Getting ready for take off

Mr. J.A.R. Bell, General Manager of Mobitel


Interview with:

Mr. J.A.R. Bell
General Manager

May 5th, 2000
Can you give us a brief historical background of Mobitel here in Tanzania?

Mobitel were granted a licence in 1993 and commenced operations in 1994 with an analogue network. Mobitel expanded rapidly and currently has the largest network in Tanzania. Mobitel services are available in Dar es Salaam, Arusha, Bukoba, Chake Chake, Dodoma, Mbeya, Mkoani, Morogoro, Moshi, Mwadui, Mwanza, Shinyanga, Tanga and Zanzibar. Further Mobitel network also covers a large number of Rural areas including Bagamoyo, Mererani and Saadani. Mobitel is committed to further expansion to cover all regional capitals and areas of major economic or social importance.

In 1998 we launched a pre-paid service called Simu Poa, together with a pre-paid card called Kadi Poa. The launch of a prepaid service resulted in a major expansion in the market and more than doubled the subscriber base in 1999. In November 1999 we launched Mobinet, which was Tanzania's, possibly at that stage Africa's, first free Internet service. We recently launched a Family & Friends service. We're obviously preparing a number of new products and packages to meet the new competition.

We currently operate on an analogue network which has the advantage for underdeveloped or developing countries of having a wider range - you can get a signal from a cell site in our analogue network, reasonably well up to 75 kms, and on occasion up to 125 kms. The Mobitel network is able to transmit not only voice communication but also fax and data transmission and access to the Internet. Using fixed units subscribers are able to hook up computers and fax machines to bring fax data transmission and Internet access to people in rural areas without access to those services by any other means.

We recently signed a contract with Ericsson for the installation of a GSM network scheduled to be up and running in August 00. Implementation of this new service has commenced. The GSM network will be operated in addition to our analogue network. Therefore we will be the only company running both an analogue service and a GSM service. The GSM service will enable us to meet the demands of high end users and provide additional services, for example, caller line identification, international roaming, short messages whilst continuing to operate the analogue network will enable us to cover more of the rural areas.

You were the first cellular provider in Tanzania, but there's more competition coming in. Could you describe to us the development of the industry since you're here in Tanzania?

We commenced our service in 1994 and since that time have maintained our position as market leaders in terms of network coverage and range of services.

Tritel commenced operations in 1995 but have not expanded their national coverage to the same degree or speed as Mobitel.

Zanzibar Telecom, known as Zantel was issued a license to establish a network and an international gateway in Zanzibar. Zantel commenced operations in 1999. Zantel were originally restricted to only operating on but they have now been given a license to operate on the mainland of Tanzania.

On the 30th of June 1999, Tanzania Telecommunications Company Ltd. (TTCL) were given a license to establish a cellular network. TTCL did not commenced the rollout of the network within the six month stipulated period, and therefore their license expired. A mobile cellular licence is a condition of their privatisation plans so it must be assumed their license will be extended or re-issued.

In September or October 1999, Vodacom were granted a license to establish a cellular network and have commenced the roll out of their network at a very fast pace.

Who are the shareholders of Mobitel?

The major shareholders - 57% is Millicom International Cellular, a NASDAQ quoted company, operating 31 networks in 19 different countries in South America, Europe, Africa and Asia. They have the largest population under licence worldwide.

The Government of Tanzania has a 29% shareholding, formerly held through TTCL and now through the Treasury Registrar.

Ultimate Communications Limited a local Tanzanian company is the holder of the remaining 14% of the shares.

The market will be saturated very quickly I suppose, with all the competition coming in as well?

We welcome the competition is good, it makes us actively review our products and services. However, too much competition in a small market could be detrimental to the development of the industry.

Tanzania is a currently a relatively small market with a low level of telephone density. The population is approximately 33 million people and per capita income of less than $300 per year. It is an obvious fact that people earning below $300 a year are not able to afford a cellular telephone or other means of telecommunication. The low level of per capita income restricts the market. By comparison some other regional countries, for example Zimbabwe, S. Africa, and Kenya have larger, or more developed middle classes and therefore a larger market for communications.

With 5 licensed operators and a smaller market the competition is going to be very intense. For any network to be developed it must be economically sustainable. Excessive competition could lead to a price war with the consequence that service providers will tend to concentrate in areas of high population density, high demand and high revenues. This will restrict the development of networks into regional towns and rural areas.
By comparison, South Africa has a rapidly developing cellular market with millions of subscribers. They have only two service providers with the third about to be licensed. The SA government decided not to issue a fourth license.

The market will only become saturated when telecommunication services have reached all levels of the population. Access to telecommunications services will eventually trickle down to all levels of the Tanzanian population. Think of society as a pyramid with rich people on top and poor at the bottom. For any new consumer product, whether computers 15 years ago or mobile handsets now, consumption follows a similar pattern. It starts at the top with those that can immediately afford it. Then as the technology develops and production increases, prices come down within reach of the next lower level. Each segment of the pyramid represents a broader range of the population. Our target is to keep trying to make the service more affordable to the next level of the pyramid, accessing a greater segment in economic terms of the population. Our target is to bring telecommunications within affordable reach of a greater segment of the population - even if they cannot afford to buy their own handset.

Your Internet Service is another new service that you have launched. Can you elaborate on this?

Mobitel launched Mobinet Tanzania's first subscription free Internet access service. Since its launch Mobinet has exceeded our expectations. It was designed to bring Internet access within reach of those Tanzanians with access to a computer without the need for a subscription account and for visiting businesspersons and tourists. Mobitel is an information service provider, not just a cellular telephone company, and hence the move into providing Internet access. We are actively looking at other areas to provide additional information services. As we move down the GSM route we will launch new services including SMS and Internet access over a handset.

Can you give us some more statistics in terms of your staff and turnover?

We have 160 staff. Forecast revenue for this year is approximately 40 million dollars.

You were talking about covering the rural areas? Can you tell us about your expansion plans in terms of the network?

In a lot of the rural areas there is a very low population density and there is a very low earnings level. It's commercial reality that those areas are difficult to provide communication services. Our expansion is planned first into all of the regional capitals and in the areas of economic and social importance. Communications is a catalyst to development. Improved communications in these areas will improve business development and the economy. Demand for communications will then expand into the surrounding rural areas.

Given that you are the first cellular operator that came in the country, and given that there is a lot of competition; what would you say is your image in Tanzania?

We are fortunate that having been the first in Tanzania, people call a mobile phone a "Mobitel", so it has an advantage in terms of branding. We currently have the widest national coverage and the best customer service. However with the impending competition we will have to work hard to maintain our position. The introduction of our GSM network should help us to maintain that position. Vodacom are scheduled to make a major investments in their network with national coverage. We will have to be proactive to maintain our position as the market leaders and respond to each of their initiatives.

In terms of your future, with all the competition coming in, where do you see Mobitel in the next three years?

In the next three years, we plan to maintain our position as the leaders in the industry. In Tanzania there are five licensed service providers in a very competitive market. This may lead to consolidation within in the industry with one or more mergers amongst the 5 competing service providers. It is our intention to continue as a major player within the industry in Tanzania.

So what you are talking about is eventual mergers of companies in the future?

Internationally the major players are merging or acquiring smaller operators to achieve market share. This process could be repeated here with the purpose of acquiring subscriber bases and market share.

What is the best advice you can give to foreign investors who want to come to invest here?

There are enormous opportunities in Tanzania, but you have to have a large amount of patience. The investment climate could be better and should continue to improve. This country's strongest fact is its stability. However, following the period of Ujamaa or African Socialism, the majority of people have only known a system of state control and have not yet absorbed a more commercial culture. This will change in time and the business culture will be more commercially focussed. With this change the emphasis should be on a liberalisation and not deregulation and the encouragement for local businesses to become competitive. Excessive deregulation could lead to a "free-for-all", and the problems of grey imports, tax evasion and sub-standard goods.
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© World INvestment NEws, 2000.
This is the electronic edition of the special country report on Tanzania
published in Forbes Global Magazine.
October 16th 2000 Issue.
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