Middle East & Africa Telecommunications Insight


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Middle East & Africa Telecommunications Insight
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Tanzania ' s mobile market is gearing up for more competition with the expected arrival of a fast - growing international telecoms operator. According to local media reports in Vietnam, Viettel has acquired a 65% stake in mobile licensee Epocha and Golden Ocean Tanzanie Ltd (Egotel) for US$18mn and intends to invest up to US$337 .7 mn in the operator. The commercial launch of Egotel will bring the number of active mobile operators in Tanzania to eight. While we expect Viettel to make an immediate impac t given its experience and resources , we retain the view that the Tanzanian market will be unable to support that many active operators over the long term .

Crowded Market
Tanzania Mobile Operators By Market Share, March 2012

BMI notes that Egotel is one of up to 12 other firms with licences to provide mobile services in Tanzania, seven of which are active with varying levels of performances. According to regulatory and operator data, only the country's large mobile operators - Vodacom, Airtel and Tigo - have consistently recorded positive subscriber growth during the past 12 to 18 months. The four smaller operators - Zantel, TTCL, Benson and Sasatel - which account for less than 6% of the total subscriber base, have mostly experienced flat growth or a contraction of their subscriber bases during the same period. This may be related to the superior financial resources available to the larger operators, used for network development and introduction of new services. Tanzania is among the countries in the region that experienced an intense price war over the last three years, a development that depressed ARPUs and affected operators' financial performances. Although the intensity of the price war appears to have abated, we expect the fierce competition in the mobile market to sustain the downward pressure on ARPUs in the short-to-medium term.

Egotel won a national Network Facilities (NF) licence to provide fixed-line and mobile network services in Tanzania for TZS2.8bn (US$1.76mn) in November 2008. In December 2010, the firm announced plans to launch commercial services during Q111, a target it missed without providing any reasons. Egotel's inability to launch commercial services may be related to the paucity of funds and other resources, especially as the firm's network deployment is expected to be on a relatively large scale in order to gain a foothold in the market from the start.

BMI expects Viettel's stake and subsequent investment in Egotel to boost its network roll-out plans and sustain its long-term competitiveness in the Tanzanian mobile market. Details of the deal are fairly sketchy; however, it appears the Viettel board approved the move in August 2012, which would see the firm contribute around US$225.8mn of the total of US$337.7mn it intends to invest in Egotel. It is not certain where the balance of almost US$112mn will come from, although BMI suspects it may be from the contribution of the holders of the remaining 35% stake in Egotel. Viettel's strengths are mostly its considerable experience in emerging markets and significant resources for network investment.

BMI notes that Tanzania is the latest addition to Viettel's rapidly expanding portfolio of international operators. Viettel already operates in Cambodia, Haiti, Laos, Mozambique and Peru, but is bidding for mobile licences in Nicaragua and Cameroon. The firm has also indicated interest in entering Kenya. In 2011, Viettel reported consolidated revenue of US$6bn from 60mn subscribers across its domestic and international operations.

Part of the Telecommunications Insight series of newsletters, Middle East and Africa Telecommunications Insight provides informed and independent analysis on the main trends affecting the telecommunications industries in Bahrain, Egypt, Iran, Israel, Kuwait, Nigeria, Oman, Saudi Arabia, South Africa, Turkey and the UAE.

Regular features include BMI's 5-Year Industry Forecasts for fixed-line, mobile and internet segments covering telephone lines, mobile phone subscribers, internet users and broadband subscribers, PCs, TVs, pay-TV, cable and direct-to-home subscribers, as well as telecommunications equipment imports and exports. Middle East and Africa Telecommunications Insight also provides analysis of the impact of regulatory changes on industry performance and competitive Intelligence on leading telecommunications companies in the region.

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