Deloitte Kenya Technology, Media & Telecommunications (TMT) Predictions 2016

1. Technology, Media and Telecommunications Predictions 2016

4. 10% 24% 30% 37% 8% 18% 25% 30% 13% 31% 32% 45% 9% 25% 35% 38% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Make an online purchase Pay/Transfer money to a business for a service or product Browse shopping websites/apps Make a payment in-store Total 16-24 25-34 35-44 M-commerce’ in Kenya Still young, but with a potential to grow 4© 2016. For information, contact Deloitte Touche Tohmatsu Limited. 0% 10% 20% 30% 40% 50% 60% 70% 80% Morocco South Africa Egypt Kenya Nigeria % of shoppers held back from online shopping by security reasons Source: MasterCard 2014 Online Shopping Behaviour Study

5. Preference for mobile transactions Which provider processes my in-store mobile payments 5© 2016. For information, contact Deloitte Touche Tohmatsu Limited. 11% 16% 35% 60% 0% 10% 20% 30% 40% 50% 60% 70% Money transfer service Financial institutions Bank Mobile operator provider Base: All who have use phone to make a payment in-store

6. Near Field Communications or ‘just’ Biometrics Innovation in Mobile Payment We predict that the next major shift in preference for MNO or Bank will occur as the result of the next innovation.

8. Kenya Examples in Education Education Innovations set in place to improve Kenyans lives… 8 Source: www.ibm.com; www.forbes.com Develop daily reports that indicate the conditions in these schools This system is uploaded into affordable tablets and mobile phones of teachers and headmasters. IBM’s Africa Lab - App Provides accurate alerts to relevant government authorities as to where resources are needed the most. How it works At the touch of a button, the system can produce colour-coded performance indicators and attendance records.

9. Kenya Examples in Security 9 Integrated Public Safety Communication and Surveillance System (IPSCSS)…potential in the security sector CCTV Cameras The IPSCSS involves placing CCTV cameras with face and motor vehicle number plates recognition capacities. Cameras and Traffic Lights Facial Recognition Enables the identification/ authentication of individuals by comparing their faces against those in a database system of known faces

10. Nairobi becoming a Smart City? "A Smart City is an urban area where public and private entities cooperate in achieving sustainable outcomes through the analysis of real-time contextual information shared between different expert systems" The Singapore of Africa? Maybe not yet ….

13. Between 2013/14 and 2015/16 premier league seasons the English Premier League overseas rights were valued at GBP 743.3 million per annum. English premier league overseas revenues Expect to pay more for your football viewing 13© 2016. For information, contact Deloitte Touche Tohmatsu Limited. GBP 55M p.a. GBP 10M p.a. GBP 32M p.a. Sub Saharan Africa’s annual revenue contribution to EPL is valued at GBP 68.3M > 2016/17 -2018/19 Sub Saharan sports rights are now up to GBP 98M

15. OTT Subscription Fees + Internet connection TV Choices and Preferences We predict that OTT will only appeal to a limited section of the market One time fee OR Premium TV with monthly fees Free To Air Digital TV VS Unless the quality and cost of internet connectivity becomes easily accessible OTT will remain a niche.

16. Considerations in the OTT space Regulations and Market Restrictions Who should regulate OTT providers and content? The only barrier to entry for OTT players in an internet connection How can local content requirements be enforced? OpportunitiesChallenges There is a ready market of people already consuming content

19. Used phones: the market you may never have heard of 19© 2016. For information, contact Deloitte Touche Tohmatsu Limited. In 2016 we expect that up to 20% of Kenyans who upgrade their device will either sell outright or trade-in their used smartphones. Globally we expect 26% of smartphone users to follow this trend 37% 26% 16% 4% 3% 3% 3% 3% 2% 2% 1% Gave it/sold it to a family member or friend Kept it as a spare Lost it Sold it/traded it in for a new phone to the mobile operator Sold it/traded it in for a new phone to the device manufacturer Sold it to a retail shop for cash Disposed of it / threw it away Other Sold it online) I did not have a mobile phone before Can’t remember 0% 5% 10% 15% 20% 25% 30% 35% 40% In Kenya about 63% of used phones are “available” for resale. A used phone market exists. Lost are likely already being sold albeit without the owner’s consent. 1 in 8 Kenyans sells or trades-in their used phone Sources: Deloitte Research

20. Used phones: the market you may never have heard of Why would you sell a phone? 20© 2016. For information, contact Deloitte Touche Tohmatsu Limited. • Increase of annual sales by encouraging a shorter replacement cycle • Devices more affordable to customers with smaller budgets • A likely margin in processing used phones Direct benefits for phone vendors 82% of all phones in Kenya were purchased in the last 3 years Growth of the used phone market is dependent on the availability of a convenient market place Sources: Deloitte Research

22. The rise of the data exclusive 22© 2016. For information, contact Deloitte Touche Tohmatsu Limited. In 2016 we expect that 10%of smartphone users in Kenya will not make any traditional phone calls in a given week. A “data exclusive” – someone that substitutes voice calls for a combination of messaging (including SMS), voice and video services delivered ‘over the top’. 0% 10% 20% 30% 40% 50% 60% 70% 80% Text messages (SMS) Social networks Voice calls Instant messaging Emails VoIP Video calls Phone features used in the last 7 days 16-24 25-34 35-44 16-24yr olds place less importance on voice calls than instant messaging Sources: Deloitte Research

23. The rise of the data exclusive Two contrasting trends with voice 23© 2016. For information, contact Deloitte Touche Tohmatsu Limited. Mobile voice volumes (in minutes): 50% increase between Sept 2013 and Sept 2016 Smartphone owners’ usage patterns more data intensive VOICE+ - SMS grew by 600% Mobile data grew by 150% Between Sep 2013 and Sep 2015: • Growth in voice bucks the trend in developed countries • Growth driven by falling prices and bundling of services • Growth has slowed down in recent years • The growth in SMS is due to operator initiatives • SMS growth spiked in 2014, but has slowed due to prevalence of OTT services Could all you-can-eat app access and data bundling be cannibalising MNO revenues? Watch & read news stories Top 3 ways Kenyans typically use phones Watching short videos Streaming music Sources: Deloitte Research, CAK

24. The rise of the data exclusive Data over voice 24© 2016. For information, contact Deloitte Touche Tohmatsu Limited. 3rd overall in frequency of usage over seven days after SMS and Social networks. 4th overall on increase in frequency of usage in the last 12 months after SMS, Social networks and Instant messaging In Kenya voice calls were ranked Voice calls rank SA UG NG ZW Seven day usage 5th 2nd 3rd 3rd 12 month increase 4th 2nd 3rd 4th Regional Comparison Sources: Deloitte Research

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Deloitte Kenya Technology, Media & Telecommunications (TMT) Predictions 2016

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