Determinants of financial performance of internet service providers in Kenya

Abstract

Due to the increase in competition and increasing market liberalization, firms in the telecommunications industry are facing a threat to the profit sustainability. As market players’ increase and offerings diversify, the market share reduces causing decrease in profit (Neto, Kenny, Janakiram, & Watt, 2005). Furthermore, customers’ preferences are dangerously volatile and satisfaction of their diverse needs can prove arduous and the heightened customer awareness results in search for better alternative offerings in the market. As a result, customers may voluntarily switch from one vendor to the other. The study adopted a descriptive study design. The population was ISP firms in Kenya from which 10 large ISPs were selected. A total of 50 questionnaires were mailed to the managers of these firms. Primary data was collected through structured questionnaires. Data was analysed using descriptive analysis and regression analysis. The study found that before customer make a decision to purchase or stay with a service provider, they considered service uptime, network coverage, and customer service. The regression results showed that product pricing, customer service, and service uptime had negative but insignificant effects on firm performance while parent shareholding and network coverage had positive effects on firm performance. The study concludes that the factors influencing customer staying in a provider were service uptime, customer service, and network coverage. The study also concludes that product pricing, customer service, parent shareholding,network coverage , and service uptime do not have a significant effect on firm performance. Thus the financial performance of ISPs in Kenya is not influenced by the churn factors. The study recommends that Internet Service Providers in Kenya should ensure that they enhance the level of service uptime as this was a major factor that customers considered before making a decision to purchase an ISP product or to stay with the same ISP. The study also recommends that Internet Service Providers should have large network coverage and not just limit themselves to a small or specific area to cover. Third, the study recommends that Internet Service Providers should invest in a modern and efficient customer care service that can provide solutions to customers who have issues with their internet. This was an important purchase decision factor by customers.