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?

Cellcos banking on m-financial services in tough 2009?

I recently made reference to the Mobile World Congress preview written by my former colleague, Informa Telecoms & Media Chief Research Officer Mark Newman. Mark's article was in large part dedicated to wondering about how tech vendors would be able to balance showcasing next generation mobile broadband technology with addressing operators' concerns about the need control costs in response to the global economic downturn. Right at the end of the article, however, Mark found the time to say that he felt growth potential in emerging markets will remain a theme of so this year's event, adding that discussions could centre on mobile banking.

There does seem to have been plenty of activity in this area of late, across a wide range of emerging markets. Yesterday's Cellular News email carried a highly relevant article about UK-based Monitise, which says that it has been awarded US$1.5 million by the Africa Enterprise Challenge Fund (AECF) to help fund the launch of its mobile banking and payments service in East Africa.

Monitise East Africa will initially offer services in Uganda and then plans to expand into Burundi, the Democratic Republic of Congo, Ethiopia, Kenya, Rwanda, Tanzania and Zambia. The service will enable the provision of banking, payment and money transfer services by both banks and mobile networks, within the regulatory framework of each market. Hugh Scott of AECF said: "By helping enterprises to build successful businesses in Africa, we believe that we can make market systems work better and generate wealth that benefits the entire society. Through the extension of the reach of the banks and allowing people to save, make payments and transfer money to their families, we believe that Monitise East Africa has the potential to transform the economic outlook for literally millions of people. I also firmly believe that in due course many of the people who use the service will, through the empowerment that a savings and payments culture delivers, become business people themselves, creating a truly sustainable economy."

The cellular news piece mentioned that the news from Monitise and AECF coincides with a recent launch by the UK's Department for International Development of a £1.4 million fund to spur the development of biometric and mobile phone-based banking in emerging economies in Asia and Africa. Known as Facilitating Access to Financial Services through Technology (FAST), this project will explore the options for introducing 'branchless banking' in developing countries and look at how technologies such as mobile phone banking can help the poor to access financial services.

Also in the news in recent months have been related operator-led initiatives - or at least initiatives in which certain MNOs are key partners. Again with reference to East Africa, I read a Global Mobile Daily new item just this week about Zain launching mobile banking services in Kenya and Tanzania in partership with Citigroup and Standard Chartered. Branded 'Zap', this service is also set to be extended to Uganda. Zain intends to offer the mobile banking service as part of 'One Network' allowing subscribers to send airtime to each other across Kenya, Tanzania and Uganda without roaming charges. 'Zap' is supported on all devices including ultra low cost handsets (ULCH) which are especially popular in Africa.

I also noticed last month, again courtesy of Global Mobile Daily, that in the same region, Rwandatel, the Rwanda-based unit of Libya's LAP Green will launch a mobile banking and cash transfer service in October 2009, according to reports, allowing subscribers to send and receive money via SMS. The operator has a target of 600,000 subscriptions by the middle of 2009. My feeling is that the low level of mobile penetration in the country (13.36% at y.e. 2008, according to WCIS) will be something of a stumbling block. I daresay that higher rates of penetration in some of the other markets mentioned here will mean that the benefits of mobile banking will spread faster elsewhere.

Ugandan incumbent telco, Uganda Telecom, meanwhile, has selected software developer Redknee to provide its 'Mobile Money 2.0' mobile money transfer solution, according to a Global Mobile Daily article this week, which reports: "Redknee's new Mobile Money 2.0 service will aim to allow subscribers to store and transfer money through their mobile device, and will be targeted at rural communities with poor or limited banking resources. Implementation of the solution will begin as soon as all requirements for launching the service have been approved, and will initially be available for subscribers making domestic payments and transfers, before being expanded to microfinance initiatives."

While there is plenty of mobile banking news coming out of East Africa, Francophone West Africa has seen fewer developments. In December, Global Mobile Daily reported that Orange, together with French bank BNP Paribas, will launch its Orange Money service in Côte d'Ivoire, apparently the first mobile-based payment and money transfer service in Western Africa, according to the operator.

This claim seems a little strange given that around a month earlier, GMD reported that Senegal's Sonatel is to offer the Orange Money mobile money transfer service in the country in partnership with banking group BICIS.

As a UK citizen, currently resident in my home country, and as someone who has lived in Poland, I could not have failed to notice this decade's westward movement of people from the EU accession countries of Central and Eastern Europe. When I returned from Kraków in 1997 after four enjoyable years working there, I initially found it frustrating to have very few opportunities to practise speaking the Polish language, with which I'd made some headway in my time away from home. In the years that followed, it soon became that case that not a day would pass without having the chance to chat with someone po polsku, be it a colleague in the office, the guy delivering groceries, the lady serving me coffee on the way to work or the carpenter quoting me a (very good) price to build a bookcase. It felt like Polska had followed me across the Baltic en masse. I love it that I can buy a jar of bigos and a packet of pierogi z mięsem on the high street of the SE England commuter town where I now live. It also makes me smile to travel along London's Finchley Road and see Polish language bus shelter advertisements for money remittance services. My guess is that a good proportion of the monies earned by the grocery van driver, the coffee shop lady and the carpenter have been sent back to Poland to support families there.

In December, the UK's NatWest bank gave these members of our large Polish migrant community a new option - send money to Poland from the ‘Polish Welcome Account' via a mobile money transfer service. Maybe it's a pity that this service was not launched sooner. My feeling is that the number of Poles working in the UK is set to fall rather than rise. That said, a Banking Times article of 23rd December indicates that Polish migrant workers send an estimated £1 billion a year to their homeland.

Migrant workers sending money home via mobile remittance services could be one of the m-financial services applications with the best prospects. Of these, I would guess that the new international version of Safaricom's M-Pesa services may become one of the most widely known.
M-Pesa, developed in partnership with Vodafone, has just netted another award at Mobile World Congress. Receiving the awards, Safaricom CEO Michael Joseph said: “We are very proud of the M-Pesa service. It continues to impact positively on the millions of Kenyans who have no access to banking services."

Now, in addition to Safaricom subscribers being able to transfer money and make payments within their home country, they can now take advantage of an international money transfer service between Kenya and the UK. According to a Global Mobile Daily article back in December, users of the service will be able to send money from Western Union agents in the UK to subscribers to Safaricom's M-Pesa mobile money transfer service.

Hot off the press today is news of further investment in an MVNO set up specifically to leverage the demand for international remittance services for migrant workers. Japan's Sumitomo Corporation today announced its involvment in Malaysia's first-ever MVNO, Merchantrade Asia Sdn Bhd, whose focus is prepaid mobile and remittance services targeting foreign workers, from Bangladesh, Indonesia, Nepal, the Philippines, Vietnam, India and Sri Lanka. The press release indicates that in Malaysia there are over 2 million foreign workers in various industries such as construction, plantation, manufacturing and service sector.

Merchantrade launched its mobile service in mid 2007 and as of January 2009, it has 94,000 active subscribers, according to the press relase, which continues: "as for the remittance service, Merchantrade obtained the license to operate remittance business from Central Bank of Malaysia in 2007. One of the pioneer non-bank organizations to receive license to operate remittance business in Malaysia, Merchantrade outbound remittance transaction numbers is growing aggressively. Such remittance service is in line of the global efforts targeting to secure the transparency on the personal remittance."

All of the above suggests that Mark Newman is not too far wide of the Mark in tipping mobile financial services in emerging markets as a bright spot in a tough 2009.

Cellcos banking on m-financial services in tough 2009?