Over $287 million sunk by the three operators to deepen penetration

Rwanda’s telecoms industry is headed for a long awaited and much needed level playing field with the entry of the licensed third national operator, TIGO.

The market entry by Tigo has consequently led to the two players MTN and Rwandatel to reposition themselves for purposes of fending off Tigo’s onslaught which is expected to be stiff, writes Fred Oluoch-Ojiwah.

The repositioning can be seen through wide ranging readjustments that the two operators have been undertaking.

This includes price movements as well as new offerings unseen before within the sector. This repositioning can be analyzed by studying the trends of the operator’s in the last ten months against their operations in the last ten years.

Within the last ten months clients have been treated with of offers  that they have not seen in the last ten years.

This repositioning by the two players in the sector is mainly attributed to Tigo’s entry into the market with an official launch expected before  end of this year.

Prior to Tigo’s entry the Rwandan telecoms industry has been built around  a duopoly structure. Within this market structure MTN has been the more dominant player in which it has the widest network coverage in the country.

According to MTN Group results for 3rd Quarter 2009, MTN Rwanda had 1.6 million subscribers representing an 80 percent of the market share.

This represent a 19.8 percent increment from MTN Rwanda’s subscription level for 2nd Quarter 2009. MTN reported that its Rwandan operations for this period had an Average Revenue User (ARPU) of $7.

However Rwandatel puts its subscriber base at 450,000, according to the company’s Corporate Communications Manager Cleophas Kabasiita.

Analysts contend that even though penetration rates are the second lowest within the East African Community(EAC), which currently stands at 17 percent, the prospect of intensified competition with Tigo’s entry  has already  sparked a new subscriber growth phase.

In this new phase the expected trickle down effects include registering a fall in average revenue per user (ARPU) to figures below $10 per month.

The other notable effect of the upcoming competition is additional services being introduced.

The fixed-line incumbent and second mobile operator, Rwandatel launched its third-generation (3G) mobile services of which MTN is yet to commercially launch.

Both Rwandatel and MTN are concurrently rolling out national fibre backbone networks which would also allow them to connect to international submarine fibre optic cables on the East African coast.

There is contention that these developments will radically change the dynamics within the telecoms sector especially with broadband provision.

For instance it is highly expected that as Tigo launches the price for international Internet bandwidth, it is expected to plummet to a fraction of the current level.

While Tigo is planning to launch by end of this month, MTN is targeting an additional 200,000 new subscribers with an intention of sustaining market leadership position. MTN seeks to maintain this leadership streak by retaining half of the 6 million subscribers government targets by 2012.

"Our plan is to reach the target which we set in our effort of being the leading telecoms operator in Rwanda. We will invest close to $100 million in 2009.

The focus has been on infrastructure where we are now covering over 90 percent of the country in addition to the fibre optic project which is also being rolled out throughout the country,” Yvonne Manzi Makolo MTN’s Senior Sales and Marketing Manager told Business Times.

Makolo’s statement came in the wake of MTN’s concerted effort to deliver better services in which it unveiled a new customer service centre within down town Kigali at Rubangura worth $300,000.

Rwandatel on the other hand has invested over $187 million, with the lion share going to extension of infrastructure. Rwandatel’s officials emphasized the company is focused on making access to technology available.

"Our focus remains on using our platform to enable consumers to do more across all segments. Specifically, our objective is to be the leader with 70 percent share of the corporate sub-market and a solid second in the consumer telephony segment in mobile, residential landline and mobile internet,” Kabasiita said.

A report by African Development bank dubbed  ‘African Economic Outlook’ released recently indicates that MTN’s market share dropped from 96 to 80 percent by end 2008.

MTN on its part says that its market share had dropped to 83 percent as at end June 2009. However MTN is quick to point out that it is keen to make a 4.4 percent recovery by 2013.  This reconfiguration can be looked at as a sign of emergence of shifting customer loyalty.

The reconfiguration within telecoms means that Tigo’s actual entry is meant to level further the playing field.

The current duopoly structure in which MTN’s has been enjoying unparalleled advantage will be dismantled to give way to a more balanced perfect competition scenario.

In an exclusive interview with The Business Times recently , Tigo CEO Alex Kamara  confirmed that its entry is appropriate  for the deepening of Rwanda’s telecoms based on the fact that it is an accomplished operator playing in  an emerging market.

Kamara emphasized that Tigo’s business model is designed to provide products and services where penetration rates are low as has been the case in Rwanda.

In its entry, the top Tigo official has said that the company will want to ensure that it does the basics well for the purposes of attracting and retaining the subscribers.This Tigo intends to do through its $100 million investment.

Rwandatel according to the source disposed off, close to 200 workers and changed its top management structures as part of  a major human resource restructuring exercise.

The move saw its CEO Patrick Kariningufu being replaced.
According to our sources MTN on its part has brought in fresh talent from middle and top echelons to beef up the marketing and branding department.

"There is lot of action, promotions and lowered prices prior to our entry and I hope things are going to improve even more. The price movements of MTN and Rwandatel are very interesting. There is a lot of action to stimulate the market to secure the subscriber base,” the Tigo boss said recently.

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