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Thursday, 19 July 2007

A growing giant?

Could Zamtel's incredible inefficiency in the sector actually be fuelling a growing giant in shape of Celtel? That may not be good news for the future in face of a weak regulator (Communication Authority of Zambia). Two or three years down the line Celtel may possess a lot of market power which are best anticipated now and handled with a liberalisation of the international gateway and necessary break up of Zamtel in two as we have argued here.




Update 1:

The source for these pictures and other Celtel related information can be found here.

Update 2:

Celtel reached 1.5m customers in June 2007. More information can be found here.

12 comments:

  1. Very interesting map! It's quite incredible to watch the coverage of these cell phone companies grow into even the most rural areas.

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  2. Yes Celtel has grown very dramatic. I have just added an update to the post with a link to the source for the maps. That link has a graphs within it that shows the numbers. The growth has been quite dramatic.

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  3. Apparently Celtel is a subsidiary of Kuwait-based MTC (www.mtctelecom.com), a $29B company aimed at expanding to a base of 70 million subscribers by 2011 throughout the Middle East and Africa. Their FY 2006 Annual Report has this to say about the Zambian division:

    "Celtel Zambia, launched in 1998, was the best performing African operation of the Group. It registered record growth in all areas and was recognized by the Group's leadership as the African 'Operation of the Year' 2006. Celtel further strengthened its leadership position in Zambia by securing an 80% market share despite increased competition from its main competitor MTN. The company's strong performance in 2006 was underpinned by improved coverage which was extended to each of the countries' 72 districts in 2006, with accelerated rollout in the Eastern, Northern, and Copperbelt provinces. In addition, existing capacity in the main towns of Lusaka, Kitwe, Ndola, Solwezi, Chipata, Kasama and Mansa was expanded.

    During the year under review, Celtel added 203 new base stations, up from 145 to a total of 358 base stations – a 147% increase. By the end of 2006, 65% of the Zambia's population of 11 million was under coverage, a 10% increase over the previous year. The number of customers adhered to Celtel Zambia remarkably increased from 700,000 in 2005 to 1.32 million in 2006, representing an 89% year-on-year increase. Total revenues were up by 111% from US$90.1 million to US$190.1 million. EBITDA also improved by 114%, from US$39.5 million to US$84.6 million. Finally, average ARPU for the year was US$16.

    Celtel Zambia's success rests heavily on brand loyalty from the company's customers. The company actively supports community initiatives such as the promotion of music, art and culture as well as the sponsoring of 9 traditional community ceremonies. Additionally, Celtel was involved in the first Zambian Idols program, called Star Search. In 2006, Celtel Zambia introduced ME2U in February, Mobile Top Up in October and GPRS/EDGE in December."

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  4. "The company's strong performance in 2006 was underpinned by improved coverage which was extended to each of the countries' 72 districts in 2006, with accelerated rollout in the Eastern, Northern, and Copperbelt provinces."

    This is the key. Celtel is literally everywhere in Zambia. In every district. When I was in Zambia over Xmas I went to Nchelenge - by lake Mweru.

    All I could see was Celtel along the way. I actually use MTN when I am in Zambia. I was fortunate to get the reception in Nchelenge but along the way from Copperbelt i didn't have any reception. Quite bizarre how MTN are expanding.

    Of course MTN should provide some competition to Celtel but their marketing strategy is very different. They appear to cater for a more business audience.

    "Celtel Zambia's success rests heavily on brand loyalty from the company's customers. The company actively supports community initiatives such as the promotion of music, art and culture as well as the sponsoring of 9 traditional community ceremonies. Additionally, Celtel was involved in the first Zambian Idols program, called Star Search. In 2006, Celtel Zambia introduced ME2U in February, Mobile Top Up in October and GPRS/EDGE in December."

    This is actually true!!
    MTN do alot of community initiatives and are always on TV using soap stars music shows. Its working!

    I think if Celtel can use their platform to provide wireless internet access they would dismantle any hope that Zamtel may have to dominate that market.

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  5. Currently, I do not see how any other company will take market share from Celtel, MTN included.

    Celtel is literally "everywhere you go," taking MTN's slogan and owning it in this case. They spend more money, it seems, on advertising and infrastructure than any other mobile phone operator in the country.

    As for Zamtel and their Cell Z service, I believe the bus left them a while back! All Cell Z has to hang onto for now is it's hold on the international gateway, but once that goes, I seriously do not see how it will survive as a mobile operator.

    Celtel already has wireless internet access with their GPRS/EDGE service offering, a bit on the high side in terms of cost compared to other wireless providers (iConnect, Zamnet, etc.) but powerful nonetheless because it enables anyone with a capable mobile device to browse the internet albeit for short periods whenever away from a computer.

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  6. Mweshi,

    Celtel already has wireless internet access with their GPRS/EDGE service offering, a bit on the high side in terms of cost compared to other wireless providers (iConnect, Zamnet, etc.) but powerful nonetheless because it enables anyone with a capable mobile device to browse the internet albeit for short periods whenever away from a computer.

    Very interesting!
    Presumably GPRS technology should allow access from the laptop?

    You said this is expensive - I would interested to know whether you think there are other ways of delivering cheap internet access to rural areas?

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  7. I have used GPRS to access the internet on both the phone and my laptop (via bluetooth access to the phone's GPRS network access). It's been great on the cell because I can access my emails and quickly browse for information whenever I'm away from a high-speed internet connection.

    I believe speeds average around 56Kbps or so on the Celtel network which would be far better than nothing for rural area schools, farmers associations, etc. Celtel currently has the widest coverage of any internet and telecoms company in the country and their GPRS solution would be a great asset to delivering last mile internet access to some of Zambia's remote areas.

    Obviously, Celtel's primary focus remains the voice and SMS services they offer as these bring in the most money for them. They're pushing and advertising their GPRS solution everyday, but I believe cost is still a major factor.

    GPRS at the moment, and until we can get the fiber optics line into the country, is the quickest solution for providing internet access to rural areas especially with Celtel's blanketing network, a VSAT connection will require a license and a bit more money.

    If Celtel can find ways of reducing the cost of data comms on their solution, perhaps through some partnerships, we'll see a great push and new services spring up to cater to the rural areas of the country especially for schools.

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  8. Mweshi,

    Thanks, very enlightening!!

    Okay, I am planning to be in Zambia over Xmas - I currently use my MTN sim card when am there and I never carry laptop. But because I will be there over 6 weeks or so this time (as opposed to my usual 4 weeks annually), I would like immediate wireless access.

    You said it's costly, what are the charges like?

    If Celtel can find ways of reducing the cost of data comms on their solution, perhaps through some partnerships, we'll see a great push and new services spring up to cater to the rural areas of the country especially for schools."

    The prospect of cheap internet access in Mwansabombwe is too exciting!!

    The only issue of course is one raised by David in a different post. His view is that Celtel may need to fund the current expansion in rural areas, with higher costs for urban dwellers….whats your view on this?

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  9. I picked up a Celtel info packet that they've just released highlighting their services yesterday.

    Celtel access to GPRS network:
    Pay per use - K1,600 per MB
    15MB/month - K19,500
    100MB/month - K85,000

    Internet Cafes ~ K9,000 per hour

    Kwacha : US Dollar ~ K4,000 : US$1

    Compare that with 2.5GBs on iConnect for about K675,000 a month for in-home wireless broadband after you include tax...non-taxed - K550,000. I believe Zamnet is a bit less than that with unlimited bandwidth through their access anywhere-in-the-city "Rabbit" network. I don't know how reliable they are though as several people I talked to have complained of it. On the Celtel deal, accessing 2.5GBs per month would certainly put one in debt!

    Could be that Celtel's funding it's expansion through high costs for urban dwellers, but I think the issue is way deeper than that and entrenched in several policies from different groups both public and private. But then again, Celtel's main cash cows are voice and SMS.

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  10. Yes, certainly Celtel can make you go broke!!

    But the iconnect package must come with some expenses upfront right?
    http://www.iconnect.zm/internet_broadband_service.html

    You need the equipment. Those cannot be free. Do you know how much they charge for say the K550,000 package for the associated equipment?

    Otherwise the monthly charges are very reasonable for the middle income earners - but obviously no where near affordable for the average Zambia. The cost of internet for 2.5G is half of what the average Zambian family of six would spend on a given month.

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  11. Of course there are upfront costs for iConnect's equipment, this is Zambia after all :-) and everyone always wants to milk the cow for as long as they can.

    I had to pay something like $300+ for the equipment if I remember correctly for the home+ solution.

    Was having a discussion with a friend over the weekend and there's talk of a few more players entering the wireless ISP market by the end of the year with more affordable solutions. Guess we'll have to wait and see what comes up.

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  12. ”I had to pay something like $300+ for the equipment if I remember correctly for the home+ solution”

    Not bad…for the size of the customer base, that is actually quiet reasonable. It almost certainly bodes well for the future when the customer increases.

    ”Was having a discussion with a friend over the weekend and there's talk of a few more players entering the wireless ISP market by the end of the year with more affordable solutions. Guess we'll have to wait and see what comes up”.

    That would be fantastic news!!
    Are these likely to be foreign investors or domestic?

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