synergia

Synergia has recommended Access Kenya as an Internet service provider for the last 5 years.  They have not let down any of our clients in the way their competitors have in the past.  However, I watch the price movements of their stock with consternation every night.  They are like Cynthia on Idols Africa.  The judges say they shouldn’t go up, but the people keep voting them right back in again!

Access Kenya has traditionally been a corporate Internet services business.  Domestic users and the lower end of the SME space have never been their target market.  Their competitors on the other hand have began to roll out products and services that are bound to result in shrinking revenue for them where these consumers are concerned.  The small enterprises that are already on the Access Kenya platform will jump ship as soon as they get a more affordable option.  And they way things are going, the problem will be how to choose from the number of options available.

Safaricom rolled out their 3G data network in June with a product that is targeted at the SME market.  At KSh.10,000 a month, even with limitations on data transfer this beats Acccess Kenya’s KSh.20,000 per month product.

For residential users, Safaricom’s modem based service as well as Celtel’s EDGE based data service all provide fairly decent performance for well under KSh.3,000 per month.  Telkom are in the process of re-branding and relaunching their ADSL product and rolling out a new broadband service priced for the masses.  Rumors have been rife that Wananchi Online will launch a product for KSh.3,000 per month that will have upwards of 512kb bandwidth and a phone line.

How is Access Kenya dealing with this?  By launching Access@Home.  256Kbps for KSh.7,000 a month.  It seems obvious that to me that the efforts of Safaricom, Celtel, Telkom and Wananchi will result in shrinking revenues and slower growth for Access Kenya in the short term.  Their decision making process hints at trouble in the long term as well.

How then are their share prices going up?  Why does anyone want to buy stocks in a company that will not have much to show in 9 to 12 months?

My money is in the bank for another month.  All this activity means SME owners will get hitherto unprecedented low prices for Internet access, a scenario that can only be a good thing for all of us.  A bad thing for Access Kenya if their price sensitive, SME clients bail out for more affordable, flexible and low-investment-required internet services.

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