internet consumer market bites back...

  Aki, those are different things: 

  What is Access going to do? No idea. Ask them. Not my point. 

  I didn't say the article was negative or unimportant. I just disagreed with your 'the customer has spoken' conclusion, as that wasn't the logical conclusion from the article. A 30% drop in profits is not necessarily the result of customers leaving in great numbers because they are dissatisfied. 

  According to the data cited in the article, it is partly the consequence of significant infrastructure investments, and POSSIBLY a decline in corporate customers. That is not clear. Maybe you could fish out the Access Kenya statement and check whether they just had a slowdown in the growth rate of corporate clients, or whether that number, or the turnover in that segment fell? 

  Yes, competition is a good thing, I agree with you on that. 

  On 23 March 2010 10:53, aki <aki275 at googlemail.com> wrote:

    Hi Andrea, I put forward this question.How excatly is AK going to tap into the SOHO market? It cannot do so with a bandwidth price tag of double-bandwidth/same price scheme and it is eyeing a sector that many have already targetted long before the arrival of undersea cables. Most buildings for example in Nairobi are on national fiber, KDN fiber, JTL Fiber, Telkom Fiber as there. All these players have Internet terminations, switches and bandwidth allocations to tenants within those buildings. What excatly is AK going to offer better than these players? = cheaper bandwidth as a start. Do also consider that by towards the end of this year, most annual contracts that Corporate clients have with ISPs will need to be renewed and am sure that many are not happy being bogged down to the double-bandwidth/same price scheme whereas they can buy the same bandwidth at half or quarter of the price.  If AK profits dropped by 30% and it learnt something important from the market, then we have a bonus as end users. I dont think the Business Daily article is negative at all, infact it is an important piece of information. Lets see how things turn out towards the final quarter of this year. I'm sure we will re-visit some of the points listed here. 

    Rgds.

    On Tue, Mar 23, 2010 at 10:18 AM, Andrea Bohnstedt <andrea.bohnstedt at ratio-magazine.com> wrote:

      I'm with Tim on this. I haven't looked at the overall data yet, but according to the BD articles and assuming they cite this correctly, some, by no means all, customers may have spoken: 
      'While AccessKenya’s revenue was up 32 per cent from Sh1.5 billion to Sh2 billion last year, a slowdown in profit as a result of lower corporate IT sales, last year, proved to be a major stumbling block for the firm.'

      This doesn't actually say whether the growth in corporate IT sales has slowed down, or the company's number of corporate clients has declined. 

      In addition, corporate ITdoesn't appear to have been a focus: 
      'AccessKenya is eyeing the opportunity to tap the increasing appetite for Internet connectivity in the high-end residential and SOHO (Small offices and home offices) segment.'

      And the company doubled its investments in infrastructure: 
      'Last year, AccessKenya spent Sh1 billion in investing activities compared to Sh511 million in 2008.'

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