North Africa’s post-revolutionary telecoms market presents opportunities amid the difficulties

Eighteen months after Tunisia’s Jasmine Revolution marked the onset of the Arab Spring, what effect has the upheaval in the region had on the telecoms sector?
According to Vodafone Egypt’s CEO Hatem Dowidar, speaking at the North Africa Com conference put on by Informa Telecoms & Media in Tunis on 15-16 May, the regional telecoms market has proved to be robust, and has in fact benefited from the demand for new forms of communications.
“It [the political change] did not adversely affect our industry,” said Dowidar. “People are relying more and more on telecoms to mobilize and to access social media, which has become integral to people’s lives.”
The use of YouTube in Egypt has, for example, increased ten-fold over the past year, according to Dowidar. A growing number of Egyptians use mobile broadband services and smartphones – and that has contributed to the continued growth in overall mobile subscription numbers, he added.
Indeed, Egypt has North Africa’s largest mobile market by subscriptions, with 80.82 million mobile subscriptions at end-2011, according to ITM research. Egypt is also North Africa’s biggest 3G market, with 7.62 million 3G subscriptions at end-2011. Although Egypt leads, the availability and take-up of 3G is increasing across North Africa.
Tunisiana, Tunisia’s biggest mobile operator by subscriptions, was – at its second attempt – awarded a 3G license as well as a fixed license earlier this month. Having secured the 3G license, Tunisiana plans to launch 3G services before the start of the Muslim month of Ramadan in late July, said CEO Ken Campbell at North Africa Com. Tunisiana is under pressure to launch 3G quickly because its two rivals, Orange Tunisie and Tunisie Telecom, already offer 3G services.
Algeria is the only major North African market to not yet have 3G, with 3G licenses unlikely to be awarded until after the nationalization of Orascom’s Algerian unit, Djezzy.
Other new services are also evident in North Africa’s increasingly complex and sophisticated telecoms market. Earlier this month, Tunisiana launched a mobile-money service called Mobiflouss, in partnership with Tunisia’s Post Office. Orange Tunisie has launched its own apps store. The introduction of MVNOs is expected in a number of regional markets, including Egypt, Morocco and Tunisia. Tunisia’s Virtual Networks plans to launch an OTT TV service as well as a triple-play offering.
Recent M&A activity in the North African telecoms market – both before and since the political upheavals over that have taken place in the past 18 months – also indicates a continuing interest in the potential of the region.
France Telecom has become an increasingly prominent player in North Africa, having launched Orange Tunisie, the country’s third operator, in 2010, and subsequently acquiring a 40% stake in Morocco’s Meditel. And earlier this year, France Telecom and Orascom Telecom Media and Technology reached an agreement by which the former will take control of Egypt’s Mobinil. Other important recent M&A activity includes the merger of Vimpelcom and Egypt’s Weather Investments; and Qtel’s move last year to take control of Tunisiana by buying out its former partner Orascom. (Qtel conducted the Tunisiana transaction through its subsidiary Wataniya.)
France Telecom, Etisalat and Qtel have all shown an interest in the Libyan market, though it will not be clear what opportunities there might be in Libya until a new government is formed and draws up its policy for the telecoms sector.
But the North African telecoms industry also faces difficulties, which are not all due to the political upheavals in the region. Most of North Africa’s telecoms markets are competitive – in the mobile sector at least – and mobile penetration rates are now quite high, leaving fewer obvious opportunities for growth.
In Egypt, the retail price of mobile services fell at a rate of 40% per year after the debut of third operator Etisalat Misr, according to Dowidar, although the rate of decline in prices has fallen recently. Mobile calls in Egypt now cost less than US$0.02 per minute, and the ARPU for prepaid subscriptions at Vodafone Egypt is less than US$3 per month, said Dowidar.
As a result, there is increasing pressure on North Africa’s operators to keep costs down, through various strategies including, increasingly, network-sharing.
Some figures suggest that the take-up of data services is being held back because data devices are too expensive for many. Smartphones account for only about 2% of all mobile phone sales in Tunisia, said Mohamed Ben Rhouma, General Manager at Cellcom Tunisia, a distributor. (Though Ben Rhouma conceded that this figure does not take account of smartphones that individuals buy abroad and bring back to Tunisia.)
In addition, the cost of living is rising in Tunisia and that is squeezing the amount that many Tunisians are able or willing to spend on telecoms, said Tunisiana’s Campbell.
The roaming revenues of operators in Egypt and Tunisia have been hit by a decline in visitor numbers, as tourists stayed away from those countries because of the upheavals.
A lack of competition in the fixed sector is holding back commercial and other development, say some. In Tunisia, Orange Tunisie and Tunisiana have argued unsuccessfully that Tunisie Telecom’s fixed network should be unbundled. In Egypt, the lack of competition in the country’s fixed-broadband market was identified as a shortcoming in the eMisr National Broadband Plan report, published in late-2011.
North Africa remains an attractive yet difficult region. Broadly, it is attractive because it has a substantial, growing and youthful population; its people tend to have more spending power than their counterparts in many other emerging markets; and because there are good growth prospects in data services. But political uncertainty, tough economic conditions and fierce competition in the mobile market in particular mean that operating in the region is no easy ride.