Zain Africa Speculation Watch: Episode 10 - Who's rejecting whom?

Today seems to be merger/takeover/tie-up-on-hold-day at DevelopingTelecomsWatch.

We begin with a brief visit to India for a peek at that country's most current mooted-marriage-gone-bad story before turning the gaze of DTW once again on the main subject of our fascination - the future of Zain's assets in Africa.

The deal which has stalled in India is a proposed merger of two state-owned telcos, BSNL and MTNL, which, according to an Economic Times story yesterday, has been put on hold for the time being because, in the words of IT and Communications Minister Gurudas Kamat, "the enabling conditions for the suggested options are not appropriate enough to lead to a successful merger."

OK. Back to Zain Africa Speculation Watch, the mini-series. Now running to ten episodes, is this still a mini-series though? I'd hate to think I'll be visiting this ad nauseum. I hadn't planned for this to run seemingly forever like Cheers, Friends or Seinfeld.

Writing this particular episode, however, could hardly be avoided - yesterday I gave up counting how many news services were carrying the announcement by French telecoms and media conglomerate Vivendi that it was "interrupting" talks about acquiring a majority stake in the African assets of Zain. As Cellular News observed, no reason was given for the break-off of the talks and no hint given about whether they would resume at some stage. The Cellular News article, however, reminded us that when the talks were confirmed earlier in the month, Vivendi said that it "attaches the utmost importance to keeping its credit rating and its dividend at their current levels and will continue to work in the interests of its shareholders." The article speculates whether recent comments from debt ratings agency, Standard & Poor's may have caused Vivendi to back off - the comments amounted to a warning that the company's credit rating could face a downgrade following any investment in Zain.

Staying with this theme for a moment, I'd like to recommend a rather amusing treatment of how Vivendi's credit rating might be affected - rough calculations and quick analysis by 'Somze', whose Telecommunication in Nigeria blog is well worth a read.

Andrew Parker of the Financial Times, meanwhile, asserts that while Vivendi has not ruled out restarting talks with Zain, much could depend on the level of interest from other companies. Parker suggests that France Telecom and Vodafone will be tempted to take a look at Zain's African operations because both have stakes in mobile businesses across the continent.

Elizabeth Judge of the Times, however, seems much more confident that Vivendi will resume discussions with Zain, writing that "people with knowledge of the talks, which would create a combined business with more than 62 million subscribers, indicated it was a temporary breakdown and that negotiations were likely to resume at a later stage."

These reports, then, don't really make any suggestions about what might have gone wrong. Thanks, then, to the good people at Gulf News, for translating into English a much more juicy story (from Kuwaiti daily newspaper Al Qabas), which gets straight to the point with the allegation that Zain has rejected a Vivendi offer mainly on the basis of not liking the terms and conditions of payment. This story also contends that Zain feels its financial position is strong enough to accept only the most beneficial offers.

One person emphatically not attracted to the truth of this is Kuwaiti blogger 'Alpha Dinar', who asks whether Zain rejected Vivendi or Vivendi walked away. 'Alpha' feels the latter is probably correct.

So, it feels like we are still some way from knowing how this saga is going to play out. I daresay what was once a mini-series will indeed run for a few more episodes.

Perhaps, though, we can be a tad more confident about developments in one outpost of Zain's African empire where the group does appear keen to cash in some of its assets. According to George Obulutsa of Reuters, the Kuwaiti group plans to give up its 35% stake in state-run Tanzania Telecommunications Company (TTCL), the largest fixed-line operator in the East African country and the owner of a struggling CDMA mobile service with just 115,000 subscribers, according to an estimate by the World Cellular Information Service from Informa Telecoms & Media. Zain also has its own GSM operator in the country, with an estimated 4.47 million subscriptions, which gives it a market share of 32.27%.

The Reuters article does not state why Zain wishes to end its involvement in TTCL, but I daresay this is not unconnected to the generally shaky state of the Tanzanian telco which has, since the early part of this decade, been in a number of joint management arrangements necessitated by its financial instability. The latest of these came unravelled very recently, with Canadian firm SaskTel International pulling out of a management contract covering the operation, maintenance and expansion of the incumbent’s network to improve its financial, commercial and technical performance. This was meant to run until July 2010.

So, while it seems pretty clear what's going on in that one particular corner of the Zain footprint, the bigger picture remains worth watching. Don't touch that dial. No flipping - etc. etc.

Zain Africa Speculation Watch: Episode 10 - Who's rejecting whom?

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?

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?