End of roaming in East Africa; Lessons for Europe?eurocpr.org/data/2009/papers/19 Muriuki Mureithi.pdf · revolutionized and replaced the concept of roaming changed the way how people

Summit Strategies Ltd ICT Consultancy & Research

End of roaming in East Africa;Lessons for Europe?

(Work in progress)Presentation to EuroCPR

Seville Spain March 29-31, 2009

Muriuki Mureithi


2

Session Agenda

roaming context The drivers Market outcomes Implications and lessons Way forward & Initial recommendations


Roaming

The context


4

Background and context extortionately high charges to make and

receive calls in Africa Global phenomena for all consumers, monopoly prices to terminate cross border calls. “death of distance” a misnomer even when

countries were contiguous . Extraordinary circumstance for

extraordinary response European Parliament in 2007 finally introduced

much contested regulations for roaming.


5

In the meantime… In the East Africa,

Celtel (later Zain) in Uganda found itself on the brink of survival following the licensing of a major competitor, MTN who grew rapidly.

Underdog on all the markets in Tanzania and Kenya Extraordinary response

Zain identified its presence in three actively integrated markets as a competitive advantage, the dominant players in each of these markets did not enjoy.

launched ONE Network in 2006, a seamless service across the three countries – abolish roaming

Dominant operator response Within a few months, Vodacom in Tanzania, Safaricom in Kenya and

MTN & UTL in Uganda and MTN Rwanda and put together a seamless to compete with Zain

End of roaming in sight – supported by major networks


6

ONE network evolution


7

ONE network operational features

Objectives Increased customer acquisition of the high end market Customer retention and improved loyalty

Technology support Building a IP based virtual network to reduce cost of

roaming customer administration Commercial arrangements Sender keeps all /bill and keep Exploits its corporate structure for ska


8

ONE network disruptive features Use the same phone number and SIM card across

participating countries incoming calls are free. outgoing calls and SMS’s at local rates. Prepaid customers automatically charged in their home currency. Postpaid

customers are charged at local rates converted to their home currency upon billing.

recharge phone with local top up cards or with cards bought from the home Zain network


9

Benefits revolutionized and replaced the concept of roaming changed

the way how people are communicated with friends, colleagues and family members while away from home.

Mix of innovative technical solutions, business processes and consistency of brand attributes delivers service through user friendly, easy to understand and seamless customer experience...it is a non-burdening experience and is automatically activated when Zain customers cross borders.

Demonstrates how telecommunications operator’s and regulators/governments can work together for the benefit of societies and economies.

Tangible evidence of how complex technological solutions and processes can make life simpler through delivering very user-friendly and cost-efficient mobile communications.

Source; www.wikipedia.org

http://www.wikipedia.org/�


The drivers


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History and experience MSI -forerunner of Celtel and Zain

with operations in DRC and Congo Brazzaville. River Congo separates the two cities of 7 km apart

- Calls across the river Congo had to be routed through Europe at great cost –

dampen call traffic - MSI sought and got a license to

interconnect by microwave across the river in 2002

- calls to each capital across the river become local from international. Call cost fell by 80%. All calls are post paid .

- Phenomena replicated in other border towns


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Infrastructure legacy in EA telecoms operators previously operated as

one network under East African community upto 1977 ,

Still retain special code for the region - Under East African Postal & Telecom

Operators - Operators take a decision to allow operators to

provide services in towns across the border . Thus all calls are now local eg Busia Uganda and Busia Kenya , instead of being national


13

East African local realities

Integrated community in the region Respond to travel patterns in the region the realities of the communities in the region

where colonial boundaries cut across communities in the region

Political and regulatory pressure in region to reduce prices.


14

valuable roaming customers Roamer Average Revenue Per User

are higher than average customers They tend to churn less often Contribution by visitors is higher than

average local customer Roaming is an important service to

retain high end customersBermudez (2003)


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Lack of transparency dampens calling; confusion over service charges, in addition to

the price of calls, prevents international roaming from taking off.

A fifth of mobile users cite confusion over roaming pricing as their primary reason for using their phone less when abroad. especially true of younger consumers, where

nearly a quarter (24%) of those aged 16-34 are still baffled by the costs of using their mobiles abroad.

TNS study 2008


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Implication of Europe regulatory action High charges raise complaints by consumers

‘International roaming charges in the EU are excessively high and cause significant damage to consumers. The lack of transparent tariff information and the lack of real consumer choice means that consumers are not given an opportunity to put competitive pressure on providers to reduce their charges.-’

The European Consumers' Organisation -2005 Response by European Parliament

‘The regulation introduces a Eurotariff at retail level (excluding VAT) not exceeding EUR 0.49 per minute for any call made and EUR 0.24 per minute for any call received for the first year. The price ceiling for calls made will automatically be reduced to EUR 0.46 and EUR 0.43, and for calls received to EUR 0.22 and EUR 0.19, in the second and third year respectively.

European Parliament adopted on 23 May 2007


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Enabling regulatory framework Celtel /Zain has operations in Kenya, Tanzania and

Uganda- Fully liberalised markets in Tz and Ug existed before

2004- In 2004 Ke decides to liberalise international gateway

and Celtel awarded an international gateway licence in 2005.

- This provides the opportunity for a regional network- Sept 2006 , ONE network launched in EA- Eventually connects 46 million Zain Group customers

in 16 countries in Africa and Middle East


Market outcomes


19

East Africa competing operators respond to ONE network by

creating own service – Kama Kawaida (as usual) Safaricom – Kenya, MTN,UTL –Uganda, Vodacom –Tanzania MTN – Rwanda.

Within EA roaming citizens have a choice of two seamless networks with similar features.

Operators without partners are disadvantaged Governments complain about tax losses


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Kenya scenariokenya

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08

Celtel Kenya

Safaricom

•Renewed growth on the launch but is not sustained .

•Safaricom has an 80% market share by last quarter of 2008.

•Appears the impact benefited the competitor Safaricom

Source: Informa telecoms


21

Uganda scenarioUganda

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08

Celtel Uganda

Uganda Telecom

MTN


•Celtel overtakes UTL and records a faster growth and is challenger to MTN.

•Note UTL and MTN join to form the Kama Kawaida seamless network


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Tanzania---Tanzania

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

1Q042Q04

3Q044Q04

1Q052Q05

3Q054Q05

1Q062Q06

3Q064Q06

1Q072Q07

3Q074Q07

1Q08

Celtel TanzaniaTigoVodacomZantel


Zain’s improvement is better than other operators who are not a party to seamless a network


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Shepherding traffic flow

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

cost

facto

r for

visit

or ag

anist

loca

l cha

rges

w ithin ow nnetw ork

Other cellularnetw orks in the

country

fixed netw orksin w ithin Dar

Fixed netw orksin the country

Zain in otherEA countries

Othernetw orks inEast Africa

Local SMS (per message)

InternationalSMS (permessage)

ONE network tariffs -EA

ke

Tz

Ug

Used as a tool to create a barrier to increase on-net traffic


24

Africa MTN subsidiary member

of Kama Kawaida Nov 2008 MTN group

announce plan to launch MTN Seamless to all countries with its operations Tested Cameroon,

Nigeria and Ghana and found successful

Decided to link all the countries of operation by mid 2009

Nigeria announce an initiative to have ECOWAS traffic with a common roaming tariff


Implications and Lessons


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Enabling regulations opens the door for innovation ONE network possible due to liberalising the international

gateway, in Tanzania and Uganda and finally Kenya providing an opportunity for innovation by Celtel/Zain supports the goal of regional integration , reduced costs Liberalisation unleashes real market competition ushers

innovation. As more players came into the market , One Network is a response to competition in the market.

Creates competitive reaction from incumbents who have to find a competitive solution

Drives roaming traffic up across all networks and drives down prices.

Review the underlying constraints to usher competition Government support in taxation measures on roaming traffic by

removal of tax on roaming is an enabler


27

Regulations have international implications Zambia not part of the ONE network due to

restrictions on international gateway Deny both Zambians and international travellers the

benefit of the ONE Network But because Zain dominant operator in Zambia, inclusion

in one network not as driven at national level as in markets where it is the underdog.

One network has ushered calls by regulators for across regional removal of roaming as noted in West Africa


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Market forces are good for consumer Competitors responded to ONE network with own

solutions – Kama Kawaida, MTN Seamless Network response undergirds this feature for the longer term for the

benefit of the consumer. New realities that were obvious are now being

implemented That most traffic for roamers is home network related and

is best served from their networks. 80-90% of the traffic is to or from the home network.

Traffic in destination country is insignificant Transparency in tariffs helps –encourages more use Zain did not achieve its immediate objective


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Way forwardInitial Recommendations

Review regulations with a view of increasing liberalisation to enable business innovation

Remove tax regime to reduce cost by accepting Mode 2 supply for roaming traffic under WTO rules . This is an export service and should not be taxed twice.

a need for oversight for single operation network who cannot compete and hemmed by multiple country operator this will avoid additional market entry barriers

Need to link this initiative to regional blocks where interregional trade is highest . Private sector operates where they have licences not where

regional travel is significant. Thus traffic between Rwanda and Afghanistan is insignificant though MTN Seamless has linked the two nations

Should be part of general effort to move towards cost based pricing (interconnection and retail).


Thank you

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End of roaming in East Africa; Lessons for Europe?eurocpr.org/data/2009/papers/19 Muriuki Mureithi.pdf · revolutionized and replaced the concept of roaming changed the way how people

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