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.

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

Azerbaijan: as the Ministry pushes 3G licences, the market is eyed by giant Russian cellco

It's time to take a break from writing about the rumoured sales of Zain's African assets to Vivendi (or whichever potential buyer is the flavour of the day), although I daresay there will be cause to return to that theme before too long.

Instead, I wanted to take the opportunity to take a look at a part of the world about which I got to learn a little while producing three annual iterations of a conference for telecoms execs from the former Soviet Republics of Central Asia and the Caspian region. One of these countries, Azerbaijan, is, according to recent local reports, moving closer to making 3G mobile licence awards, with the the Ministry of Communications and Information Technologies planning to distribute spectrum by the end of this year.

This is apparently not the Ministry's first attempt to bring 3G services to Azeris. According to a brief TeleGeography report, the MCIT submitted a 3G frequency use proposal to the country's cellcos in July 2008, "but few developments have emerged since."

Now, according the the Minister, Ali Abbasov, all the three of the country's GSM operators have already applied to the Ministry for 3G licences. These three operators are: Azercell, Bakcell and AzerFon (brand name: Nar Mobile), with market shares of 58.66%, 22.29% and 18.00% respectively as of March 2009, according to WCIS. A fourth player, CDMA operator CATEL/FONEX has just over one per cent of the country's mobile subs.

Given that oil-rich Azerbaijan is potentially quite an attractive market, it is striking that only one of these operators is associated with a significant multi-country group - market-leading Azercell is controlled by Fintur Holdings, a joint venture between giant Scandinavian telco TeliaSonera and Turkey's Turkcell. Fintur Holdings, via a mix of majority stakes and management control arrangements, is also active in Kazakhstan, Moldova, Georgia, Uzbekistan, Tajikistan, Cambodia and Nepal.

Strikingly absent from the Azeri market are big Russian cellcos, two of which, Vimpelcom and MTS, have each built a multi-country footprint across other parts of the former Soviet Union. This may be set to change, if recent comments from the latter company's CEO are interpreted as representing a firm commitment to further international expansion.

Speaking to Reuters on the sidelines of the of the St Petersburg Economic Forum earlier this month, MTS CEO Mikhail Shamolin said "there are two countries (where) we are not present yet and I believe we should be present... Kazakhstan and Azerbaijan."

Shamolin added that MTS is not thinking in terms of start-up operations in either country, which seems sensible given that mobile penetration in Azerbaijan and Kazakhstan stand at 71.11% and 93.81% respectively according to WCIS. "We are looking at acquisition opportunities there," said Shamolin. "We are waiting until the right time comes. When this opportunity shows up then we will consider it carefully." He added that the company was not holding specific talks with any Kazakh or Azeri firms.

In Azerbaijan, you would have to guess that TeliaSonera and Turkcell will look to hold on to their market-leading MNO. So let's see which of Bakcell or Nar Mobile might be targeted for an MTS takeover.

Azerbaijan: as the Ministry pushes 3G licences, the market is eyed by giant Russian cellco

The mobile phone: the tool of freedom fighter and terrorist alike

These are turbulent times for some mobile operators in South Asia. Earlier this week, India's oldest communications service provider, state-owned BSNL, had to shut down all of its mobile network base stations along a 500 km stretch of the border with Nepal. According to an Economic Times article, this was due to security concerns. "All the BTS towers of BSNL mobile established in all Nepal bordering districts including Basti, Balrampur, Bahraich, Gorakhpur, Shrawasti, Siddharthnagar and Maharajganj have been jammed," a Government source said on condition of anonymity." By taking this step we have tried to chop off a helping hand of those involved in anti-India activities on Indo-Nepal border," the official added.

This comes very soon after the mobile operators of Bangladesh lost revenues during the recent mutiny by members of the Bangladesh Rifles regiment. In a Daily Telegraph report, I read about the Bangladesh Telecommunication Regulatory Commission asking the country's cellcos to cut off services.

Further east, the tiny minority of Burmese citizens with access to mobile services had services suspended in during the 2007 protests led by Buddhist monks.

Even for those of us lucky enough to live in quite stable countries, it is easy to imagine how mobile devices could be used to accelerate the spread of dissent during times of unrest. The Burmese Government certainly takes no chances. Services are provided by a lone operator - the state-owned Myanmar P&T - to just 0.59% of the population (by December 2008), according to the World Cellular Information Service. It will not surprise many readers to see the close correlation between very low mobile penetration and a country ranking right at the bottom of the world press freedom index compiled by Reporters Without Borders. Burma is ranked 170 out of 173. Other countries in the bottom five are Cuba (2.93% mobile penetration), North Korea (0.02%) and Eritrea (2.13%).

More encouraging is the 19.51% mobile penetration rate of Turkmenistan. The Central Asian, former Soviet Republic was until recently notable for a long list of peculiar restrictions placed on its citizens. Former President Saparmurat Niyazov enforced a ban on satellite dishes, beards, long hair, ballet, opera and recorded music. These restrictions are now being gradually relaxed by the new President Gurbanguly Berdimuhamedow, who came to power after the death of his predecessor in December 2006. Although Turkmenistan continues to attract criticism as a repressive one-party state, the relatively more open society since the passing of the country's first President seems to correlate with the steady increase in the take up of mobile services. Penetration was just 4.40% around the time the Türkmenbaşy died in office. A year later this figure had doubled, growing faster still during 2008.

I am sure many applaud the mobile phone and Internet access as being useful tools for anyone seeking to weaken the grip of a repressive regime. These sames technologies, however, are equally useful to those keen to change the world in ways which do not meet with approval of the western media - hence the network suspensions in Bangladesh and on the India-Nepal border.

The mobile phone: the tool of freedom fighter and terrorist alike

Nordic telcos' emerging markets plans for 'challenging' 2009

In July 2007 I was pleased to provide meeting facilities for in Dhaka, Bangladesh for a gathering of the South Asian GSM Forum, whose Chairman Mehboob Chowdhury was a key supporter of the following day's Mobile South Asia conference of which I was co-organiser. Mr Chowdhury, a former Chief Commercial Officer of Orascom Telecom-backed Banglalink, had fellow Forum board member Stein Naevdal run the pre-conference meeting. Mr Naevdal, now CMO at Bakcell of Azerbaijan, was with Bangladeshi operator Grameenphone at the time, a company owned by Grameen Telecom and Telenor.

Having had the opportunity to meet members of Grameenphone's senior management team, and having had a quick look round a Grameenphone retail store on the busy streets of Dhaka, I have continued to take an interest in the performance of this and other MNOs across Telenor's collection of emerging markets operations.

An article carried yesterday by Telecompaper reported Telenor's cautious forecast for the "challenging" year ahead: stable organic revenues and an adjusted EBITDA margin around 34 percent, versus a reported 34.7 percent in 2008.

The article indicates that the Norwegian company's $US 1 billion purchase of a majority stake in Indian cellco Unitech Wireless is not expected to add significantly to revenue and will generate and EBITDA loss of of NOKA 2-2.5 billion ($US 295 million-369 million). Revenues are not expected to begin flowing from the greenfield operator, which has licences in all 22 of India's telecoms circles, until mid-2009.

The largest shareholder in Telenor, the 7th-ranked telecoms operator in the world in terms of subscriber numbers, is the Norwegian Government, which was apparently initially supportive when the business proposed a rights issue in order to fund the Unitech Wireless purchase while maintaining the company's credit rating.

While Telenor CEO Jon Fredrik Baksaas has continued to express great confidence in the long-term value of the move into the Indian market, investors have not responded well to news of the acquisition. The proposed rights issue has also attracted criticism, not least from Norway's Conservative opposition, which attempted to persude the Government to prevent Telenor from selling shares to fund the Indian adventure.

A Bloomberg TV interview with Baksaas on November 9th was prefaced with a reminder that Telenor's share price fell by as much as 20% on the trading day on which the Unitech deal was announced. Baksaas reponded by saying "The negative swing in the share price was greater than we had expected... but in order to build a long-term... mobile operation takes years." He reminded viewers that the company has been making such long term bets in Ukraine, in Russia, in Malaysia and in other countries for many years. "It is a period of investment that's needed in order to grow towards a sustainable, long-term position," Baksaas explained.

Baksaas told viewers about the criticism Telenor faced when entering Ukraine, then "one of the poorest countries in Europe" in 1997 and stated that Kyivstar now one of the best performing contributors to the Telenor business.

When interviewed by the same channel twelve days later, by which time the fall in Telenor's share price (since the Unitech announcement) was 26%, described by the interviewer as the largest in eight years, Baksaas was speaking about the good growth prospects afforded by India's low teledensity relative to other countries in the region. He sounded lukewarm about the prospect of Unitech getting involved in the Indian 3G licence auction, saying that the company would be intitially focused on "basic services". Baksaas was also keen to express the belief that the telecoms industry is likely to be more resilient than many sectors in a downturn.

Late last month, Telenor finally withdrew the proposed rights issue, electing instead to fund its investment in Unitech Wireless in India through a combination of cash flow and issuance of additional debt. A proposed immediate result of this will be to make no payment of dividend to shareholders for 2008 or 2009.

Yesterday, another Nordic telecoms giant was reporting a positive contribution from emerging markets business units. As reported by Telecompaper, TeliaSonera's Eurasian activities continued to show strong growth, with sales up 45 percent to SEK 4.2 billion and EBITDA rising 57 percent to SEK 2.1 billion. Consolidated since October 1, 2008, the operations in Nepal and Cambodia affected net sales positively by 5.8 percent. However, according to Total Telecom, TeliaSonera cautioned that it needs to "be prepared for a potentially drawn-out economic downturn that may affect consumer and corporate behavior."

Nordic telcos' emerging markets plans for 'challenging' 2009