Tanzania telecoms market
Tanzania is one of Africa’s most liberalised and competitive telecoms markets with significant potential for growth.
The country’s government plans to establish the country as an ICT hub in the region by improving its international and domestic connectivity.
A number of projects are already underway on both fronts, as the government looks to strengthen the country’s national backbone, as well as deploy more subsea cable landing points.
One such initiative is the 5,300km National Information Communication and Technology Broadband Backbone (NICTBB). The project is designed to provide affordable data traffic to support e-education, telemedicine, e-agriculture, e-commerce and e-governance at all regional and district centres.
In August, the second phase of the NICTBB was completed, connecting Dar es Salaam Lindi, Mtwara, Songea, Makambako, Mbeya, Tunduma, Sumbawanga, Kigoma, Manyovu – Biharamulo, Bukoba, Mtukula, Nzega and Tabora to the national backbone.
The third phase of the project will connect the western side of the ring from Tunduma on the Tanzania/Zambia border to Biharamulo in north western Tanzania. It is scheduled for completion by March 2013. The network now also reaches border points with Uganda, Kenya, Rwanda, Burundi, Zambia and Malawi, with Mozambique to follow.
With the launch of the SEACOM submarine cable in 2009, and the Eastern Africa Submarine Cable System (EASSy) the following year, Tanzania already boasted significant international capacity, and the arrival of a third cable this year has enhanced the country’s capabilities further.
In August, the Seychelles East Africa System (SEAS) submarine cable became the latest addition to Tanzania’s connectivity portfolio. The €27 million cable, linking Beau Vallon on the main island of Mahé in the Seychelles with Dar es Salaam, was mainly designed to increase capacity to the islands but will also drive traffic through Tanzania.
The Tanzanian government is also reportedly eyeing a submarine link with landlocked Uganda, across Lake Victoria. The cable project, which, according to local reports, is being carried out in collaboration with the Ugandan government, will travel via Mtukula on the border of Tanzania. It is designed to increase Uganda’s internet transmission capacity and improve the reliability of transmission connection between the two countries.
African carrier’s carrier, Six Telecoms, which operates out of Dar es Salaam, believes that data pricing in Tanzania is still an issue and more of the country’s subsea capacity needs to be used. “Ideally, we see the data market growing and increased consumption will be realised. Critical mass consumption will be reached if pricing allows,” says a company spokesperson.
Tanzania’s mobile sector is fiercely competitive with eight players presently operating in the market. Surprisingly, however, this has not held back further interest from international investors. Vietnamese telco Viettel recently purchased a 65% stake in Tanzanian firm Epocha & Golden Ocean (EGOTEL) for $18 million as part of a wider investment in the country.
Viettel plans to initially inject $61.7 million into EGOTEL with another $146.1 million in loans from shareholders. EGOTEL holds a network facilities licence for fixed-line and mobile networks, which was awarded in 2008, but has yet to launch commercial services.
“Viettel seems to be serious about establishing a footprint in Africa – they launched in Mozambique earlier this year. The effect on the market in Tanzania will be limited though because it is already very competitive,” says Peter Lange, senior analyst for Africa at BuddeComm.
The country’s mobile players have been targeting rural deployments to help expand their subscriber base. Zantel is reportedly planning to invest heavily in its 3G/3.5G network over the next two years with the intention to reach 20% market share in the next two years, from 6.7% at the end of March.
MIC is reportedly engaged in a $100 million investment in capacity upgrades and network expansion with the intention of reaching all 26 of the country’s regions by the end of 2012. Airtel Tanzania is also planning to increase its rural coverage and the availability of its mobile money service, with the intention of claiming more market share than its rivals.
With so many mobile players in the market, a price war has developed in Tanzania, lowering ARPU to unsustainable levels according to Lange. Service quality has also suffered under the traffic load generated by mobile promotions.
At the Capacity Africa event earlier this year, Tanzania’s Minister for Communication, Science and Technology, Makame Mbarawa, announced that the government would begin operating a telecommunications monitoring system in December to track the amount of money generated in the sector.
The project is reportedly due to government dissatisfaction with the low returns the industry is generating, amounting to only 2.1% of overall GDP. Lange believes that consolidation will be necessary among the market’s smaller players to make the sector more profitable.