Zain slows expansion schedule

January 22, 2009
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, NAIROBI, Kenya, Jan 22 – Mobile phone operator Zain Kenya has cautioned that it might not be able to achieve all the expansion programs that it had previously outlined for this year.

Zain Kenya Managing Director Rene Meza told reporters on Thursday that 2009 portends to be a challenging year for the company, which has to grapple with high taxation levels and the negative effects of the ongoing food and global crisis.

“We have shifted investments from the projects that are not feasible anymore to those that are much more viable. With the limitation in access to funding and the increasing cost of capital, it will be much more reasonable for us to increase capacity in areas we are covering already, rather than going to the remote villages,” he said to justify their decision.

Part of the company’s plan was to develop the rural infrastructure, which would enable them to spread their services to more than the 85 percent of the population that they currently cover.

Mr Meza said that they would also not get any reprieve from the newly enacted ICT Bill as it has the ‘Rural Access Fund’ concept that requires telecommunication companies to pay a certain fee towards the fund, to facilitate the provision of ICT services to rural areas.

This taxation was in addition to the 26 percent excise duty and Value Added Tax that the mobile phone operators have to pay on airtime.

“This will represent an additional taxation on airtime, which will obviously affect the development of the telecom business in the country and the increase in (telecommunications) services penetration as well,” he complained.

The CEO said that despite the challenges, the company would continue to develop new products and add value to the existing ones in order to remain competitive.

“The major differentiator in the sector is not going to be price but value and quantity of service, and therefore we shall continue to enhance our unrivalled customer service,” Mr Meza pledged.

The Chief Executive also hinted that Zain Kenya would soon roll out the WiMax technology to enhance internet connectivity for residential areas and businesses.

Without divulging further information, Mr Meza said that they would either apply for spectrum from the Communication Commission of Kenya (CCK) or initiate an acquisition to enable them offer the services.

At the same time, Mr Meza disclosed that they were still awaiting the government’s approval for their proposed mobile commerce service dubbed ‘Zap’, before they could roll it out in the market.

“The process to get the legal approval is taking too long and it’s putting us at a disadvantage with the competition. We will continue fulfilling the requirements but if we don’t get concrete response, we may have to seek other ways like legal action to launch the product,” he threatened.
 
Mr Meza spoke during the launch of their ‘friends and family’ package that allows pre-paid customers to choose up to 10 preferred numbers which they can call within the network for Sh3 per minute every day.

“The subscription will be free of charge. Customers can change the numbers once a month and the maximum numbers that they can subscribe is 10,” he explained.

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