Safaricom Says Price of 5G Smartphones Slows Network Rollout

Safaricom Says Price of 5G Smartphones Slows Network Rollout

Kenyan operator Safaricom says costly 5G mobile phones have slowed down its expansion of its 5G network and sites, according to a report. Safaricom reckons that it will require a critical mass of handsets before it can significantly increase the number of 5G sites targeted at retail consumers. The operator is targeting homes and offices in areas that are not currently covered by its fiber network with the high-speed internet platform as it seeks to capitalize on burgeoning mobile internet use in the country.

Safaricom CEO Peter Ndegwa said that until handsets that can receive 5G are at a sufficient scale, there is no great need to have many sites that offer 5G. The 5G-enabled devices are still very expensive and that is one of the reasons why Safaricom is focusing more on 4G, and leaving 5G to serve homes, as opposed to providing mobile internet.

Currently, 5G phones in the Kenyan market are few and expensive, selling for more than KES 100,000.00 (US $853.00). The high prices may be a deterrent for millions of subscribers willing to switch from 4G phones to 5G, despite the increased appetite for services such as ultra-high resolution video streaming and live 3D gaming. The 5G service is a central part of Safaricom’s attempts to expand its data business to counter slower growth in voice call revenue.

In March 2021, the operator upgraded the network in major urban centers including Nairobi, Kisumu, Kisii and Kakamega, all of which are seeing increased data traffic. Safaricom said it applied the technology on a trial basis and that it does not account for a big part of its capital spending for now. Safaricom launched a program in partnership with Google that allows its customers to pay for 4G/LTE-enabled phones on an installment basis, as it seeks to increase smartphone usage on its network. Customers pay as little as KES 20.00 (US $0.17) a day over a nine-month period, with the ultimate aim of switching about 4 million 2G and 3G phones to 4G.

Tarifica’s Take

In any market where 5G is being offered, penetration of 5G-enabled handsets is key to the success of the rollout. Since legacy devices will not support the new high-speed networks, it is incumbent upon mobile operators to get as many 5G smartphones into the hands of their customers as possible. This may be done by subsidizing the devices to decrease the price point, or by offering discounts on services that will compensate for the high cost of buying the device. Without enough 5G phones, usage of 5G networks cannot be maximized and the service cannot come to fruition.

In Kenya, 5G phones are currently prohibitively expensive, apparently beyond the reach even of many affluent consumers. As a result, demand for 5G mobile services is kept low, making it uneconomical for Safaricom to fully develop the network. This raises the question of what approach the operator could take under the circumstances. Normally, one would imagine that it should make a massive effort to make 5G devices more affordable, as outlined above, so as to increase the number of subscribers with compatible phones. However, the price currently is so out of line with what Kenyans can afford that it may be impossible to bring the price down sufficiently with subsidies or other methods. Larger market forces may be work, forces that are beyond Safaricom’s control.

Therefore, Safaricom is using the strategy of targeting 5G development toward the home hotspot market and away from true mobile 5G. The fixed-mobile customers in question are those who are not well served by existing fiber infrastructure. This somewhat niche use of 5G may have to suffice for the operator until mobile handset prices can be brought down significantly. In the meantime, Safaricom is focusing its mobile efforts on 4G/LTE, improving that network (with help from Google) and incentivizing its customers to upgrade from 3G and even 2G to 4G. For now, that may have to suffice.