Africa�s mobile newcomers target off-centre country markets

21 January 2008

Just as mobile markets in Africa seemed to be consolidating and the price for new entrants was going off the scale, a new wave of competition is breaking. Africa�s two newest mobile operators � HITS and Warid Telecom � are both concentrating on what analysts would call the �low cards in the pack� in order to get a foothold before tackling larger territories. Both come from re-invested oil money earned in the Gulf and have ambitions to play on a larger stage. Warid�s Wateen Telecoms looks set to offer some additional surprises in Uganda. Russell Southwood asks whether the newcomers will re-ignite the market or simply fizzle out after their high profile launches.

Warid Telecom has been going through the formal launch ceremonies for its services in both Congo-Brazzaville and Uganda but users in both places will have to wait a few weeks before getting actual services. According to Joseph Walusimbi, its Head of Marketing:�We�re currently going through a pre-registration exercise with customers but the actual launch date will be in January.� That said, 150,000 customers have pre-registered interest in buying the service.

Warid will offer its Ugandan users a pre-paid GSM network and with 380 base stations it will cover 70% of the geographic area of the country. Technology partners are Ericsson, Huawei and Motorola. This first phase investment has cost US$200 million and the second phase that will cover the rest of the country will cost an estimated US$400 million.

It is seeking to differentiate itself from the three existing operators (Celtel, MTN and utl) by emphasising its network quality. In price terms, it remains a little cagey. According to Walusimbi, �we�ll be affordable and no higher than the other players.� He says that the current market is around 4.5 million subscribers and that it expects to get 1.2 million (27%) of this market.

The surprise is has up its sleeve is the roll-out of a Motorola 802.16e Wi-MAX network later in the year through its subsidiary company Wateen Telecoms that according to the vendor will allow VoIP calling and VPNs. Elsewhere in Pakistan, it has already rolled out a Wi-MAX network covering the 22 major cities and has offered this capacity as a carriers� carrier. In addition, it has plans to offer �triple play� services that may yet also see the light of day in Uganda. If it only half-way succeeds in these ambitions it will be lighting a flame under both MTN and utl who are both unified licence operators.

In Bangladesh, Warid is the sixth mobile operator and it got 150,000 customers in its first week of operation. It invested US$150 million in that operation and a further US$291 million in its Pakistan operation so it is not a �short-pocket� player.

Sheik Nahayan Mabarak Al Nahayan, the president of Warid Telecom, told those invited to its opening ceremony in Brazzaville that the company aimed to be the "biggest mobile telephone company in Congo and even in the whole of Africa". It says it has spent US$79 million on setting up a 44 base station network in the country.

Warid Telecom is owned by the Abu Dhabi Group, a large conglomerate based in that country that is owned and controlled His Highness Sheikh Nahayan Mabarak Al Nahayan, a member of the Royal Family of Abu Dhabi� who is also Minister for Higher Studies and the Chancellor of the University of Al Ain. The Group is one of those typical Gulf family conglomerates that has its fingers in all aspects of trade and finance in Abu Dhabi, particularly banks and car and truck imports.

The other newcomer is HITS Telecom which plans to launch later in the year in Uganda but has started operations in Burundi. HITS is the sixth mobile operator to receive a telecom licence to operate in Burundi. Its five other competitors are ONATEL Mobile (the incumbent), U-COM, Africell, and Econet Wireless. Of all these mobile telecom operators, only ONATEL mobile and U-COM cover the whole country, although its signal is weak and almost non-existent in some areas. It will also offer data services branded Omax later in the year. Only U-Com currently provides a mobile Internet service either through an expensive USB device or a portable fixed telephone locally known as Telema.

HITS in Uganda is 88 per cent owned by its Saudi Arabian investment company Middle East and Africa Investments Company and 22% by local investors through a vehicle called Veritus. Its CEO Edwin Rowell has announced the same level of investment as Warid, US$200 million, although the spending of it is phased slightly differently.

Rowell is clear that price will be a key market driver: "All over the world, the expansion of the number of operators and the associated competition drives down tariffs and improves service for the customers. Uganda will not be an exception to this principle." It believes that the overall market is nearer to 9.5 million than its current number and plans to acquire a significant chunk of this larger market. Its approach is different to Warid in that it has contracted Alcatel on a �build and manage� contract as it is not primarily a network operator but a trading investor, selling shareholding when it has realised financial gain.

Both players will only really establish a foothold in the market if they can reduce both operating costs and prices to users. As new entrants in the market, they both have the advantage of probably getting better deals from equipment vendors and therefore will already have lower CAPEX costs. Additional competition is bound to drive rates in a downward direction and this will persuade the reluctant major mobile chains to slowly migrate their own charges downwards. Up to a point, price elasticity will do the rest.

The biggest challenge for both new operators is how � beyond price and quality of service � to capture the hearts of potential customers. A mobile service is a mobile service is a mobile service. All the rest is branding that will somehow capture them emotionally and there�s not much sign yet pre-launch of how they will tackle this all-important task.

Ends

Source: http://www.balancingact-africa.com/news/current1.html