A Vodacom retail store. In 2017, Vodafone Group sold its 35 per cent stake in Kenya’s Safaricom to Vodacom. PHOTO FILE | NATION
East Africa’s mobile telephony market is set for more mergers
and acquisition as stiff competition puts the revenues of the existing
operators under pressure.
Global consultancy firm
McKinsey&Company Ltd says regional mobile phone markets are ripe for
consolidation to reduce costs, lower investment requirements and allow
weaker firms to survive.
“Consolidation and new types
of partnerships are likely but the pace and nature will depend on
regulatory conditions, industry structure and shareholder value,” the
firm said.
In Uganda, the mobile phone market is split
among seven operators, with MTN-Uganda being the dominant player in both
the voice and money transfer business.
Other players are Airtel Uganda Telecom (UTL), Africell, Smile Telecom, K2 Telecom and Vodafone.
In
2017, Vodafone Group sold its 35 per cent stake in Kenya’s Safaricom to
South Africa’s Vodacom Group Ltd, and last week the British telecoms
giant sold its New Zealand subsidiary to an investment consortium—
Canada's Brookfield Asset Management and Wellington-based infrastructure
operator Infratil — at an estimated price of $2.2 billion.
Vodafone had operated in New Zealand since 1998.
Competition
It
is argued that with increased competition in Uganda’s telecoms industry
coupled with a combination of the inability of the operators to raise
prices, the stage is set for increased consolidations in the coming
years.
Airtel, the regional subsidiary of India’s
Bharti Airtel has made a series of consolidation moves in recent years
including its agreement with Millicom International Cellular SA, to take
over Tigo Rwanda in 2017, the second biggest telco in the country by
market share.
Airtel also acquired assets in Uganda’s Warid and Kenya’s Yu Mobile, and consolidated operations with Millicom in Ghana.
In
Kenya, Airtel Kenya and Telkom Kenya signed a binding agreement in
February this year to merge their operations to form a single joint
venture company to be named Airtel-Telkom.
Bharti
Airtel is also looking to raise about $1 billion through an initial
public offering this month, with plans to list the shares on the London
Stock Exchange.
A 2017 Swedish Trade and Invest Council
report titled Opportunities in the ICT Sector in East Africa shows that
revenue from voice calls is shrinking, forcing traditional mobile phone
operators to diversify to other sources including data and mobile money
transfer.
The Council helps Swedish companies to grow
their international revenues and international companies to invest and
expand in Sweden.
In Rwanda, mobile phone penetration
continues to grow but it is held back by the country’s low urbanisation
rate and insufficient network coverage in rural areas.
Increased investments
However,
intense competition between operators is expected to contribute to
increased investments in underserved areas and expansion of existing
networks, boosting mobile subscriptions.
The telecom
market in Rwanda is dominated by three players — MTN RwandaCell, Tigo
and Airtel (with Tigo having merged with Airtel).
In
Tanzania too, the telecoms market is witnessing growing competition with
Vodacom (Tanzania), Tigo and Airtel controlling close to 86 per cent of
the market.
All the three telcos had expressed an
interest in acquiring Zanzibar Telecom Zantel, but Tigo eventually won
the bid to acquire an 85 per cent stake in the telecom from the United
Arab Emirates Group in 2015.
Viettel Tanzania Ltd
currently trading as Halotel entered the market in October 2015,
targeting rural areas with low cost products and services.
Other operators include Tanzania Telecommunications Company Ltd (TTCL) and Benson Informatics Ltd (Smart).
Network expansions
In
Kenya, mobile phone operator Safaricom has remained the dominant player
due to its ongoing network expansions in non-urban areas and its deeply
entrenched mobile money transfer platform M-Pesa.
Safaricom,
which is listed on the Nairobi Securities Exchange rode on increased
revenues from M-Pesa and Internet (data) to grow its revenues in the
12-months period to March 31, 2019.
Its net earnings for the financial year ended March 31, 2018 stood at Ksh55.29 billion ($552.9 million).
“In
a year where macro issues weighed on customer choice, we continued to
generate positive momentum. We achieved this by focusing on the
customer, investing in the quality of our service, the performance of
our network and creating differentiated customer experiences,” said Bob
Collymore, the telco’s chief executive.
Partnership
Early
this month, Safaricom entered into a partnership with Equity Bank,
which runs the Equitel money transfer service, to build synergies that
will help the two firms increase their market share and boost revenues.
Airtel
and Telkom Kenya have also formed a partnership after individual
attempts to dilute Safaricom’s dominance failed to yield fruit.
Latest
data from the Communications Authority of Kenya for the three-month
period to December 2018 shows that M-Pesa has 26 million active
subscribers followed by Airtel Money (four million subscribers) and
Equitel (two million customers.)
However, during the
period under review, Safaricom’s market share for mobile subscriptions
dropped by 0.9 percentage points to stand at 63.3 per cent while Airtel
Networks Ltd gained 1.1 percentage points to record a market share of
23.4 per cent.
The market shares for other operators
such as Telkom Kenya Ltd, Finserve Africa Ltd and Mobile Pay Ltd were
recorded at nine per cent, 4.2 per cent and 0.2 per cent respectively.
According
to GSM’s Mobile Economy Report 2018, slowing unique subscriber growth,
regulatory intervention and intense competition continue to put pressure
on mobile phone operators’ traditional mobile revenue
However,
Kenya, along with Uganda and Tanzania, has benefited from exponential
growth of mobile content in Kiswahili, with the number of mobile apps in
the language increasing from around 5,000 in 2014 to almost 30,000 by
2017.
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