With TowerXchange Meetup Africa moving for the first time to Nairobi and running alongside our sister events ITW and Datacloud, I travelled to Kenya in June alongside ITW Commercial Manager Paul Robinson to understand the country’s growing connectivity infrastructure ecosystem.
Kenya has one of Africa’s most advanced connectivity infrastructure ecosystems, owing the country’s heavy adoption of digital services. The use of mobile money, particularly Safaricom’s M-PESA, was a part of daily life in Nairobi, and all sorts of institutions from government to enterprise to street vendors actively use mobile money payment.
Safaricom, Kenya’s largest MNO and one of the largest institutions in Kenya, faces rising competition from Airtel Kenya, who has been aggressively competing for market share. While M-PESA, dominates mobile payment systems, Airtel Kenya’s affordable mobile rates make them the most attractive choice for voice and data plans. It was a taxi driver who told me that many Kenyans have dual SIMs, one for Safaricom to make mobile payments, the other for Airtel to make calls and use data.
The rapid construction of backhaul infrastructure to facilitate this ever-growing demand for connectivity requires significant investment, and I sat down with KEPFIC, a local Kenyan industry body supported by USAID, the World Bank and various local pension funds, to understand the important role of local investors in the country’s burgeoning digital infra sector.
Digital infrastructure in Africa, like other large infrastructure projects, is dominated by Development Finance Institutions (DFIs) who are often the only entities with enough hard currency capital to fund projects of this scale. Institutional firms such as pension funds have historically invested in government bonds, which while stable have been near-flat when it comes to returns.
KEPFIC is attempting to educate Kenya’s pension funds about the stable long-term opportunities of investing in various digital infrastructure and telecommunication asset classes such as towers and data centres.
As KEPFIC sees it, this is a win-win, helping connectivity infrastructure firms offset the pressure of having foreign entity shareholders who view returns through a hard currency lens, while also helping the local economy play a role in developing critical infrastructure, bringing a level of domestic ownership to some of the most important economic sectors.
To better understand this critical infrastructure, I had the pleasure of visiting my first ever data centre, noting the similarities and differences between core and last-mile infrastructure.
Although smaller in scale, PAIX Data Centres owns one of the most important data centres in Kenya, located in the Britam Tower Nairobi in the heart of the financial centre. This data centre hosts critical network carrier racks as well as major financial services and institutions, and internet service providers, ensuring resilient connectivity to global core networks.
Unsurprisingly, power is their biggest cost, with the largest proportion of this coming from cooling systems. Temperature control is critical to ensure the safety and reliability of active equipment and is a significant investment in air conditioning hardware as well as sophisticated software systems to carefully manage temperature.
While touring the facility it was a pleasant surprise to come across some familiar vendor names, including the ASSA ABLOY security system for accessing rack keys, Vertiv’s power distribution system, and HIMOINSA generators on the roof, as well as some names I was less familiar with such as Rocket batteries. While the three generators on the rooftop were purely for backup power, PAIX was in the process of installing solar PV on the roof that will help offset high-cost grid power and improve their energy efficiency.
In the Network Operations Centre (NOC), I saw the Remote Monitoring Solution (RMS) and equipment optimisation platform hard at work monitoring live performance. The PAIX data centre uses Power Usage Efficiency (PUE) as a measure to calculate the efficiency of their power consumption, tracking what the data centre consumes across their customers’ and their own equipment.
This is used to optimise equipment runtime to improve operational efficiencies as well as gather data for ESG reporting, which is a requirement for their shareholders, although rather intriguingly not something that was requested or required to produce by the MNOs being hosted in the data centre.
TowerXchange and ITW just outside the PAIX Data Centre
Having better understood the data centre component of Kenya’s ecosystem, it was time to learn more about another vertical, fibre. I sat down with two fibre players active in Kenya, Wananchi Group and HAYO Telecom. Wananchi Group’s fibre business unit Zuku Fibre is now working with American Tower to deliver fibre-to-the-tower as well as connecting data centres across the country.
Zuku Fibre has been leading Kenya's FTTH market, while Liquid Intelligent Technologies has dominated the enterprise and backhaul space. Safaricom still owns and operates a significant fibre division, which mostly serves end-users as fibre-to-the-home.
HAYO Telecom, a fibre and voice firm operating in South Africa, Senegal and now Kenya after launching last year, has been exploring opportunities in last-mile fibre connectivity as well as fibre-to-the-tower, as the government is pushing a 100,000km fibre deployment target to strengthen network capacity.
Kenya’s core fibre network is already very strong, with a mature metro network and connections to core infrastructure such as data centres already in place. While data penetration in rural areas is relatively good, quality of service remains poor, and fibrecos are moving to capitalise on new demand for rural fibre.
While previously lacking due to the poor commercial use-case when compared to urban areas, cost of fibre deployments in Nairobi has recently spiked from US$1 – US$1,000 in some places. However, while Kenya’s Universal Service Fund was recently established by the regulator to help provide financial support to subsidise rural mobile infrastructure coverage, this has not been expanded to include fibre infrastructure.
TESPOK, a Kenyan telecom and ICT industry body, is currently in discussions with the government to push the USF to provide support for fibre infrastructure as well.
TowerXchange and ITW alongside Wananchi Group at their Nairobi Office
Of course, it wouldn’t be a TowerXchange trip if we didn’t also visit Kenya’s tower ecosystem, and I made a visit to the Nairobi office of American Tower, who is not only the largest towerco in the country but also the largest US investor in Kenya. Amongst plans for Meetup Africa we also discussed Kenya’s evolving tower climate. A new player has emerged on the stage as Jamii Telecom, previously a fibreco, acquired an MNO license in 2020 and is now colocating with both American Tower and other local towercos, driving up tenancy ratios across the board.
Back at the PAIX Data Centre, the team there informed me about how many of their ISP customers were trying to contact the towercos, and American Towers explained that ISPs have been increasingly looking to lease space on mobile towers for their broadband coverage. However, they typically ask for lower rates owing to their smaller scale, making them less attractive tenants than the MNOs. But the regulator has also been pushing mandated infrastructure sharing, so towercos are unable to turn down requests.
To help build up the resilience of their supply chain, improve lead times and reduce foreign exchange costs, ATC has partnered with Greenbow to manufacture towers in Kenya. While there are still challenges of procuring local equipment at scale, ATC is fostering the growth of the local supplier industry to be able to take larger contracts over time.
Alongside American Tower I also met up with local towerco AlanDick & Co. East Africa, who first showed themselves to the TowerXchange community back at Meetup Africa 2023 and are very excited to have the show move to their home market this year.
Most surprisingly AlanDick reported that their tower infrastructure has shot up to include 700 macro sites with 80 inbuilding solutions, 80 small cells, and 46 low-cost rural sites. AlanDick had looked at opportunities in the fibre market, but high costs and issues around contract negotiations meant that MNOs and fibrecos remain the major plays in Kenya’s fibre market.
They also mirrored comments from American Tower that due to mandated infrastructure sharing laws ISPs are becoming a more prevalent tenant on tower infrastructure. ISP towers are also less secure and reliable due to lacking the large operational expertise in passive infrastructure management that towercos possess, making towerco sites more attractive options to building and operating their own.
Inside ATC Kenya's NOC; the brain of Kenya's largest towerco
As a main supplier to Safaricom, AlanDick kindly introduced me to their network operations team, and I sat down with the MNO to dive into their portfolio as the largest tower owner in Kenya.
Safaricom reported a total of 7,400 towers in their portfolio, adding around 1,000 new sites over the last 3 years, although this pales in comparison to Airtel Kenya who has been building 1,000 sites every year over the same period.
The operators’ network in Kenya is already expansive, with only about 20% of these towers being for coverage expansion, while 80% were for meeting demand for increased capacity. Recent years have seen a big push into more rural parts of the country, and around 2/3rd of Safaricom’s towers are now in rural areas. The operator has also been investing heavily in last-mile fibre as their network is 100% 4G.
While network rollout has been aggressive over the last few years, future growth is predicted to slow down as Safaricom find their capex budgets being stretched over a wider scope of infrastructure and services. Safaricom are not only investing in towers but their own data centres, fibre networks and are pushing their enterprise business solutions as well. Their highly successful mobile money platform M-PESA, while profitable, also requires significant investment.
This has led to some discussions around a possible tower divestment. Safaricom’s shareholder Vodacom mirrored this in South Africa last year with the carve-out of their towers into MAST Services, but a 30% tax rate on any potential carve-out made no financial sense. In addition to this, regulatory pressure is being applied to Safaricom to share their tower portfolio with Airtel, reducing the strategic advance of owning their own network.
Kenya’s grid energy is very expensive, and with most Safaricom towers being grid-connected the operator is reviewing their energy network strategy. Loadshedding is also becoming a creeping issue, as the state-owned grid company KPLC has been unable to meet growing capacity, leading to loadshedding in some areas.
Currently, 1,500 Safaricom towers have on-site solar installations, but the goal is to massively increase this to help reduce energy opex. Despite a 5-year return on investment from the solar PV installed so far, the capex burden is very high, and Safaricom’s investment strategy is prioritising revenue generation over cost reduction.
Instead, Safaricom is looking at energy financing to provide the capex. There had been previously discussions around Safaricom exploring ESCO partnerships, but the operator is keen to maintain ownership if it’s energy equipment, so is looking for a partner to help take on the capex burden, and possible operations & maintenance responsibilities as well.
To my surprise, I found that my final day in Nairobi coincided with the first day of Lifting Safety to New Heights (LSNH), a two-day health and safety workshop run collectively by Nokia, Helios Towers and tower technology consultancy UIRTUS, which I was kindly invited to attend.
It was my second time attending the event, having travelled to Senegal the previous year, with much of the core messaging mirroring las year’s show around building resilience HSE practices and standards, as well as showcasing new technology that can help improve working at height, not just for towercos and MNOs but the often complex and multi-tiered managed services ecosystem.
While there I spoke with NEWL, a tower managed service provider operating across East Africa, to understand how they are looking at digitising their operations and maintenance practices across the organization. Major challenges have been around staffing and training, as there can be skill gaps and concerns from site workers about losing their roles to advancing technology and automation.
Another managed services company, TowerTech Africa, was also present, who have been manufacturing and installing towers in Kenya, deploying over 1,000 sites since 2012. TowerTech informed me that a recent surge in urban rooftop and rural macro sites is continuing to push demand for local tower manufacturing. But raw steel is imported and with few domestic steel manufacturers and high demand, getting your hands on steel is a challenge, leading to supply chain and lead time issues.
Also present was Nokia’s Kenya team, who has been working with Airtel Kenya on tower installations and recently received an order to deploy 869 5G sites to keep up with their growing 5G network coverage needs. Much of the newer tower activity is coming from the rural space due to ongoing technology shift. Due to regulatory pressures on infrastructure sharing, Nokia reported seeing 50% of MNO-owned towers now collocated.
I am looking forward to heading back to Nairobi in September for TowerXchange Meetup Africa, ITW Africa and Datacloud Africa to meet familiar and new faces across the Kenyan and African digital infrastructure ecosystem.
