Kenyan operators turn to outsourcing to stay in the game

In order to remain competitive, Kenyan telecom operators are outsourcing their customer service and Network management operations.

Following Telkom Kenya and Zain’s decision to outsource its customer care line, Essar Telecom Kenya, operating under the Yu brand, announced a similar outsourcing agreement with to Aegis, an Indian-based BPO company, that would enable the operator to cut costs in a market where margins are very low.

Zain Kenya has already outsourced the operation of its customer care services and Network management to Nokia Siemens, while Telkom Kenya has outsourced its customer care operations to local BPOs Horizon and Kencall, in an effort to keep its employee costs low.

“The initial focus for the firms was to grow their top lines, but now the executives are looking both at the top line and costs”, said Robert Bunyi, an analysts with Mavuno Capital, quoted by African newspaper, Business Daily.

ARPUs (average revenue per user ) have declined significantly in recent years, due to increased competition which has resulted in reduction in mobile tariffs across the board.

“Falling ARPU will put downward pressure on earnings growth”, said analysts within African Alliance and Renaissance Capital, citing an earlier report on the status of Kenya’s mobile telephony market.

As a result, operators have opted to bring down the operation costs where possible. According to the cited analysts, the ARPU will continue to plumet in the coming years and is only expected to stabilize in 2012, as operators continue to penetrate areas with low spending power.

Zain and Telkom Kenya announced losses of Sh7.1 billions (2008) and Sh10 billions (2009) respectively in the past two years.

Indian operator Essar joined the Kenyan mobile market last year. The market is lead by Safaricom with a 78% market share, while Zain has 17%, Telkom Kenya’s Orange 4% and Essar Kenya (Yu) only 1%.

Safaricom has announced new business services, offering broadband, video conferencing and voice to its high-value subscribers, a converged-services strategy aimed at increasing its ARPU, market share and revenue from data services.