News, views and commentary from the telecoms sector across emerging markets and developing countries worldwide

Saturday, 28 March 2009

Burundi: room for more mobile operators or set for market consolidation?

Thoughts of my imminent trip to Nairobi have, of late, prompted me to write more regularly here about African markets than I would usually. One about which I know very little is Burundi, a small Francophone country in the Great Lakes region of Eastern Africa, bordered by Rwanda to the north, Tanzania to the south and east, and the Democratic Republic of Congo to the west. Burundi, one of the the poorest countries in the world, has an exceptionally low GDP, largely due to civil wars, corruption, poor access to education, and the effects of HIV/AIDS. In light of these difficulties, it is perhaps not surprising that this land of some 3.59 million inhabitants has the third lowest mobile penetration rate in Africa - 5.48% in December 2008, according to the World Cellular Information Service database maintained by Informa Telecoms & Media. Only Ethiopia (3.16%) and its neighbour Eritrea (2.13%) have lower mobile penetration.

The cellular industry in Burundi, however, is apparently growing strongly, albeit from a particularly low base. A Telegeography article this week noted that the country's telecoms regulator, Agence de Regulation et de Controle des Telecom (ARCT), has published data showing 78% year-on-year subscriber growth from the end of 2007 to the end of 2008. ARCT figures have subcriber numbers moving from 270,000 to 480,000 over that period. WCIS numbers indicate even more impressive growth, with the Informa service indicating that the growth from y.e. 2007 to y.e. 2008 was 224,300 to 495,250.

Whichever set of figures is correct, the Telegeography article contends that
"the sharp rise has been attributed to increased competition in the local market and mobile network expansion by the four active operators - U-Com, ONAMOB, Africell Burundi and Econet."

The first of these is now part of the Orascom Telecom empire, having been acquired from India's Global Vision Limited in July, according to a Global Mobile Daily article.

In my last post on Zimbabwe, I noted that Egypt's Orascom Telecom seems to have a taste for adventurous investments which is not always shared by other major telecoms groups with multi-country footprints. Thus far, under-penetrated Burundi, too, has not taken the fancy of any truly large-scale international telecoms company apart from Orascom Telecom. U-Com's foreign-owned competitors are subsidiaries of rather smaller players.

Africell, for example, which offers which offers GSM services under the Safaris brand, was acquired by Dubai-based telecoms group VTEL Holdings in January last year, according to a Global Mobile Daily article of the time. Africell is the lone African operation of VTEL Holdings, which has stakes in an eclectic portfolio of telecoms and broadband assets scatted across the Middle East region, the Caucausus and the Caribbean.

Africell does not appear to be holding its own. WCIS figures indicate that the VTEL-backed cellco's market share was just 1.96% by December 2008. The Burundi subsidiary of Econet Wireless Holdings is also finding the going extremely tough, its share of the market having fallen below 1%. The vast bulk of the country's mobile subscriptions, then, are split between U-Com and ONAMOB, the mobile arm of Burundi's state-owned incumbent telecoms operator.

The decline of Africell and Econet Wireless Burundi (the former had nearly a 25% share of the market in December 2004; the latter had 12.45% of the market at that point), seems to support the idea recently expressed by MTN CEO Phuthuma Nhleko who believes that Africa will see a wave of telco sector consolidation in the next 1-2 years as both new entrants and more established competitors struggle to maintain healthy margins in increasingly crowded markets.

While Burundi's extremely low mobile penetration looks encouraging for potential further entrants, the overall market size is quite limited and the population's spending power is severely constrained. I wonder, then, what the future holds for two operators which are supposed to be making their Burundi debut soon, according to the recent Telegeography article, which states that two more companies hold mobile licences: Lacell and HiTS Telecom. All I know about the former is some information about the operator having done a turnkey deal with Ericsson for the network rollout. There is nothing on the website of Kuwait-based HiTS Telecom about a Burundi licence or subsidiary company.

The Burundi market appears to have proven too tough for two of its legacy cellcos. I wonder how succesful two more entrants can expect to be without the backing of deep-pocketed strategic investors. Although under-penetrated, there is something about this this small African market which has deterred major players (other than Orascom Telecom) from getting involved. I will watch future developments with interest.

1 comment:

  1. I just stumbled across your great blog! I actually live in Burundi, and wanted to put two other things on your board about the market here. One is that landline systems work relatively well here, compared to neighboring countries, explaining lower penetration than, say, the DRC next door. Another is that no provider yet offers mobile internet, MMS, or pretty much anything beyond voice/SMS service, so there might be a chance to expand with technology.

    Incidentally, Africell is now operating under the "Tempo" B\brand, and Econet is operating under the "Buddie" brand. Not sure if these are new companies or what. Since the rebranding, it seems (at least visually), that there has been an increase in visibility for Africell/Tempo, I'm and surprised to see that Onamob has a bigger user base than Econet/Buddie, because I have heard very little about Onamob service.


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