WiMAX set to drive broadband growth in Sri Lanka?

Sky Network: WiMAX offering set to shake up Sri Lanka's broadband market?

News items from Sri Lanka's mobile market have caught the eye of DevelopingTelecomsWatch a few times of late. Most recently, DTW asked whether the arrival of the UAE's Etisalat as a player on the island nation's cellular scene would cause price competition to become even fiercer. It was noted that a sustained price war has been eroding tariffs and weakening cellcos' profitability over the last four years. Since then, further worrying figures from the country's telecoms sector have been released.

On November 11th, for example, Reuters reported that market leading MNO Dialog Telkom posted a fifth straight quarterly net loss for Q3 2009, disappointing analysts who had predicted the company would break even. Reuters reports that the telco, a unit of Malaysia's Axiata lost 438.9 million Sri Lankan rupees (USD 3.83 million) in the quarter which ended on September 30th. As well as margins being squeezed by fierce competition, the Reuters piece traces a link between between this loss and profit remaining elusive at Dialog Telekom's broadband and direct-to-home satellite TV operations.

That's the latest from the Sri Lankan mobile market. What, though, of the country's incumbent wireline operator, Sri Lanka Telecom (SLT)?

SLT, which was part-privatised in 1997, hit the headlines this week for its efforts to improve the availability of its services in the country's Northern and Eastern provinces, the areas affected by the on-and-off conflict between government forces and the Tamil Tigers, which ended earlier this year after twenty-six long years.

Harshini Perera of Sri Lanka's Daily News writes that SLT has addressed the need to improve its services in these areas by expanding its copper and fibre access networks, installing new exchanges and the CDMA base stations.

With a view to improving its broadband offering across the whole island, Sky Network, a subsidiary of SLT, will, according to Sri Lanka's Daily Mirror, be providing the WiMAX services to parts of the country where ADSL services are not offered. The Daily Mirror reports that the venture will commence operations in March 2010 and will initially provide services to Colombo, Gampaha and Kalutara Districts.

It will be interesting to watch for the impact this WiMAX offering has once launched. Australian telecoms research company BuddeComm's Sri Lanka Internet Market report indicates that Internet access and other forms of data services have lately been starting to take off in the country, but that coverage and accessibility remain limited, with user penetration estimated by the ITU to be at around 6% by the end of 2008. Buddecomm's report contends that early moves to offer broadband Internet in Sri Lanka have met with only limited success, albeit with some promising signs of growth in 2008-09. The report notes that early activity in the wireless broadband segment of the market has not yet translated into significant subscriber numbers.

2010 looks to the year during which it will become apparent whether wireless access technologies will contribute significantly to the growth of broadband services in Sri Lanka.

WiMAX set to drive broadband growth in Sri Lanka?

Lucky Seven? Can the Tanzanian market offer solid returns for its (growing) plethora of mobile players?

Via TelecomPaper on Tuesday, I learned that one East African country will soon home to its seventh mobile operator, which will offer services over a CDMA network. With a population of around 40 million, Tanzania is not an insignificant country, but one must wonder if there is room for all players to run profitable operations in a market split so many ways.

How many other markets of about this size support such a large number of MNOs? The answer seems to be... none. Here is a fairly comprehensive sample of nations with populations of roughly the same size:

• Spain - 45m - 4 operators
• Colombia - 44m - 3 operators
• Sudan - 42m - 5 operators
  
• Argentina - 40m - 4 operators
• Kenya - 39 m - 4 operators
  
• Poland - 38m - 4 operators

Even highly penetrated, mature European markets of roughly the same population size, then, are home to fewer MNOs - cause enough, perhaps, to be cautious about the prospects for a brand new entrant in Tanzania. Further, it is already the case that two existing CDMA operators in the country have failed to establish large customer bases. One of these, Benson Informatics, is an ISP and telecoms service provider founded in 2000, which added mobile services to its product portfolio in 2007. To date, according to WCIS, the company has built a market share of just 0.2% - barely 3000 subscribers.

A bit more significant is the mobile network of Tanzania Telecommunications Company (TTCL), with a reported 110,000 subscriptions, down from a high of around 160,000 subs in September 2007. Prior to 2007, TTCL offered a fixed-wireless CDMA WLL service. The decision was then made to offer mobile services. In the two years that have followed, the impact on the market has clearly been very limited.

Once wholly state-owned, TTCL is the oldest and largest wireline telco in the country and operates the PSTN network of mainland Tanzania. The country's name is portmanteau of Tanganyika (the mainland of the present day country) and the Zanzibar achipelago of islands a few miles offshore. In the latter, the fixed-line market is split between TTCL and Zantel, the second basic telephony services provider there.

Given that CDMA mobile operators across Africa are typically pretty minor players in terms of market share, it is perhaps not surprising that TTCL's mobility proposition has not really grabbed the attention of Tanzanian consumers. Further, the company itself is perhaps not ideally geared to compete with the three GSM operators that have collectively established almost a 90% share of the mobile market. While these three are outposts of significant multi-country mobile groups (Zain, Vodacom and Millicom International Cellular), TTCL has, since the early part of this decade been in a number of joint management arrangements necessitated by its financial instability.

The company's rival in the Zanzibar fixed-line space, Zantel, has fared rather better in the mobile space, with a 9.19% market share (about 1.1 million subs on its GSM network).

Overall, the mobile penetration rate of Tanzania has not yet passed the 30% mark, lagging well behind the overall rate for the African continent as a whole (39.19% as of March 2009). Does that mean there is sufficient room for growth for this veritable plethora of mobile players? Perhaps not. In terms of GDP per capita at Purchasing Power Parity, Tanzania appears to rank as low as 50th out of 53 countries in Africa. Further growth of the overall market, therefore, will doubtless by constrained by consumers' ability to afford even very low-cost services.

A discussion of this type is not new territory for Developing Telecoms Watch. In March, I considered the case of Gabon, asking whether a fourth entrant mobile operator could expect to be profitable. Around the same time, I was thinking a bit about how tough the Burundi market appears to be.

Blog posts of this kind are just very quick thumbnail sketches of these markets - a quick look at mobile market metrics (penetration, market share etc.) cross-referenced with some very basic information about the countries themselves. You might be able to guess that for the latter, I am rarely looking further than Wikipedia. So when I raise questions such as whether these markets are attractive to new entrants or likely to see market consolidation, you are seeing nothing more than a bit of pure conjecture. Readers who really understand the markets concerned are warmly invited to correct any glaring errors in my rough analyses or to add some local colour and detail to the stories. Please use the comment function to do so, if you feel so inclined.

I note, for example, that this blog does get visits from Tanzania. Perhaps someone there will be able to offer a view on the prospects of success for the country's latest mobile market entrant which, according to the Citizen newspaper, will trade under the name Sasatel. The company apparently has a licence for voice and data services, Internet service provision and international gateway services and will have a fixed-wireless (CDMA WLL) offering as well as full mobility via a CDMA network.

I would be interested to know the level of this operator's ambitions and to what degree it expects to compete more effectively than Benson Informatics, whose offerings appear to be somewhat similar.

Lucky Seven? Can the Tanzanian market offer solid returns for its (growing) plethora of mobile players?

Who provides telecoms services in states with limited recognition?

Late last year, I had more than one opportunity to chat with friends in the telecoms space who have worked for businesses with operations in Georgia - the transcaucasian country, not the US state. Inevitably, the subject of the August armed conflict with Russia and with separatist groups from South Ossetia and Abkhazia was discussed. I did not hear reports of very serious damage to telecoms infrastructure. This is confirmed by an extract from a statement by a shareholder in Magticom, one of the two mobile operators licensed by the Tbilisi Government:

"Magticom started the year with a strong performance compared to budget and last year. The conflict with Russia during August caused some damage both to the Georgian economy and to future economic prospects. The full effects of the conflict are yet to be determined. Magticom's physical infrastructure, however, was not badly damaged bythe conflict."

Magticom, which had a 42.28% share of Georgia's 3,352,100 mobile subscriptions by December(according to WCIS), launched a CDMA450 WLL network last summer. According to my fomer Informa Telecoms & Media colleague Gemma Bunting, writing for Mobile Communications Europe, Magti Fix is primarily aimed at people in rural areas with poor fixed-line access. As Gemma noted in her article, Magticom is also active 2G and 3G mobile services as well as Internet access via Wi-Fi and WiMAX.

The Magticom WiMAX offering caught the eye of Andrew Mitchell, writing for for Yankee Group's 4G Trends next generation wireless publication last month. Mitchell noticed Magticom's launch of a mobile WiMAX service offering on February 9, quoting the company's CEO David Lee: "The service we are launching is not only the country’s first WiMAX offering but also the fastest Internet connection available in Georgia to date." The carrier will deliver mobile WiMAX services to both consumer and business markets and plans to include VoIP as well, notes Andrew Mitchell, who also observes that offering wireless connectivity in a country like Georgia presents a number of unique challenges such as mountainous geography and the distribution of its population. Mitchell feels that WiMAX "has continually demonstrated an ability to rise to the engineering and business challenges that are unique to emerging markets."

As far as the Georgian Government is concerned, Magticom should be competing with only two other mobile operators. Of these, Geocell is the country's mobile market leader and is one of the CIS outposts of the Fintur Holdings/TeliaSonera Eurasia empire. The third officially licensed competitor is the Georgian subsidiary of Vimpelcom, which has managed to grab just a 6.78% share of the market since its launch in March 2007.

These are not, however, the only mobile operators active on land which the Georgian Government considers to be within its sovereign territory.

In the aftermath of the August conflict, Russia recognized the Georgian regions of South Ossetia and Abkhazia as independent states. Of UN member states, only Nicaragua has followed suit. Abkhazia, which lies at the eastern edge of the Black Sea, has been the scene of conflicts and tensions since the disintegration of the Soviet Union at the end of the 1980s, when ethnic tensions grew between the Abkhaz and Georgians over Georgia's desire for independence. The 13-month Abkhazian War began in August 1992, and hostilities flared up again in 1998 and 2001.

In the telecoms domain, Abkhazian desire for independence from Georgia is manifested in the form of two GSM operators which offer services in the disputed region.

One of these is A-Mobile, which started its operations on November 25, 2006. WCIS estimates that the operator now has just over 44,000 subscribers. The other, Aquafon, was established in March 2003, with its network becoming operational on July of the same year. WCIS market intelligence indicates that the operator now has around 82,000 subscribers. The population of Abkhazia is estimated to be be somewhere between 160,000 and 190,000. In September 2008, Aquafon officially launched its 3G network. 51% of Aquafon's shares are owned by Mondeo Holdings, an offshore company based in the British Virgin Islands, in turn owned Bermuda-registered ComTel Eastern, which also owns 31% of MegaFon, one of Russia's 'big three' cellcos.

On January 23rd, the UK's Guardian newspaper gave space to an article which was extremely critical of what its author percieves as the Russian Government's desire to "revive a lost empire, the Soviet Union." The writer of this piece, the lawyer Anthony Julius, alleges that "Russian businesses have... been encouraged to collude with state and state-security entities in order to expand Russian influence in the region," adding that "the Russian mobile telecoms company Megafon has operated in South Ossetia since 2004, and Aquafon (Megafon's subsidiary) has been in Abkhazia since 2003." Megafon, writes Julius "does not have a licence to operate in either region [but] on the day that fighting broke out in August last year, the company extended its coverage further into Georgian territory."

Not long before the conflict of last August, Georgia's telecoms regulatory agency had fined Megafon USD 3500 over what it alleged to be an illegal network, operated without a license, according to a Global Mobile Daily article at the time.

Although Russia and Nicaragua are the only UN member states to have recognised Abkhazia and South Ossetia, these two regions are also recognised by the de facto independent state of Transnistria, another disputed area within the former Soviet Union. Located mostly in a strip of land between the Dniester River and the Ukrainian border, Transnistria declared independence after the dissolution of the USSR. This led to a brief war with Moldova that started in March 1992 and was concluded by the ceasefire of July 1992. As with Abkhazkia, Transnistria is home to a telecoms operator of its own. Interdniestrcom, founded in 1998, offers Internet access and operates a CDMA2000 mobile network whose coverage area includes almost all of the Transnistria region.

Another de facto independent state on former Soviet territory is the Nagorno-Karabakh Republic, a predominantly Armenian-populated region which was the object of a dispute between Armenia and Azerbaijan as far back as 1918, when both countries gained independence from the Russian Empire. In the final years of the Soviet Union, the region re-emerged as a source of dispute between Armenia and Azerbaijan, culminating in the Nagorno-Karabakh War fought from 1988 to 1994. The country remains unrecognised by any international organization or country, including Armenia.

Again, this is a de facto state served by its own telecoms company. Karabakh Telecom offers GSM mobile services, PSTN services and Internet access, covering 75% of Nagorno-Karabakh and almost 100% of the capital Stepanakert and its suburbs.

In Africa, one state stands out for existing largely in a de jure capacity. Somalia has a weak but largely recognised central government authority, the Transitional Federal Government, but this is only the latest in a series of ineffectual, externally recognized governing authorities. De facto control of the north of the country resides in the regional authorities. Of these, Puntland, Northland State, Maakhir, Galmudug, acknowledge the authority of the TFG and maintain their declaration of autonomy within a federated Somalia, while Central, Southern Somalia and Kismayo are in the control of the Islamic Courts Union and Al-Shabab. Baidoa is currently the seat of the TFG, and Somalia's commercial centre. On the other hand, the Somaliland region in the north, with its capital in Hargeisa, has declared independence and does not recognise the TFG as governing authority. Its self-declared independence is unrecognised internationally due in part to opposition from the TFG and other countries, such as neighbouring Ethiopia, which fear ensuing secessionist movements.

Golis Telecom Somalia operates in North East Somalia, offering fixed and mobile services in both Puntland and the self-declared independent state of Somaliland.

I daresay this is not a truly exhaustive tour of telcos operating in states with varying degrees of limited diplomatic recognition. I just wanted to explore briefly the question of who extends communications services to people who live in the world's disputed territories. I enjoyed meandering around these curious places and if anyone reading this found it interesting that's even better.

Who provides telecoms services in states with limited recognition?