How Zuku is wading the waters

May 7, 2009
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, NAIROBI, Kenya, May 7 – When telecommunication provider Wananchi Group announced in October last year that it had launched a triple-play brand dubbed ‘Zuku’ into the market, there was a lot of excitement in the air.

This is because it meant that many Kenyans would be able to access cable television, broadband internet and voice services all in one delivery system and at an affordable rate.

But seven months down the line, the many customers and industry players have expressed doubts that the product was sustainable. Some people say there is no way that the company would be able to offer this product seeing as bandwidth costs are still very high. Players in the ICT currently pay Sh470,000 per one megabyte of bandwidth a month.

Also the fact that the voice component that was supposed to complete the ‘triple-play’ is yet to be fixed, has not helped to ease the pundits’ doubts about the success of the product.

Capital Business recently sought audience with ‘Zuku’ Brand Manager Benson Maina to clear the air on the success or failure of the firm’s product.

Q. It’s a few months now since you rolled out ‘Zuku”. How many customers have you connected since your launch?
A: We now have a subscriber base of 1, 500 broadband customers and 12,000 on the (pay) TV over a period of less than seven months. We target to have 3,000 subscribers by the end of year one which ends in October.

Q: Does this mean that internet connection is riding on the back of the cable TV? How’s the uptake?
A: The cable business is not supporting the broadband project; it is just more profitable. The two businesses run separately and they are able to meet their financial obligations.

On what’s the uptake, we are making money. We are appealing to the mass market because getting that number of customers over six months period is a pretty steep task to do. So the fact that we have done it and done it successfully is a benefit to us.

Q: What do you attribute the growth to?
A: People are realising that there is value to be had (from our products) and there’s also the referral business. Viral marketing is the best form of marketing because if you have a group of believers already using your products it is easier for them to refer your business to someone else.

Q: Why has the launch of voice service been delayed?

A: Voice to us will be a value added service and will be offered free of charge. But what we are asking ourselves now is whether is there a need and is the network that large? The voice will ride on the broadband network which can support voice services but the issue is when you don’t have a large subscriber base, then is there really a point to invest in all these?

Q: There are some people who have been questioning the sustainability of your business. How are you doing?
A: Sustainability of a business is dependent on what your goal was. ‘Zuku’ was not designed by faint-hearted people who wanted to make a quick buck in the short-term. It is a long-term project, our sustainability comes from the fact that we expect to grow large volumes and get minimal profits from each person.

We want to generate small margins from a large base of people. It is also sustainable because we are able to offer a wide range of services to our customers for a cheaper rate than they would be able to get from different providers.

Q: The bandwidth costs are still very high. How are you holding up considering you offer connectivity in both residential areas and businesses?
A: We are not struggling. The competition would be struggling to keep up with us because we are able to give you much more value for what you can afford. For example with Sh5,000 you can get both a pretty good internet connection and a cable Tv access which is not something you can easily get from anywhere else.

Q: The country is expecting the landing of two under sea fibre optic cables in a few months time. How will it change the way you operate?
A: Once the fibre hits the coast in two months time, we see bandwidth prices fall up to 400 percent so we can benefit as a company (and) be able to break even.

It will change a lot of things. First our prices will drop in terms of how much we spend. Bandwidth to an ISP or any communication is a raw material, so if the cost of your raw material is significantly lowered, you can reduce your prices. The amount of capacity that we will be able to get will enable us to offer that much more services on it.

Broadband in itself should mean a multitude of much more services (that is) video, voice, data, triple play the whole array of products that can be offered on it. Once it lands we will be able to carry voice data and video content on our network. So we expect cost drop for both us and our customers and the improvement in the services that we offer and diversification.

Q: Do you expect growth in your subscriber base when this happens?
A: Yes we do, mainly because if the cost of connectivity is lowered then we would assume that the average Joe who visits his regular cyber (café) on a regular basis would be able to get internet in his home. The issue which we should be addressing now as a communications industry is whether it is affordable to own a computer.

Q: KPLC recently got a license that will see it enter into telcoms market. How is this likely to affect you?
A: We highly doubt KPLC will go into the retail business which is what we are looking at; they would probably do more corporate business than anything else. A provider like ourselves who’ve already invested heavily in infrastructure would hardly suffer with the entry of a new player on board.

Q: You will agree though that the market is becoming increasingly competitive. How are you gearing up to take up the competition?
A: The Wananchi Group is composed of the Wanachi Group Kenya Limited which was formally Wananchi online and SimbaNet Communication. Based on that we are able to do both retail and corporate business; our corporate angle of business keeps in check with whatever everyone else on the corporate side is doing and through Zuku we are able to keep up with retail.

We have diversified our content and our offerings to provide TV content, broadband and soon to launch voice services we are in essence diversifying our sources of incomes and thus remaining competitive and relevant.

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