Malawi: under-penetrated mobile market offers opportunities for local entrepreneurs?

Talking about Zain seems to be the flavour of the month here at DTW. Following yesterday's piece about the future of the group's African assets, today I'd like to zero in on one of the these, the company's MNO in Malawi, which, according to a recent Cellular News story has clashed with the country's telecoms regulator over plans to lower tariffs.

The Malawi Communications Regulatory Authority apparently wants to open the market up to more networks in order to get a better deal for consumers. Zain, meanwhile partly blames high taxes for the current prices which customers must pay. The cellco also claims that as the overall mobile market grows in Malawi, it will be able to lower prices. Zain Malawi's Managing Director Fayaz King explains: "Imagine at Zain, we have mounted a network that could take up to 5 million users but we currently have only 1.5 million customers. We believe that if at least 3 million people started using the Zain network, we could start enjoying the benefits of economies of scale."

What does the country's mobile market look like, in terms of penetration and in terms of the competitive landscape? According to WCIS, mobile penetration in Malawi stood at just 13.36% (vs. an African average of 39.20%) as of March this year. This market (from an overall population size around 13.9 million) is currently home to a duopoly, with Zain enjoying the lion's share (70.98%) and the remaining subscriptions being owned by Telekom Networks Malawi, a cellco in which the country's incumbent fixed line operator Malawi Telecommunications owns a 44% stake.

While there are certainly numerous European countries with populations smaller than that of Malawi sustaining three or more mobile operators, the landlocked southeast African country might nevertheless offer insufficiently attractive returns for prospective new entrants seeking to split the market more than two ways. While its high population density suggests that mobile coverage could be built out relatively cost-effectively, Malawi is, however, among the world's least developed countries, with a heavily agriculture-dependent economy and with GDP per capita of less than USD 320. Low life expectancy, high infant mortality and a high prevalence of HIV/AIDS all blight the country, with the latter draining the labour force and expected to impact further on GDP in the near future.

I have reported here more than once a feeling among powerful multinational telecoms groups that Africa will see a wave of market consolidations as smaller players struggle to compete againts better-funded rivals. This feeling has been articulated by MTN CEO Phuthuma Nhleko and by Zain Africa CEO Chris Gabriel in remarks quoted here yesterday. Due to the economic factors mentioned above, Malawi might be the kind of market where only MNOs able to leverage the scale and best practices of large groups can prevail and prosper in the long term.

In line with the regulator's desire for more competition, however, two more mobile networks have indeed been licensed. Or is it just one? I will admit to being a bit confused on that point. This week's Cellular News piece on Zain's clash with the regulatory agency states that "two more networks have been licensed. Globally Advanced Integrated Networks (Gain) expects to launch its network within the next couple of months, while G-Mobile is still waiting to announce a launch date."

An article written in April this year by Gregory Gondwe of BizCommunity, however, refers to Globally Advanced Integrated Networks as being the holder of the G-Mobile brand name. Gain and G-Mobile? One and the same? Or two separate entities? I am genuinely unsure. Answers, please, from anyone who really understand the Malawi mobile scene...

Whatever the story, the G-Mobile name was mentioned in an April 3rd story from the Informa Telecoms & Media Global Mobile Daily service - this stated that a company named Lilongwe Mobile planed to operate under the G-Mobile brand name. The GMD report quotes the company's Vice Chairman Limbani Kalilani, who says that the new cellco is expected to invest USD 40 million in the first five years of operations. If I've got this right, Mr. Kalilani will be a colourful addition to the ranks of Malawi's mobile sector leaders. As far as I can tell, the G-Mobile Vice Chairman has also established himself as a rap music star (AKA Tay Grin) as well as setting up a wireless payphone company called Phone Yanu.

Can the rapper/enterpreneur and his partners succeed in this mobile enterprise? Let's see. It's worth pointing out that forty million dollars is an extremely modest investment for a mobile network. To put that sum of money into context, consider that Zain Malawi invested ninety million US dollars in 2008-09 just to expand and improve its existing network coverage across the country.

It's churlish not to wish any local entrepreneurs well in their attempts to offer services to their Malawian compatriots. I would personally be surprised, however, if the challenges they face do not turn out to be very considerable.

One cause of optimism, however, for enterprising Malawians looking to get into the telecoms space, could come in the form of the Malawi Communications Regulatory Authority going out of its way to smooth their way into the market. The main thrust of Gregory Gondwe's article is that Gain/G-Mobile (?) is initially expected to pay a smaller levy of audited net operating revenue than the two established MNOs, something about which Zain is reported to have sought "clarification."

Malawi: under-penetrated mobile market offers opportunities for local entrepreneurs?