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

Tuesday, 7 July 2009

How many cellcos does it take to deliver quality, choice and value? It depends where you ask...

A number of recent blog posts here at DTW have chewed over the issue of how many mobile operators is the optimum number for a given market. That has usually been 'optimum' in the sense of a number conducive to a level of competition which allows all players to turn a decent profit. It occurs to me now that I've spent less time thinking about the optimum number of MNOs in terms of making up a competitive environment which delivers choice, value and quality to subscribers.

This last point seems to be on the minds of Nepal's new Minister for Information and Communications, Shankar Pokharel, according to a report from Cellular News yesterday.

The Minister has warned the country's two cellcos that the Government might consider licensing a third mobile operator if they do not improve their quality of service. This is despite the fact that the current operators have a guarantee that no new networks will enter the market until September 2010 at the earliest.

This is not the first time this year that the county's MNOs have faced criticism and intervention.

In March, according to the Global Mobile Daily service from Informa Telecoms & Media, the country's telecoms regulator was pressuring operators to lower interconnection rates, the telcos having failed to reduce rates when asked to do so in February. The feeling would seem to be, then, that high prices have been keeping services beyond the reach of much of the population of a country whose economic development is hampered by a number of factors - the country's isolation from the world's major land, air and sea transport routes; hilly and mountainous terrain making the building of roads and other infrastructure difficult and expensive, which means volume distribution of goods is very challenging; a relative lack of tangible natural resources and the importance of agriculture in the economy meaning that over 75% of the workforce is employed in low-paying farm work; around half the working-age population being unemployed or underemployed. Mobile penetration, according to WCIS, currently stands at just 18.23%.

One of the two incumbent mobile operators, Mero Mobile, appeared to be responsive to concerns about prohibitively high tariffs by late March, when it announced substantial cuts to prepaid prices, according to GMD. Mero Mobile is now part of TeliaSonera's Eurasia business unit, the giant Scandinavian telco having acquired a controlling interest last year.

The growth-inhibiting factors described above make for a challenging market for Mero Mobile and its rival in the cellular space, Nepal Telecom, which is also the county's incumbent fixed-line operator. Of these factors, the rugged physical geography of the country presents a number of problems. This is clear from the fact, as reported in yesterday's Cellular News article, that the TeliaSonera-controlled MNO has announced that it will invest USD 120 million in 2009 and USD 130 in 2010 on boosting its network coverage, with some of the investment to go on increasing back-up power supplies to cope with the unreliable national power grid. Nepal Telecom has apparently also recently announced plans to boost its own back-up generators and switch to renewable power supplies where possible due to the same reliability issues.

The nature of the terrain also necessitates the use of satellite communications for cellular backhaul, as demonstrated by the incumbent telco selecting Gilat Satellite Networks earlier this year to ensure coverage in rural communities.

It remains to be seen if the new Nepali IT/telecoms Minister will open the market to a third operator and, if he does, how much enthusiasm this market arouses among strategic investors. Clearly, Nepal is an under-penetrated territory and, with a population of nearly 30 million, could represent a decent-sized opportunity. A new entrant, however, will need to be mindful of the challenges presented by the country's under-developed economy and infrastructure.

From a market in which the government is keen to add another MNO into the mix, we now turn our attention to one where this is decidedly not the case.

According to a TeleGeography article yesterday, the Information & Communication Technology Agency (ITCA) of Mauritius is of the opinion that four MNOs would be to many for the island nation of around 1.3 million souls.

Three cellcos currently compete there. Orange is the clear market leader with an estimated 57.50% share of mobile subscriptions. Next comes Emtel, a company in which Millicom International Cellular has a stake and which claims to have been the first mobile telephony operation in the whole southern hemisphere in 1989.

A much smaller player, founded in 2003, is Mahanagar Telephone Mauritius, a subsidiary of Indian state-owned telco MTNL. This company, which also provides broadband and fixed-wireless telephony services, has just an estimated 2.67% of the country's mobile subs on its CDMA network - Orange and Emitel operate GSM and 3G W-CDMA networks.

The company hoping to join these MNOs to compete in a mobile market with a 83.55% penetration rate is Outremer Telecom, an operator with a presence in the French overseas departments of Guadeloupe, French Guiana, Martinique and Reunion. According to yesterday's TeleGeography piece, this company has been dealt a blow to its plans to extend its footprint to Mauritius, with the ICTA declining its application for a mobile licence. Outremer Telecom says it plans to appeal the decision to the ICT Appeal Tribunal.

The ICTA told the company it had decided not to issue a fourth mobile operating licence, citing the global economic downturn and the need to protect the investment plans of incumbent operators as the reason. ICTA is understood to have received official complaints from Orange and Emtel.

Presumably, ICTA believes that the current line-up of operator delivers quality and value to the mobile consumer of Mauritius.

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