? Vodacom's revenues-per-user shrink by 28pc

MNAKU MBANI

THE mobile telecommunications sub-sector in Tanzania is already facing the effects of the major reforms that they have been implementing on their own initiative, as well as other measures which have been imposed upon them  by the Official Regulator, the Tanzania Communications Regulatory Authority (TCRA).

According to various reports garnered by Business Times from different sources – including some of the mobile telephony service providers – as calling rates have continued to fall, the service providers are in real danger of seeing their revenues drop, and a cut in subscriber growth of up to 20 per cent!

One report states that the voluntary reduction of mobile tariffs to a maximum of Tsh60 per minute as a way of increasing competitiveness has affected the companies' revenues – especially their Average Revenue Per User (ARPU).

But, this is good news for the consumers, as they had been an outcry to the general effect that calling rates in Tanzania were higher than those in the other East African countries.

According to the projections of the Business Monitor International (BMI) in its Tanzania Mobile Telecommunications Report for the Third Quarter of 2010, ARPU has fallen below US$5 (about Tsh6,800) per month for some operators.

Vodacom alone has announced a 28.7 per cent year-on-year fall in blended ARPUs in local currency terms – and operators are looking to offering a greater amount of non-voice services despite the absence of 3G licensing!

“The key competitive factor in mobile telecoms in Tanzania is still price; and there has been a lot of price-cutting going on, with 'specials' on network rates drawing in more users. This inevitably weighs in on ARPUs,” says the BMI report, a copy of which Business Times has accessed.

The average revenue-per-user surged to US$66 (Tsh81,000) during the second quarter of this year ? a figure which means that subscribers spend an average of $16 (Tsh22,000) per month.

However, with the ongoing price reduction wars, analysts in the sub-sector believe that the ARPU is expected to fall further as service providers still lower their tariffs.

Currently, almost all mobile telecommunication companies charge tariffs ranging from Tsh15 to Tsh60 per minute for calls within the same network.

The competition continues to become stiffer and stiffer... One telecommunications company recently launched a new regime under which its subscribers can call for as little as Tsh1 per minute!

However, analysts believe that, despite the fall in tariffs, interconnection rates have remained as high as Tsh300 per minute when a call is made to a different service provider.

The report also reveals that, following reduction of tariffs and the SIM card registration exercise which ended yesterday (July 15, 2010), the rate of growth in subscriber numbers would never be the same as had been experienced over the last decade.

Nonetheless, “subscriber growth is expected to slow to 20 per cent. At the same time, the average revenue per user (ARPU) continues to fall,” says the report.

However, its is projected in the report that with four major operators (Vodacom, Zain, Tigo and Zantel) the mobile market is expected to break the 50 per cent penetration barrier during 2010.

It is also feared that conclusion of the SIM Card voluntary registration might lock out of the sub-sector anything up to five million subscribers who will have failed to register their lines by yesterday's deadline. This is also bound to adversely impact upon the mobile companies' incomes.

The five million mobile subscribers are from Vodacom Tanzania Ltd, Zantel, Tigo, Tanzania Telecoms Company Ltd and Dovatel Tanzania Ltd.

In the long term, the mobile companies say, revenues from both voice and data are projected to drop by up to 20 per cent.

All this will affect not only Tanzanians, but also other East African residents who have hooked into a border-less network system that is being operated by Zain Tanzania Ltd, whose major shareholder is Bharti Airtel Ltd of India.

The Mobile Operators Association of Tanzania (MOAT) is, however, already up in arms against the move by the Government in Dar, arguing that phone-tracking and blocking telephony systems, are costly and can cause network delays.

MOAT argues that this is compounded by administrative difficulties associated with the fast churning-out of handsets that is prevalent in the consumer market – and the relatively short economic lifespan of handsets today.

They say the Tanzania Government’s move to block subscribers’ SIM cards will have adverse financial implications for the mobile telephony operators in the country.

Most mobile firms in Tanzania generate a lot of their revenues from direct sales of SIM cards on street pavements and in market places. In that case, failure by the Government to substantially extend the registration period would make most operators lose revenue.

Generally, BMI has found that “Tanzania's mobile telephony market has shown a convincing return to healthy growth after a real slip in the first half of 2009.”

It says after showing a real slump in growth in Q1 of 2009 – with only 397,000 new subscribers added to the market – the domestic mobile growth has picked up in every successive quarter.

“In the end, 4.143 million net additions came to the market in 2009, making the quarterly average 1.036 million, which is pretty good for a year that seemed to start so inauspiciously,” says BMI.

The best quarter was the last one in 2009, with 1.685 million net additions – more than any single quarter in 2008.

A good deal of the poor growth in the first part of the year was due to worrying losses from Zantel – and, to a lesser degree, from TTCL.

TTCL shows little sign of recovering, and may not be able to stand up to the competition from the larger and better experienced operators.

At first, it seemed like Zantel was also crumbling under the competitive pressure applied by Vodacom, Zain and Tigo. However, in the second half of last year, the firm recovered significantly.

The report also says that, despite the fall in revenues and slow growth in subscribers, other mobile telecommunication products have created a huge impact to the community. Among the more successful non-voice services has been mobile money transactions.

Although between 7 and 11 per cent of the 44-million Tanzanian  population has a bank account, Vodacom's M-PESA service has already seen over a million registered users since it was launched in April 2008, says BMI.

“We are expecting to see stronger growth over subsequent years, as Vodacom is also joined by others,” the BMI report predicts.

Interestingly enough, a local firm – Wide International Network (WIN) – has developed a new online payment system that will enable mobile telephone  subscribers to shop on-line.

The WIN chief executive officer, Isaac Kitinya,  is quoted as saying that users can make transactions on-line for services offered by different firms in tourism, travel, sports and entertainment.

Other available services are web maintenance and solutions, as well as  ticketing. These are facilitated by a proper integration of the Internet and mobile phone technology.