Anthony Masunga, the Managing Director of the Botswana Telecommunications Corporations (BTC) barely cringes at the emergence of Liquid Telecom, a new entrant which plans to shake up the market by introducing highly competitive products that are previously unknown to the domestic market. Not even the fact that Botswana Communications Regulatory Authority (BOCRA) the regulator, is enforcing tariff reductions on voice calls, which commentators fear is a threat for the whole telecommunications sector, invoke the telecommunication giant MD’s apprehension. Nor too does the fact that Minister of Transport of Communication Kitso Mokaila is making the rare but right noises for the mobile industry to mark down data charges.
While the leading mobile network provider, Mascom, dug in its heels by challenging the regulator’s tariff reduction order, Masunga says he would rather “focus on BTC strategy which is quite bullish”. “The issue is we understand regulations and liberalization. There has been waves of liberalization and will continue to happen. There will be opportunities of course.”
BOCRA has directed that all mobile phone companies reduce their Mobile Termination Rate from 29 Thebe, to 22 Thebe. It had further directed that there be an additional reduction from 22 thebe to 13 thebe by 1st June 2018. The regulator instructed further reductions, demanding that the companies commence a reduction on their Off Net Premium On Off mobile voice calls towards 1st June 2018.
Industry experts agree on one thing: the reductions are blow to the telecommunication industry and will hit network operator significantly. Kennedy Motang, the Information, Communication and Technology (ICT) Director at the Botswana Investment and Trade Center (BITC) argues the one who will experience the biggest setback will be the one with the most subscriber base, subjecting them revenue to the strain. “Telecommunication companies make a lot of money from voice,” he says, observing that there is a growing trend in people moving away from voice to data, even though data margins are still low due to high costs and inefficiency when compared to Wi-Fi.
In a catch twenty-two for mobile operators, those who have paced high value on data services now face increasing public and government demands to bring their data tariffs down.
Even though consumers tend to use multiple sim cards in Botswana, Mascom Wireless retains the largest subscriber base. Its subscriber base is in excess of 1.8 million giving it a market share of just over 53 percent of the Botswana mobile telecoms market. Orange has around 900 000 while Be Mobile trails behind with around 300 000.
Currently, Mascom is at loggerheads with BOCRA after it refused to implement the revised tariffs arguing that the tariffs will eat deep into its revenue, which will adversely impact on its profitability.
Customers and observers, raise concerns that while mobile network companies seem to charge high rates on voice calls, they offer poor quality, characterized by dropped calls and call failures, because the mobile phone companies lack capacity and capability.
Bashi Kikia, an independent Information technology (IT) expert argues that the companies remain expensive because they lack the infrastructural capacity to effectively provide data and voice network services. Kikia, who owns an IT company called Real Time Solutions, says there is no way the three mobile services giants will give Batswana a taste of quality service. The problem according to him is high congestion by network users especially in Gaborone, which overwhelms the capacity of Mascom, Orange and Be Mobile. The IT guru says that mobile network companies do not have enough transmission towers which could reduce traffic congestion and increase the quality of their services. He says that in Gaborone, where there are more cell phone users, the population overwhelms network service providers more than in other areas where there is less traffic and better service.
Kikia says the mobile providers ought to invest in infrastructure to increase the spread of network service and reduce traffic congestion.
While a reduction in data cost was not specified by the BOCRA directive, such reduction may be in the pipeline, according to the Ministry of Transport and Communication. Motang argues that reduced data charges will cause a serious problem.
While other commentators agree that the extent of the damage to telecompanies will depend on their market share, Garry Juma, Research analyst at Motswedi securities argues that for BTC to reverse the damage they need to grow their market share from where it currently stands, so as to benefit from economies of scale. “If charges are expensive there will be less subscribers but if they are cheap then more people subscribe and there will be that increase in revenue.” BTC is the smallest network provider with about 17 percent market share which grew by a paltry 2 percent from the previous year. Mascom enjoys 53 percent of the Botswana mobile telecoms market ahead of Orange with 32 percent.
Tshegofatso Tlhong the Portfolio Manager at Kgori Capital argues that the extent of the problem depends mostly on the how telco’s build their business structure. “It depend on how your revenue is structured, so if you are mostly data driven then it will hurt”. Like Motang she admits voice has hit a bit of a plateau, which means growth can only come from data.
Tlhong says if telco’s are mostly data driven and the network operates smoothly at capacity, tariffs will come down as customers will consume more data. The market has seen this with ADSL broadband that when prices came down consumption spiked. The observation has been that it’s not that people don’t want the internet it’s just that it’s expensive. Tlhong suggests this as the reason behind the popularity of social media based packages that customers opt for.
She argues that the moment we see cheaper data across the board, the market will see access increasing data usage. “Data is an important aspect. All over you can still hear people complaining about the cost of data.”
BTCL has placed high value on data services projecting that they will be an anchor moving forward and will compensate their losses with increased usage and volume. BTC closed March 31 with Data Services Revenue having increased by 21 percent, with contribution to total revenues increasing from 26 percent to 29 percent. While speaking to the The Businesses Weekly & Review, Masunga said there is still a hunger for data by consumers and if they get more people to use data services then revenue will be good.
BTCL closed the fiscal year 2016 revenue up by 8 percent year on year, compared to an almost flat performance of 0.4 percent in the previous financial year March 2016. Going forward the company expects data services to be the anchor but won’t throw away voice, even when commentators argue that people are embracing the likes of Whatsapps, Skype which fall in the brackets of data.
Instead Masunga takes solace in the fact that elderly people still want to call and have a chat with another person on the side. “It depends on the profiles of your customer. I see voice being there but it won’t be as high as it is, but it will still be there.”
While BOCRA has finally grown teeth to address voice call charges, data charges still remain high from mobile phone companies. The same companies have been enjoying very low wholesale internet prices since the formation of Botswana Fibre Network (BoFiNet) which was established after assets were stripped from the old BTC.
Mobile phone companies buy internet cheaply from Bofinet (at wholesale prices), the service remains excruciatingly expensive at retail level. Bofinet at wholesale level sells internet to ISPs and Public Telecommunications Operators (PTOs) for 6 thebe per Mega Byte, but PTOs then re-sell internet to customers at retail level for 90 thebe per MB, profiting 15 over times more.
When Bofinet was launched over two years ago, it entered the market with wholesale internet tariffs that were between 30- 59 percent lower than average market rates then. However, to date the new tariffs are between 40- 70 percent below the ones that were launched when Bofinet was established.
Mascom Wireless, Orange Botswana and be Mobile are Bofinet’s largest consumers of internet at wholesale level. The mobile phone companies have not made significant reductions in prices, although Bofinet has. In areas where a price reduction was made, quality of service by the PTOs remain terribly poor. Interestingly, all mobile phone companies admit they have benefitted immensely from the formation of Bofinet through reduced prices, despite that at retail level prices are still exorbitant.