Tanzania - Zantel Sets Ambitious Subscriber Growth Target Following Expansion of Network Coverage08 Jul 2011 • by Natalie Aster
Tanzania's fourth largest mobile operator by subscribers, Zanzibar Telecom (Zantel), aims to increase its subscriber base within the next year amid fierce competition in the mobile market, reports Reuters. Zantel hopes to increase its subscriber base by up to two-thirds through its ongoing network expansion into mainland Tanzania. The company's chief commercial officer, Norman Moyo, alluded to the negative impact of the telecoms price war on operators' revenues, a situation BMI believes presents both opportunities and challenges.
According to market data from the Tanzania Communications Regulatory Authority (TCRA) relating to the end of March 2011, Zantel continues to underperform in terms of subscriber growth compared to its main rivals Vodacom, Airtel and Tigo. The operator's mobile subscriber base has fluctuated for much of the last three years, while that of its rivals have generally trended upwards. For the three years to March 2011, Zantel recorded a total mobile subscriber net gain of 379,000, according to the TCRA data. By contrast, market leader Vodacom recorded net additions of 4.790mn during the same period, while Airtel and Tigo recorded net additions 3.3mn and 3.2mn respectively.
Although it may be argued that Zantel's underperformance is attributable to its limited network coverage, being the incumbent operator in the Zanzibar region, BMI notes Zantel was granted a licence to offer phone services in April 2005 and was reported to have started rolling out services by July. It appears Zantel lagged behind its rivals in the deployment of network infrastructure across the mainland, allowing them to record better subscriber growth over the past three years. We therefore welcome the strategy of network expansion as a tool for subscriber growth, as disclosed by Moyo. Zantel had invested about US$15mn in its network in the past year and plans more investment in the next year to meet its target.
BMI does not expect Zantel to have much difficulty in raising funds for its network expansion. Zantel is backed by UAE-based Etisalat, which owns a 65% stake in the company. The Zanzibar government holds an 18% stake in the company, while local Tanzanian firm Meeco International owns the remainder. Etisalat plans to invest about US$15bn over the next five years in the network infrastructure of its existing operations, including Tanzania. However, we caution that the ongoing telecoms price war in Tanzania is likely to be a disincentive to large scale network expansion and upgrade. Moyo's allusion to the impact of the price wars on the telecoms sector supports BMI's core view of the low telecoms tariffs in Tanzania and other affected countries in Africa.
On the flip side, it may be argued that the low tariffs present considerable subscriber growth opportunity as the affordability of services, especially basic voice and SMS, have increased the rate of mobile phone take-up. This will be key for attracting new users in the young customer segment, which is Zantel's primary target for fresh growth. Zantel plans to register up to 1mn new customers in this segment in the next 12 months and has launched a youth-focused initiative called Epiq Nation to drive this goal. Considering the strong performances of Zantel's rivals in the Tanzanian mobile market and the positive outlook for future growth (mobile penetration is still less than 50%), BMI believes Zantel's target is achievable. However, we caution that the timeframe of one year to reach that goal may be too short considering the level of investment it has to make in network infrastructure rollout and the continuing competition from its bigger rivals.
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