Tanzania update: Lucky seven or lucky eight?

Tigo Tanzania - one of seven or one of eight cellcos on the market?
photo from the Daily Nation (Kenya)

A little while ago, I wrote a piece here about the mobile market in one East African country whose title included the phrase 'lucky seven'. The point of that was to ask whether what I took to be that country's seventh cellco - a CDMA network operator using the brand name Sasatel - would be able to make much of an impact.

A anonymous DevelopingTelecomsWatch reader has pointed out that in fact that country, Tanzania, was already home to seven licensed mobile operators prior to the maket debut of new-kid-in-town Sasatel. As the helpful reader pointed out, HiTS Telecom already appears to have a presence in the country, asserting that the company launched GSM services in the Dar es Salaam region last month and is building out its nationwide network over the next two years.

I must be getting old. How did I forget to mention the HiTS Telecom Tanzania operation? Not only have I exchanged correspondence with someone who works for that operation, but I also (briefly) met one of their people at a conference in Nairobi earlier this year. A definite senior moment, then, for DTW.

That said, the HiTS Telecom launch last month does seem to have gone ahead with relatively little fanfare and also seems to have been somewhat behind schedule - in June last year, the group's CEO spoke to CommsMEA and indicated that operations would begin in late 2008. Around the same time, according to the Citizen newspaper, Excellentcom Ltd (which trades as HiTS Tanzania), signed a USD 180 million contract with Chinese telecoms solutions vendor Huawei, whereby the latter would start "building Excellentcom's network to enable it to cover the whole country within 13 months." If the work was meant to start immediately, then HiTS Tanzania would have national coverage around now rather than in the two years from now mentioned by our anonymous reader.

HiTS Telecom clearly has a presence in Tanzania, then, and while perhaps I can't be forgiven for neglecting to mention that in an article profiling the country's mobile market, you can possibly see why I remain a bit unsure of the status of the operation. That said, I definitely should have used the term 'lucky eight' in the title of the article rather than 'lucky seven', though perhaps the former would only make sense for Chinese readers of DTW.

Again, input from readers who really know the Tanzanian scene would be gratefully received.

In other Tanzanian news, the country's oldest and largest fixed-line operator, TTCL, whose CDMA cellular service has a small and dwindling share of the mobile market, is set to be affected by the withdrawal of the Canadian company which signed a three-year deal to oversee the incumbent telcos operations in 2007, according to a TeleGeography article on Monday.

It seems that SaskTel International's three-year management contract covering the operation, maintenance and expansion of the incumbent’s network to improve its financial, commercial and technical performance was meant to run until July 2010. The TeleGeography article states that the Candian company's departure "raises fresh questions over why a series of privatisation plans for TTCL have derailed."

The article goes on to say that SaskTel has reportedly submitted a 45-day notice (ends 12 July) notifying its intention to pull out of the deal citing its inability to raise the funding necessary to transform the operator’s fortunes. It seems that SaskTel has failed to secure government guarantees for a USD 1.5 million loan for TTCL, needed for various projects.

Hopefully the above improves upon my (clearly imperfect) previous Tanzania round-up for any readers interested in the telecoms scene of that country.

Be lucky.

Tanzania update: Lucky seven or lucky eight?

Zain Africa Speculation Watch: Episode 7

Dr Bahabri of HiTS Telecom: 'highly leveraged' Zain has been in talks with Vodafone, China Mobile - (photo from Comm.ae)

It's a matter of policy here at DevelopingTelecomsWatch not to write anything actively inflammatory. Controversy is not the watchword. There's no harm, however, in merely repeating contentious statements made by others. Is there?

One man seemingly unafraid of rattling cages is Dr Sultan A. Bahabri, Chairman of HiTS Telecom, the self-styled 'new opportunity communications company' that has invested in Brazil, Spain, Saudi Arabia and in several African markets.

Late last week, Bahabri spoke with the telecoms sector's very own man of mystery 'the Informer', offering his hard-hitting opinions on a range of issues. One of these was the recently much-discussed question of whether pan-MEA mobile player Zain is really going to flog its supposedly strategically vital African assets to some lucky punter.

Bahabri alleges that last year Zain was in serious talks with both Vodafone and China Mobile, claiming that the Kuwait/Bahrain-headquartered group is "highly leveraged and that leverage is going to be heavy on their shoulders for years to come."

The HiTS Telecom Chairman went on to make some fairly critical remarks about the manner in which Zain entered the Saudi Arabian market two years ago. The price paid for the country's third licence to operate was a whopping USD 6 billion, at a time when mobile market penetration was close to 80%. As Gavin Patterson of Informa Telecoms & Media wrote in his recently-penned Zain Group Q4 2008 update, mobile penetration in Saudi Arabia had passed the 100% mark by the time the third operator launched services. Patterson also saves us the bother of working out the cost of the licence per inhabitant of Saudi Arabia - USD 226: the world's most expensive on a per capita basis.

According to the Informer, Bahabri claims that his company also bid just over USD 4 billion in the Saudi Arabian auction, but that he could not have justified the bigger sum which Zain ended up spending.

Zain's management have not failed to notice sceptical remarks about their Saudi operation. In February last year, the firm's Chief Communications Officer Ibrahim Adel was interviewed by Mobile Communications International magazine, acknowledging that the move had been dismissed by some as one which that simply did not justify the expense. Adel noted that some observers had dubbed his firm's actions as a case of "crazy Kuwaitis, spending crazy money".

Adel argued, however, that the licence win was essential: "Saudi is a key strategic market for us. We couldn’t not be there."

Keep that word in mind: strategic - and fast-forward to the more recent critical remarks made by Dr Bahabri of HiTS Telecom. In last week's no-holds-barred chat with the Informer, Bahabri joked that "when you can’t think of a reason to justify that sort of spend, you just call it 'strategic'" - using the word as a barb, it seems to me. Many operators, he went on to add, have "a very dangerous combination of ego and cash. That leads to many mistakes."

Tough talk. Does it invite others to watch HiTS Telecoms closely and speak in similarly strong language should Dr Bahabri's organisation ever make moves which leave it open to criticism?

Returning to Dr Bahabri's suggestion that "highly leveraged" Zain was in talks with potential purchasers of parts of its business as far back as one year ago, fresh rumours were circulated yesterday that a sale of some sort is now on the cards - Bloomberg's Ambereen Choudhury writes that the telco has asked Swiss bank UBS AG to consider a possible sale of its African division, which it values at about USD 10 billion. The source? "Three people familiar with the plans."

These mysterious people told Choudhury that UBS "will oversee a review that may lead to a sale of all or part of the unit" and that "Zain is yet to decide on a sale, which would exclude its Sudanese operations."

In previous episodes of Zain Africa Speculation Watch we have considered the merits of various suitors that could step forward should Zain indeed decide that a sale is the best way forward. Of these, I noted that French telecoms and media conglomerate Vivendi has been dismissed by some analysts as being unlikely to be able to raise the necessary funds for an acquisition as significant as Zain's African unit.

Bloomberg's Choudhury, however, takes the time to consider a Vivendi bid and his unnamed sources allege that the company has actually approached Zain in recent months for exploratory talks about the latter's African division. According to Choudhury, Vivendi, which owns 53 percent of Maroc Telecom, has said it wants to revisit the idea of expanding its presence in emerging markets, having scrapped previous discussions about buying a stake in Dubai-based Oger Telecom in 2007.

Of the rumours feeding into Zain Africa Speculation Watch the mini-series, Ambereen Choudhury's are about the most specific. I have no idea, however, if they are the most reliable or credible. So, again I invite you to watch this space. Don't touch that dial. No flipping. etc. etc.

Zain Africa Speculation Watch: Episode 7

Good prospects for WiMAX as Uganda's mobile market grows strongly?

According to a recent Cellular News item, a new report from Pyramid Research predicts that mobile penetration in Uganda is expected to increase from 39.0% in 2009 to 70.7 % by 2014, driven by successful market liberalisation and increased competition.

Assuming the 39.0% is Pyramid's forecast y.e. 2009 figure, this is rather more optimistic than the 31.03% predicted by Informa Telecoms & Media.

The Pyramid report's author, Sylwia Boguszewska, anticipates that Uganda will see the second highest percentage increase in terms of mobile subscriptions in African countries - with only Cameroon's market set to grow more strongly.

Boguszewska notes that as a result of the liberalization process, the Ugandan mobile market is now contested by five mobile operators, three of which are well-established: MTN Uganda, Uganda Telecom, and Zain Uganda.

As Boguszewska explains, these longer-standing players have been joined more recently by Warid Telecom Uganda (in Feb 2008) and by Orange Uganda in March this year. A sixth entrant is set to join the fray soon. I understand that this will be an operation associated with the Ugandan arm of Indian eBusiness solution provider Anupam Global Soft, which, according to a Cellular News story from last summer, is owned by India's Reliance Communications and holds mobile and landline licenses. That same article stresses how far it might be unwise for any prospective new entrants to test the patience of of the country's regulator, the Uganda Communications Commission (UCC) with a delayed launch, recounting how HiTS Telecom came under fire for failing to launch on time. The recent launch of the France Telecom-backed Orange-branded MNO was facilitated by this failure on the part of HiTS Telecom. As was noted in Global Mobile Daily in March, France Telecom acquired a 53% stake in the Ugandan HiTS Telecom operation in October last year.

Released a little ahead of Pyramid's report was a Global Mobile Daily Uganda market update. This indicated that Uganda Telecom dominated mobile growth in 3Q08, with net additions nearly seven times as high as in 3Q07. It also reported strong interest in its W-CDMA services.

The GMD update suggests that Uganda Telecom's performance was thanks to the Libyan investor Lap Green, which acquired a majority stake in Uganda Telecom in 2Q07, and subsequently put in place an expansion strategy worth USD 115 million.

MTN Uganda, however, continued to report the highest ARPU in the market at USD9, and Uganda Telecom the lowest at USD5 in 3Q08.

The GMD update continues with an review of Internet services in Uganda, "which continued to grow in popularity, with fixed-broadband subscriptions increasing by 15% year on year in 3Q08."

"With total subscriptions reaching 4,050, fixed broadband is still the main mode of Internet access", continues the article, with mobile broadband accounting for only 500 subscriptions in 3Q08. Nonetheless, Informa Telecoms & Media estimates that mobile broadband subscriptions increased 150% quarter on quarter. According to Informa, deployments of fixed WiMAX are planned by licenced operators Infocom and TMP this year, following on from the launch of mobile WiMAX by Warid Telecom in December 2008.

Good prospects for WiMAX as Uganda's mobile market grows strongly?

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.

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