Kenya to Silence $60m worth of Fake Mobile Phones

KENYA WILL, for three days effective this Sunday, disable an estimated 2.5 million fake cellular phones. The exercise will cost phone owners at the minimum, US$60m. Phone operators on the other hand will lose an estimated US$118,000 a month in lost revenue or US$ 1.4 million a year. Commonly known as Mark Juma Mtambo, fake handsets comprise 8.5 percent of the total number of handsets in the country at the end of June 2012. This will reduce Kenya’s cellular tele density 67 per cent from 74 per cent at the end of June 2012.

There are 29.2 million telephone handsets in Kenya, four million more than the adult population of 25 million. Silencing of Mark Juma Mtambo will reduce the number to 26.8 million handsets, still more than the adult population anyway.

It is not clear how big a chunk of the market each provider will lose.  Our Calculations show that if each provider was to lose 8.5 per cent of its subscriber base, all will lose more subscribers than they signed up between March and June 2012.

Safaricom, the largest provider with a massive 19 million subscribers could lose as much 1.6 million subscribers- which almost five times more than the new subscribers signed up between March and June 2012. The second Largest provider, Airtel, would lose 383,000 subscribers, way higher than the new subscribers signed up between March and June. Yu and Orange will lose 221,000 and 263,500 subscribers respectively.

The problem could be compounded by disabling of all unregistered Simcards.  It is not clear what is the size of unregistered Sim cards. However this can be mitigated by the subscribers simply registering their SIM cards. However, the counterfeit phones cannot be mitigated.

What are counterfeit phones? Counterfeits of phones or other products are products that sale in the name of other brands. They are what is called intellectual property thefts where, manufacturers fake the brand name of an established brand and passes his products as that brand. Counterfeits, euphemistically called replicas, are products of questionable origin, quality and safety.

And they are a threat to economies, manufacturers and the innocent consumer. Governments feel the pinch as they lose out on uncollected taxes, legitimate industry loses its rightful share of the market to pirates and consumers are exposed to substandard, falsely labeled and possibly dangerous goods. The image of the well-established brands is also destroyed.

According to CCK, as at the end June2012, the average use per handset in Kenya was 77.7 minutes per month. At the same time, reported CCK, the average tariff was Ksh 4.00 per minute. Disabling counterfeit phones alone will cost some Kshs 10million a month in lost revenue to mobile operators. According to CCK, the industry's turnover was Kshs 104,552 million (US$1.2 billion) in 2010. Therefore the financial loss to the industry will be insignificant.

However, say analysts, these figures are purely speculative. Some operators, they say, have protected themselves by selling the handsets. But the numbers indicate the kind of damage counterfeit products can inflict on consumers.

Regardless of who will be affected to what extend, the disabling of counterfeit phone handsets will cripple many businesses, particularly the vendors of such handsets who will be forced to close shop. Some, informed sources say, are already feeling the pinch as consumers are now shunning suspect handsets.

Consumers will lose for they shall be forced to fork out more money to invest in new genuine handsets in order to remain connected. Most were attracted by the price tags which are generally lower than the genuine products. The cheapest genuine handset in Kenya is about Kshs 2000 (US$22). This means that the 2.5 million subscribers will have to invest a further kshs 5 billion ($60 million) in new handsets.

While the counterfeits handsets will tossed out of the window, the genuine brand makers will be smiling all the way to the bank. Will Kenya become the darling of investors in genuine mobile handsets? Only time will tell.

Kenya –Ethiopia to trade in electricity

KENYA AND ETHIOPIA will soon launch a power trade deal that will earn the latter an estimated US$400 million a year.  Kenya for her part will not only eliminate the US$500 million in thermal power costs, she will also enjoy cheaper power tariffs. This is perhaps the first electricity trade deal in Africa.

 To enable the trade deal, a 1068KM high Voltage direct current (HVDC) electricity highway between Ethiopia and Kenya. The project to cost an estimated US$1.26 billion will commence next and will last four years, being completed in 2017.

The project is co-financed by the World Bank, The African development Bank, the French Development agency and the governments of Kenya and Ethiopia. AfDB last week approved a US$337.5 million loan for the project. The World Bank is yet to approve the lion’s share of US$ 684 million. Analysts, however expect the Bank to move soon. AFD will cough some US$118.5 million while the governments of Kenya and Ethiopia will contribute US$88.5 million and US$31.5 million respectively.

The deal will see Ethiopia supply Kenya with 2,000MW of electricity at US$0.0065 per KWh. This will earn Ethiopia some US$400 million a year from 2018 onwards.  The Ethiopian Electricity generator EEPP has signed a 25-year PPA with Kenya power and lighting.

Ethiopia has the potential to produce 45,000MW of hydro – electricity- the largest in Africa. Currently she generates only 2000MW but is already expanding capacity to generate 11,000MW by 2017. The link will make Kenya an electricity trading hub in East Africa.

 Kenya, Tanzania, Rwanda, Burundi and DRC are members of the East African Power Pool (EAPP) and this link brings the dream of a regional trade in electric power closer. This would make Kenya an electricity power trade hub in the region.

 Apart from imports from Ethiopia, Kenya is also working hard to generate some 1800Mw of electricity by 2016 from other clean sources including: geothermal power and wind energy.  Kenya, the leader in geothermal power generation in Africa boasts of an estimated 10,000MW of geothermal power and another 3000MW of wind power.

Kenya has found off-shore LNG Gas deposits

Kenya has struck its first natural gas deposits near Malindi. Tullow Oil Plc , which partners with Australian oil prospecting company Pancontinental , announced the discovery this morning.

 It said that it has discovered approximately 52 net metres (about 170 feet) net pay of natural gas pay so far at the Mbawa deep-water well.

 The Mbawa 1 exploration well was drilled to a depth of 2,553m. It plans to drill the well further to 3275 metres. It said that the commercial viability of the find will be determined once the logs and sample analyses are completed.

Officials however, say that the “gas discovery is very promising and it is the first ever substantive hydrocarbon discovery offshore Kenya.”

"With drilling continuing to a deeper exploration target, these interim results may be the first part of the story in this well, and they are certainly just the beginning of the main story of oil and gas exploration offshore Kenya,” said excited officials.

This discovery comes exactly six months after Tullow oil, discovery 100metres of net pay of crude oil in the Turkana County. The find at Ngamia-1 well has raised hopes that Kenya of an oil find in Kenya.

 The new announcement raises Kenya’s profile as a potential Oil and LNG producer and exporter. Such discoveries have made the areas previously deemed as marginal lands to high potential lands. The discoveries, just in the neighbourhood of the proposed Kenya’s second transport corridor, Lapsset,  also raise its profile to highly viable business venture.