Tay Grin - star of the African hip hop scene... and Malawi's mobile sector?It is not with any pleasure that DevelopingTelecomsWatch sometimes observes a country's mobile market and concludes that one of more of its competing cellcos surely seems doomed to fall by the wayside. All such enterprises are doubtless founded in good faith and with the firm intention to reward investors and employees for providing services to customers who will want them. A somewhat recurrent theme of this blog, however, in its first year, has been to wonder aloud about likely market consolidations around the world, and to speculate a little about which actors might be shaken out in any such eventuality.
In March, DTW picked up comments on this topic from MTN CEO Phuthuma Nhleko, spotted in a Financial Times article. Nhleko was quoted as saying that he believes Africa will see a wave of telco sector consolidation in the next 1-2 years, and the article contended that this will result from both new entrants and more established competitors struggling to maintain healthy margins in increasingly crowded markets.
Shortly after this, DTW took a look at some examples of particularly congested competitive environments in Africa, starting with Benin, the continent's 31st largest country in terms of the size of its population. We noted that five mobile operators now compete in a country of just 8 million people.
In the same month, DTW articles asked about the potential for mobile market consolidation in Burundi and in Gabon. By June, the same questions was being asked of Tanzania. A related post the same month zeroed in on Malawi, which might be something of a different case.
In that piece, it was noted that this under-penetrated market (still only 17.47% mobile penetration as of end-December 2009, according to WCIS) may offer a decent opportunity for a new entrant. At present, a duopoly exists, with the country's mobile subscriber base split between Zain's Malawi operation and Telekom Networks Malawi, a cellco in which the country's incumbent fixed line operator Malawi Telecommunications owns a 44% stake. Market share now (as of end-Dec 2009) is as follows: Zain 71.34%; TNM 28.66% (estimated figures, again from WCIS).
The June article on Malawi noted that country's telecoms regulator felt that the services offered by these two operators were at a price point which did not offer a fair deal to consumers. Zain responded by blaming high tariffs on high taxes. The market-leading operator also claimed that as the overall mobile market grows in Malawi, it will be able to lower prices. Zain Malawi's Managing Director Fayaz King explained: "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."
The regulatory agency apparently remains unmoved by this line of argument. Aiming to bring down prices and extend service availability to the wider population, the Malawi Communications Regulatory Authority felt that the best course of action was to open the market to a third entrant. As early as April this year, press reports were naming this third entrant - Globally Advanced Integrated Networks, the holder of the G-Mobile brand name.
Does Malawi, then, really offer a good prospect for this third entrant? As discussed back in June, there are reasons to suppose that while there are certainly numerous European countries with populations smaller than that of Malawi sustaining three or more mobile operators, the landlocked southeast African nation might nevertheless offer insufficiently attractive returns for prospective new entrants. 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.
However, even in this context, mobile penetration is very low, as we have seen, even when compared with other underdeveloped African economies. So there could be room for one more MNO.
Is GAIN/G-Mobile, though, a likely candidate for success as a third entrant in this environment? Perhaps not. Due to the economic factors mentioned above, DTW suggested back in June that 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.
G-Mobile, seemingly not aligned to any such major international telecoms group, certainly does not fit that description.
Who, then, is behind this latecomer to the Malawian mobile scene? The only person connect with the business whom I have seen quoted in the press is one Limbani Kalilani, the company's Vice Chairman. Mr Kalilani appears to be something of a celebrity in Malawi - and is working to become more well known across and beyond Africa. Although he has some track record in the telecoms industry, having set up a wireless payphone company called Phone Yanu, it is in the music world that Kalilani has made his real impact. Better known to his fans as Tay Grin, Mr Kalilani has established himself as a hip hop artist. Here he is in action:
It would be truly admirable if Tay Grin can succeed as both an international music phenomenon and a domestic business success story - more admirable still if it is his indigenous Malawian company that manages to bring the benefits of mobile communications to a larger number of his compatriots than can currently afford the services offered by the two established cellcos. DTW would be instinctively in favour of this form of African empowerment.
Are there already signs, however, that the going will prove as tough as DTW fears? Perhaps.
TeleGeography has recently reported that G-Mobile has admitted it will not be able to meet the 31st December 2009 deadline for the rollout of its network as stipulated by its licence. Instead the company plans to request an extension to the deadline from the regulator, and will make up for the delay by combining rollout phases outlined by the concession. Let's wait and see.
G-Mobile's rivals, meanwhile, are making progress of their own. TNM has launched its W-CDMA/HSDPA network, with Charles Kamoto, head of the cellco's Commercial Services division, saying that the service is initially only available to post-paid subscribers but that prepaid customers will soon have access 3G. Kamoto added: "Most less developed nations do not have this service on board for their customers but in Malawi we are very aggressive, we believe that our customers need quality, they need top-notch services and that is why we had to bring this 3.5G technology."
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