Telecoms gear for turf wars in 2013

By Joan Akello

Market leader MTN has been losing market share but is piling up innovations

“Do you have a Warid line?”

That is becoming a familiar question as relative newcomer on the Uganda mobile telephone market Warid Telecom mounts pressure on the competition.

Although another player, K2 telecom was launched on December 31, 2012 to push the number of telephony operators on the Ugandan market to nine, Shailendra Naidu, Chief Commercial Officer of Warid remains upbeat.  “Warid has been at the forefront of telecom revolution by offering value for money telecom services because we believe that our customers want us to avail the best telecom services at affordable prices,” he told The Independent.

K2 telecom was the second mobile phone company to launch in December last year. Suretelcom had been launched earlier in the month. Both entrants are smaller but, going by events in 2012, there is likely to be heightened competition among the big players.

Uganda has five major telecom companies offering mobile and fixed data, text and voice services. Official figures are difficult to confirm but MTN Uganda, the biggest network has about 7.5 million subscribers, Airtel with about four million, Warid telecom three million, UTL two million, and Orange Uganda one million subscribers. The other small players are I-Telecom, Suretelcom, K2 and Smile.

MTN is likely to maintain its rising market share trend from its final quarter in 2012 performance, according to officials of the company, but official data to be released soon for its annual performance is likely to indicate a 3% decline for the year compared to 2011.

In June 2011, MTN Uganda had 55% market share, with 7, 241,000 subscribers but it declined to 50% market share with 7,228,000 subscribers by June last year. Thereafter the market share rose slightly hitting 52% with 7,239,000 subscribers by December last year but it is unlikely to match the 7,629,000 closing number for December 31, 2011.

Bullish bosses

MTN Group President and CEO,Sifiso Dabengwa, says MTN Uganda performance as of September 2012 was impacted by increased competition during the quarter. He says, however, that “although market share was negatively impacted, MTN Uganda value share was maintained.”

He attributes that stable value to the continued success of the MTN Zone, a platform that offers discounts of up to 95% on call rates during low usage times that was introduced in 2008.MTN’s local currency Average Revenue per User (ARPU) also increased by 4.6%.

Mazen Mroue, the MTN Uganda CEO also prefers a bullish stance.

“2012 was a successful year for MTN Uganda,” he says, “We managed to execute fully our investment plan that exceeded USD 70 million by December.”

He boasts that during the December festive season, the MTN Network recorded more than 14 million SMSs sent by MTN customers.

“This is really an important indicator confirming MTN as the leader in converged communication and partner of choice in Uganda.”

He says the market share of MTN, a company with 7.5 million subscribers, is easily affected than one with only 500,000 subscribers.

“MTN Uganda currently has over 7.5 million customers representing more than 52% market share. In 2012 MTN Market share improved and increased as per all indicators,” he says adding that “MTN Value maintained over the last 3 years is approximately 60%.”

Quarter on quarter  comparison shows that MTN Uganda’s subscriber base  grew  by 0.2%  from  7,228,000  in June to  7, 239,000 in September . It was the laggard of the MTN Group behind Sudan’s 0.4% and Ghana’s 4.8%.  Over the same period in 2011, MTN Uganda subscription had grown by 3.7 % from 7,241,000 to 7,508,000 subscribers. Year-on-year results indicate that by September 2012, MTN Uganda’s subscriber base had declined by 3.6%.

SIM card registration trouble

Justina Ntabgoba-Kayemba , MTN Uganda Corporate Affairs Manager says “the overall mobile penetration slowed down in Uganda during the first half of the year due to the Mandatory SIM Registration Project.”

The project calls for more administration and logistics across the country.

This means that the number of people purchasing new SIM cards reduced because of the registration.   MTN Group announced in June last year that MTN Uganda subscriber guidance had decreased from +400k to -300k due to SIM registration.

A source at the Uganda communications Commission which is conducting the mandatory SIM card registration says many people having more than one line affect the subscription base and the market share of the telecom companies.

Mroue agrees.  He says that because of lack of a national identification system, registration process remains a challenge for all Telecom Providers; not only MTN. He also cited security incidents, vandalism, fiber cuts and theft of batteries for sites among problems that have affected MTN infrastructure.

Before the SIM Card registration process gained momentum, MTN registered a high number of subscribers that pushed its total to 7, 725,000 in the first quarter of 2012 up from 7, 629,000 in Dec 2011.

For 2013, MTN says it will focus more on customer experience and ensure simplified package offerings and pricing structures to make it easier for customers to understand what they are paying for and the services they are receiving in return.

MTN Subscription trends 2011-2012

The Warid factor

The competition, as Warid’s Naidu says, is also investing in network and capacity expansion, and more innovative products and services to meet and exceed customer expectations this year.

“We are seeing very good customer adoption of Warid Pesa,” he said, ““Warid Pesa is the only mobile money service that gives ultimate customer convenience – one can be on any mobile network and still use Warid Pesa.”

He says Warid has built a good distribution system for Warid Pesa that allows customers to pay utility bills for water, electricity, cable TV, and taxes at any of their agent shops.

MTN Uganda, with its MTN Mobile Money, has until now had very little competition although Uganda Telecom has M-Sente, Orange has Orange Money, and Airtel has Airtel Money. Warid Pesa entry in December 2011 appears to offer mobile phone users the other real alternative platform for sending and receiving money.

Mobile money allows people to use their mobile phones like mobile wallets to transfer money, pay for goods and services and conduct banking services has attracted many people including the unbanked population to join the telecom industry.

Michael Niyitegeka, the Head of Corporate Relations at the College of Computing and Information Sciences at Makerere University says the drop in MTN’s market share is partly due to its poor rank in the UCC quality of services reports.

“ The company is facing a  damaged  reputation crisis  due to mobile money hitches and the fraud  cases,  he said,  “since customers do not have  a contractual agreement  with  any telecom, they can  switch to any other  network without difficulty.”

He says the telecom networks that offer better airtime bundles, promotions have contributed to the market share shift regardless of the SIM card registration.  He says most of the companies are using the exercise to attract more subscribers as others lose them due to   problems like dropped calls, network congestion.

MTN’s Ntabgoba disagrees.

“Negative publicity has no impact on our market share because we had a 3.5 million growth of mobile money. Those are just claims,” she says.

Warid which is number three in terms of subscriber base and number two in profitability has also been faulted on quality of services in the UCC reports but Shailendra Naidu disputes the reports.

“We track our network on a continuous basis and talk to our customers and our feedback is different to the one that’s published. We continue to see more customers choosing our services and we believe that is a good testament of how good our network is,” he says.

Lessons

Niyitegeka says the telecom companies need to compete on quality of services, variety, reliability, creativity and solutions for the masses in 2013.

He says the companies need to maximise the transition cycle of their customers which starts with parents buying a SIM Card and Airtime for their children.  He says this builds an identity when the children mature, enroll at university and join the workforce.

“They form a network of users when they earn and spend on communication,” he says, “Warid   is using this cycle to target the youth who can afford to speak for longer hours unlike the elderly.”

He adds that the telecoms should move from voice to data since many people now have the handsets but need to be educated on how to use different applications on them.

“Empowering the users will generate revenue for the companies through data usage as well,” he says.