Data signals better prospects in telecom market

Data growth. Currently, data contributes between 3 and 9 per cent to telecom companies’ revenue collections. Demand for data services in the country, including access to high speed internet, has been growing steadily for the past two years following the landing of the fibre optic cables such as TEAMS, EASSy and SEACOM at the East African coast in 2009.

As revenues generated by the voice segment continue to flatten, mobile telecom operators are now exploiting the internet and data platform which is expected to become a cash cow for the industry in the near future. Warid Telecom has also announced that it will launch its Third Generation (3G) mobile technology this month to enhance data service delivery as it readies itself to tap into revenues generated by this platform.

The voice platform, a segment where MTN has held the leadership position for over a decade is no longer as profitable with recent price wars seeing call rates drop from a market average of Shs380 per minute to Shs180 per minute, effecting revenue collections.

Orange Uganda which capitalised on internet and data service provision from the start seems to have gotten its game right, as industry analysts say the future of communication and revenue generation for telecom companies lies in internet and data.
Mr Allan Zaramba, an industry analyst predicts that time is coming when revenue generated by the internet and data platform will outpace that generated by voice calls, due to the growing penetration levels and relevant local content.

“The two will continue complementing each other for the time being because of low literacy levels but that will change in future when more relevant applications and content are developed,” he told Prosper last week. Uganda Communications Commission publicist, Mr Fred Otunnu echoes a similar sentiment that time is coming, though in the long term, when the highest revenue for telecoms will be generated by the internet and data platform.

Warid telecom’s Chief Commercial Officer, Mr Shailendra Naidu, however, holds a different view. Although he predicts that 2012 will be a good year for internet and data to gain pace in the country, he says revenue collections from this platform will never outstrip that generated by voice for telecom companies.

“Uganda is still a young market. Even in mature markets like the United Kingdom and the United States data still contributes just 15-20 per cent to their revenue, how about Uganda where literacy levels are still low and still have infrastructure challenges,” he asked.

Mr Edouard Blondeau Orange Uganda chief officer strategy says though it will take some time for revenue generated from internet to overtake that by voice, data revenue will grow much more rapidly because of the fast growing data usage due to the transformation of phones to include more internet related features.

“Ugandans are not going to stop talking overnight! So voice is going to remain a primary usage on phones. But as technology matures, phones with new capabilities are emerging relying more on data services and Orange acknowledged this shift in consumer need and rolled out a high speed internet network in Uganda,” he said.

Currently, data contributes between 3 and 9 per cent to telecom companies’ revenue collections. Demand for data services in the country including access to high speed internet has been growing steadily for the past two years following the landing the fibre optic cables such as TEAMS, EASSy and SEACOM at the East African cost in 2009 that stimulated the adoption of data services.

“Internet usage has more than doubled since the landing of the fibre optic cable and connectivity prices have also reduced substantially,” Mr Zaramba said. He said that social media especially facebook and twitter has played a major role in increasing internet usage in the country.

Statistics from the Uganda Communications Commission indicate that to date, there are an estimated 4.5 million internet users from 1 million at the end of 2007. The highest growth rate is registered in wireless broadband solutions which accounted for more than 90 per cent of internet subscriptions by the end of 2010.

Wireless internet subscription grew from zero in 2008 to 600,000 mobile accounts by the end of 2010 compared to fixed internet subscription that increased from 22,000 to 35,000 over the same period. Mr Otunnu says faster data uptake resulting from increasing penetration, falling bandwidth prices and growth in local content will stimulate internet usage in the country in the coming years.

Mr Rodney Rudman, Broadband Company chief executive officer says internet speed has increased by almost four times from a sluggish 64 kbps about two years, internet products have doubled and prices have substantially reduced making internet more affordable to a larger segment of the market.

The growth rates in internet and data service point to the fact that the days of using mobile phones for calls and SMSs are slowly disappearing as customers increasingly seek practical solutions for their day-to-day needs. Orange currently enjoys market leadership in internet and data service platform.

Other service providers that share a portion of the 4.5 million internet subscribers include Broadband Company, Warid Telecom, MTN, Foris Uganda, Uganda Telecom Limited and Airtel, Afsat Communications, InfoCom and Datanet among others.
Mr Zaramba says the future holds enormous opportunities for data since about three quarters of the population is still unconnected, an opportunity internet service providers should exploit by offering relevant content and application.
Telecoms are also exploiting other avenues to supplement revenues generated by voice calls by offering value added products such as mobile money transfers.

MTN is said to be a leading telecom in this platform. Other players that offer mobile money services include Airtel and Uganda Telecom Limited. Warid telecom’s Chief Commercial Officer, Mr Shailendra Naidu says that the telecom will launch its mobile money transfer platform in November.

Players, however, cite infrastructure as the biggest challenge that hindering internet penetration in the country.
“Internet connectivity remains an expensive commodity in Uganda in spite of sea cable systems at the costs and this has left internet connectivity beyond the reach of most Ugandans,” Mr Rudman said. He attributed the high operational costs to constant load shedding requiring backup generators at base stations to keep the network stable, increasing the costs of doing business.

Mr Otunnu also identified slow growth of relevant local content to drive the sector and limited e-government application.
Mr Zaramba, however, says companies can overcome the high infrastructure costs by sharing base stations to offer better and cheaper services.

Growth in internet and data services in many developing countries is also hindered by government interference.
MTN Group Chief Commercial Officer in charge of Sales, Marketing and Innovations recently told a Mobile and Convergence Workshop during the 15th Highway Africa Conference in Cape Town, South Africa that some governments in its 21 operations in Africa and Middle East asked them to block access to social networks to prevent detractors of from taking advantage of governments using social media platforms such as facebook and twitter.

When contacted, MTN Uganda chief executive officer, Mr Themba Khumalo, however, MTN Uganda has never received any requests of the sort from government, adding that Uganda is one of the countries that supports any form of media freedom.
“The requests are from other markets but not Uganda. It has never happened here and we don’t expect it to happen,” Mr Khumalo said.