Kenya backs Safaricom in US, Huawei 5G fight

Kenya will resist pressure to push Safaricom #ticker:SCOM to cut its contract with China’s Huawei in the roll out of the country’s fifth generation (5G) network.

Joe Mucheru, the Cabinet Secretary for ICT, told the Business Daily Monday that Kenya wouldn’t stop the 5G rollout amid tensions between the US and China over Huawei’s involvement.

“I have not seen any letter or document about stopping the project and we cannot stop even if we are asked to do so. We are an independent country,” Mr Mucheru told the Business Daily in the sidelines of a digital police occurrence book launch in Nairobi.

“Again, the government does not deal with vendors. It’s the service providers who will decide who to work with”.

The US has been urging its European allies and others not to use Huawei, one of Safaricom’s network vendors along with Nokia, citing security concerns.

Last month, Britain announced it was reversing the decision to let Huawei participate in its 5G network following pressure from the US.

It ordered a ban on the Chinese firm’s equipment from its fifth generation networks by the end of 2027.

Safaricom said it will this year launch Kenya’s first 5G mobile Internet services, targeting major urban centres, making it the first operator to offer commercial and superfast services in the region.

The firm had completed testing and trials for the upgraded network as it seeks to capitalise on burgeoning mobile Internet use in the country.

The network has been built by Huawei, which Washington has accused of working at the behest of Beijing.

The US says that global security and personal data will be at risk if the Chinese company dominates development of the world’s fifth-generation internet.

Huawei rejects the US campaign and has called on Washington to produce more evidence to prove the risks purportedly posed by the company.

Tensions between world’s two largest economies have grown on a range of fronts in recent weeks, including the coronavirus, trade, and Beijing’s clampdown in Hong Kong.

Involving Huawei in Safaricom’s 5G network could emerge in talks on a free trade agreement between the US and Kenya, analysts said.

“We will have conditions just like what we have seen the likes of the UK being pressured to block supplies from countries that the US does not consider to be friendly,” said James Shikwati, the director of Inter Region Economic Network (IREN)—a policy think-tank.

“So if the United Kingdom has been arm-twisted to start replacing Huawei, we could see some pressure coming to Kenya.”

Kenya and the US formally launched negotiations on July 8 for a bilateral trade pact that the two economies hope could serve as a model for additional agreements across Africa.

Kenya wants to do a deal with Washington before the expiry of the Africa Growth and Opportunity Act (AGOA), which allows sub-Saharan African states to export thousands of products to the US without tariffs or quotas until 2025.

Two-way goods trade between the US and Kenya totalled Sh117 billion in 2019, up 4.9 percent from 2018.

For Safaricom, the 5G service is a central part of its attempts to further expand its data business to counter slower growth in voice calls revenue.

However, Safaricom subscribers who want to use the service will need to acquire new handsets that are compatible with 5G before they can enjoy the superfast Internet, which offers much faster data download and upload speeds that ultimately ease network congestion.

Safaricom is aiming to rev up its data business to offset sluggish growth in mobile calls, where it has seen a small revenue growth due to saturation, forcing the firm to turn to M-Pesa and Internet to power future growth.

The 5G launch will follow the December 2015 unveiling of the 4G network, which has helped Safaricom grow its revenues from data to Sh40.67 billion as at March this year from Sh9.3 billion in 2014.

Data is one of Safaricom’s fastest growing revenue lines and it hopes that increased smart phone usage will boost it further.

Revenue from mobile data, where Safaricom has been aggressively fighting for market share by offering Internet bundles without expiry, rose 12.1 percent to Sh40.7 billion, after recording 21 percent growth in the second half ended March.

Safaricom has experienced an increase in data traffic as people work from home and students turn to e-learning services. The firm in April said mobile phone data usage had grown by 35 percent as users streamed movies on platforms like Netflix, worked from home and used social media sites like Facebook.