A Review of The Postal and Telecommunications Sector; June ...

A Review of The Postal and Telecommunications Sector; June 06- June 07

Patrick F. Masambu,Executive Director, Uganda Communications Commission15th August 2007, Grand Imperial Hotel

15th August 2007By Patrick F. Masambu at Grand Imperial

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Contentn The Market Structuren The Macro- Economic Performancen The Voice Marketn The Data Marketn Post and Courier Marketn Key regulatory Decisionsn Challenges n Future activities


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The Market Structuren It’s a year since Uganda redefined its

telecommunications policy environmentn Ministerial policy statements on Service

provisioning on 11th May 2006n Ministerial statement on infrastructure

provisioning in August 2006.n The telecommunications sector was thus

opened to full competition for both service and infrastructure provisioning.


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Market Structure Cont.The

Communication Market

The Telecom Sector

The Post and

Courier Market

Service CombinedInfrastructure

Public Service Provider

GeneralLicenses

Public Voice & Data

Capacity Resale

PublicInfrastructure

Private Infrastructure

National TelecomOperator

Cellular Telecom


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Number of Operators Telecom.

2PSP- Voice and Data plus Capacity resale

2National Telecom Operator (NTO)

n All PIP Licensees also hold PSP licenses

10PSP- Voice and Data only

4Public Service Providers (PSP)-Capacity Resale only

4Public Infrastructure Providers (PIP)1Cellular Telecom Operator (CTO)


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The New Telecom Operators .

n Talk teleKom solutions Limitedn Roke Investment Internationaln Mo Telecom International Limited

Capacity Resale Only

n Satellite Communications networknInternational Telecom Limited

PSP (Voice and Data) + Capacity resale

n WARID Telecom Uganda, nHiTs U Limited, nInfoCom and Africa on Line

PIP + PSP operators


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The New Telecom Operators .nTMP(U)Ltd, nI-Tel Ltd, nKampala Siti Cable Ltd,n Nomad Com Ltd,n Multi Choice, nLink U Wireless, nBukasa Telecom,n RCS Ltd, nKanodiko Systems Ltd, nAnupum global soft Ltd,

PSP Voice and Data Only


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The Macro- Economic Performance n The communications sector

grew by 33.3% for FY 2006/07. n A reverse trend from the

previous 3 FYs when the sector had started to slow down.

n The peak had been in 2003/04 when the sector grew more than 50%.

n Competition forces and the surge in investment expenditure has contributed to this growth.

n Increased government usage and investment by the new operators is projected to push the growth further in the FY 2007/08

Communication Sector Percentage Growth rate

38.9

50.4

31.2

33.3

0

10

20

30

40

50

60

2003/04 2004/05 2005/06 2006/07


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The Macro- Economic PerformanceContribution to GDPn Communication and transport

sector are still computed together in terms of GDP contribution.

n Efforts are ongoing between UCC, UBOS and the Min of Finance to have a communications specific contribution to GDP.

n For the FY 06/07, the combined sector contribution to GDP was 9% up from 8.2% in the previous FY.

Transport & communications sector contribution to GDP 2006/07

6.37.2

8.29

0

2

4

6

8

10

2003/04 2004/05 2005/06 2006/07

Years

Perc

ent


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Macro Performance Cont.Sector Revenue n Revenue is derived from the volume

of sales for postal, telecommunication and data services before adjusting for taxes, depreciation, cost of sales, operating and financing costs.

n Data is obtained from audited financial and operational statements of service providers.

n For the FY 2006/07, revenue generated from the sector (Post + telecommunications) was estimated to be USD 360 Million

n This is an increase of 20% from the previous FY.

n Important to note is that Industry profit (After all cost; taxes, dep., opex etc) is about USD 30 million.

0

100,000,000

200,000,000

300,000,000

400,000,000

Comunications Sector Turnover

Telephony (Voice + Data) 198,845,437 245,621,439 292,063,684 351,458,704

Postal 10,049,936 10,604,549 11,671,641 13,072,238

2003 2004 2005 2006


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Macro Performance Cont.Sector Investmentn Annual Investment is

estimated at USD 73 M, an increase of 47% from the previous FY.

n This excludes the capital investment by the new licensed service providers which is estimated to be close to USD 70 million in y1

n The increase in investment is a direct response to competition by the existing operators.

-

20,000,000

40,000,000

60,000,000

80,000,000

Communications Sector Investment

Telephony (Voice + Data) 43,096,869 77,603,802 48,850,424 72,321,439

Postal 1,000,231 883,972 1,009,069 1,178,254

2003 2004 2005 2006


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Macro Performance Cont.Employmentn The sector employs more

people indirectly as compared to direct or full time employment. These range from payphone and airtime vendors, construction workers, ICT businesses etc.

n Indirect employment for the FY 2007 is estimated close to 350,000 while direct employment is at 6,062

n The level of employment is expected to increase with the newly licensed service providers

-

100,000

200,000

300,000

400,000

Communication sector employment (2002 - 2006)

Direct 5,832 5,028 5,193 5,511 6,062

Indirect 116,640 175,980 233,685 286,572 343,886

2002 2003 2004 2005 2006


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Telephony- Voice MarketNumber subscribersn By June 07, there were close to 3.7 million voice subscribers of

which;q Mobile customers; 3,575,263q Fixed customers: 154,383

n This is a net addition of 1.5 million customers between June 06 and June 07

n It represents an annual growth rate of 68%n Reduced start-up cost (New handset costs Ugs. 65,000/- sim pack

at 3000) and aggressive marketing and promotion post duopoly account for the growth

n The surge in growth could also have lead to a decline in quality of service,

n operators are working to increase their switching capacity whichcurrently stands at 4.2 million subscribers.


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Telephony- Voice Market

n Teledensity(measure of the percentage of population owning a fixed and or a mobile phone) in June 2007 was 13.3 compared to 8 in June 2006.

Number of telephony Customers and Teledensity

0

1000000

2000000

3000000

4000000

Num

bers

of C

usto

mer

s

0.02.0

4.06.08.010.0

12.014.0

Tele

dens

ity

Fixed 60995 71272 87513 108140 154383

Mobile 621082 987456 1315300 2008818 3575263

Teledensity 2.8 4.3 5.5 7.8 13.3

2002/03 2003/04 2004/05 2005/06 2006/07


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Telephony- Voice Marketn Whereas only 14% of

population own a phone, more than 40% of the population accesstelephony using public pay phones.

n Additional 10,393 payphones were installed during the FY 06/07

n This number represents the phones installed by operators (3) and excludes phone kiosks set up by private businesses.

-

5,000

10,000

15,000

20,000

25,000

Years

Number of Payphones- 2006/2007

Series1 11,082 12,025 12,889 16,050 21,475

June 06 Sept 06 Dec 06 Mar 07 June 07


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Volume of Trafficn Voice traffic is measured in terms of minutes.

Its broken down into 2 categories;q Domestic trafficn On net traffic (Generated and terminated within one

network)n Off net traffic (Generated in one network and

terminated to another network)q International trafficn Incoming international traffic n Outgoing international traffic


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n Total domestic traffic for FY 2006/07 was 2.4 billion minutes

n This is an increased of 37% from the previous year.q Own net traffic constituted of 78%q However the ratio of own net and off net traffic is

declining

n International traffic (incoming and outgoing) increased by 58% close to 370 million minutesq International incoming is 4 times more than out going

traffic


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Telephony- Voice Marketn Growth in traffic is not equally proportion to the growth in

number of subscribersq Subscriber growth was 68%q Domestic Traffic growth was 37%

Domestic Voice Traffic

-

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2,500,000,000

Years

Min

ute

Ow n Netw ork 780,693,7 830,152,9 1,007,827, 1,147,700, 1,459,154, 1,934,857,

Off netw ork 171,635,3 187,878,2 274,250,3 301,015,4 374,742,0 531,748,1

2001/02 2002/03 2003/04 2004/05 2005/06 2006/07


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Telephony- Voice MarketTariffsn Tariffs in Uganda are influenced by two factors;

q Government Taxes – Upward pushingq Competition- downward push

n Government introduced a 5% excise tax on fixed line services andmaintained a 12% tax on mobile services. Fixed line tariffs thusincreased by 5% effective July 1st 2006.

n On the other hand, Uganda’s market is one of the highly competitive markets in the region. This is evidenced by the increase in innovative services and pricing schemes including q Innovative optimizing (peak-off, peak) calling chargesq Connection charges (sim pack) dropped to as low as

3000/-q A removal of subscription charges by all operatorsq Emergence of international voice calling cards


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n Due to competition Uganda’s tariffs remain relatively comparative in the region. Above is a benchmark on mobile tariffs (standard peak time inclusive of taxes converted to Uganda shillings.

0

100

200

300

400

500

600

Ushs

EA operators' Own network Peak Tariff- June 30th 2007

Mobile to mobile 400 427 436 450 450 497 596

UTL Ug Vodacom TZ

Celtel Tanzani

MTN Ug Celtel Ug

Safaricom

Celtel Kenya


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Telephony- Voice Marketn Off Network- mobile to mobile peak rate

0

200

400

600

800

Ush

EA operators Off Netw ork Rate- June 30th 2007

Rate 485 495 520 559 559 596 621

Celtel UTL Ug MTN Ug Vodaco Celtel Celtel Safaric


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Telephony- “capacity”n Like the voice market,

the data market has experienced a surge in capacity growth.

n International bandwidth increased by 50% during the FY. q Uplink: 72.43 Mbpsq Down link: 214.58 Mbps

n Increase in private demand and government usage,

n Innovative technologies such as Wireless broadband account for the surge

n We have close to 900 Kms of fiber optic (private and public own)

International Bandwidth (mbps)

0

50

100

150

200

250

UplinkDownlink

Uplink 4.38 6.128 10.608 26.065 50.916 56.316 72.436

Dow nlink 7.768 9.5 24.068 60.525 133.704 188.704 214.584

Sept-01 July -02 Feb -03 Jan 05 Jun 06 Dec 06 Mar 07


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Data Marketn Internet subscribers grew by 30% during the financial year

from 11,000 to 15,500 subscribers. This number is very low relative to other countries.

n 40% of data access is through dial-up.

Internet customers

0

2000

4000

6000

8000

June 06 June 07

June 06 3094 240 5913 1602 414 515

June 07 4200 1500 6500 2000 715 600

CDMA ADSL Dial up wireless Vsat Leased


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Data MarketInternet Pricingn New internet pricing schemes have emerged in the market

such as capacity based pricing among othersn Although internet prices have dropped, prices are still

relatively high compared to regional and international markets. Average monthly fees for 64Kbps

$ 1075$ 1750VSAT (64 k)$ 600$ 300Leased Line (64 k)$ 1500$ 250IP Access (64 k)$ 30NilDialup

Monthly fees (USD)Connection


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Post and Courier Market

n Number of operators Postal

5Domestic Courier service Providers6Regional Courier operators

5International Couriers1Major Postal Operator

n 7 Licenses for courier services were revoked for non compliance


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Post and Courier Marketn Volume of traffic is

measured by the number of letters, parcels and registered items.

n There has been a gradual decline in volume of letter posted and received domestically and abroad

n For FY 06/07 the average decline was by 12%

n Competition from new services such as internet and mobile messaging accounts for such declines

Volume of Letters posted and received (Domestic & International excluding official letters)

02,000,0004,000,0006,000,0008,000,000

10,000,000

2002 2003 2004 2005 2006 2007

Letters posted (Domestic & International excluding official letters)Letters received from abroad


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Post and Courier Market

n Parcels and registered mail have however continued to register increased growth

n For the FY 2006/07, volume of parcels, domestic and international grew by 33%

n Increased activity in the international market accounts for the growth

Volume of Courier Traffic

0

500000

1000000

1500000

2000000

2005 2006 2007

Domestic Courier Traf fic Courier Traffic sent abroad Courier Traff ic received f rom abroad


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Key Regulatory InterventionUniversal Access;n Subsidy financing was provided to the establishment of;

q 771 Community Information Centres (CICs) under the World Bank project

q 23 ICT training centers and are currently operating satisfactorily.q 28 Internet Cafés in the various districts and are currently

operating satisfactorily.q 9 Multi purpose Community based MCTs and are currently

operating satisfactorily q Websites and informational portals are to be developed for the

new 24 districts. The procurement processes is underway.n 52 district information portals were handed over to be managed

by the respective district administrations.


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Regulatory InterventionSpectrum Managementn Radio spectrum policy guidelines were developed

and adopted.n The Commission opened up the 1.7 GHz, 1.9/2.1

GHz, 2.010 – 2.025 GHz and 3.3 GHzn Adjustment of the 900 MHz and1800 MHz GSM

bands to accommodate more playersn Acquisition of another Signalling area/Network Code

(SANC) for Uganda from the ITUn Masaka and Njeru Remote fixed Spectrum

monitoring stations were commissioned and are currently operational


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Regulatory InterventionLicensing and Monitoringn Focus has been towards institutionalizing and making the new

licensing regime operational;q A number of ISPs were required to migrate and the process is

underwayq 4 ISPs licenses were revoked in the process.q A new guideline for quality of service and standards was

developedn The national numbering plan was modified; Lengthened to 9-

Digits and the creation of the shortened numbers instituted.n A review of the numbering plan to accommodate new operators

is underwayn An Interconnection and retail cost study is underway. This will

lead to the implementation of among other things regulatory accounting and costing


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Regulatory Intervention

Postal Regulation n A baseline study on Postal Services in

Uganda was undertaken. Findings shall be used for strategic intervention under the RCDF program

n UCC is working with a range of stakeholders to develop a post code for Uganda


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Challengesn Ensuring and maintaining an efficient and

competitive market n Ensuring affordable and universally available

services which should translate into productivity and economic growth of the country

n Absence of a national competition law required for the holistic regulatory and competition guidance at a multi-sectoral level.

n A still largely illiterate and low empowered consumer force in Uganda

n Limited and inadequate human resource capacity for ICT usage, application and software development


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Planned activitiesn Through PPPs provide strategic intervention in the

extension of ICT services in educational institutions, Government health units and agricultural extension units

n Enable the provision of public Data Access Points of speed not less than 256kb/s within each sub county (LC111) of the Administrative districts of Uganda (2004)

n Facilitate and support the development of a National Post code for Uganda under PPP

n Redefine the communication regulations to suit the current market and initiate legislative amendments to the Communications Act


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Planned activities

n Implement a regulatory accounting regime aimed at enabling fair competition in the market

n Initiate plans of migration to digital broadcasting

n Have a consumer and market focused regulatory regime

A Review of The Postal and Telecommunications Sector; June ...

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