Following global trends, the Tunisian telecoms industry has continued to move from fixed telephony into mobile, sustained by a rise in data use and the ongoing expansion of smartphone penetration rates. This has opened up the sector to new product development and expansion opportunities, despite the market’s small size relative to some of its regional neighbours. Sector development is also being driven by the accelerating pace of 4G offerings, while the three main mobile operators have continued to work towards increasing their share in a market where a large number of users have more than one provider – as of November 2017, mobile penetration had reached 126%. The growing influence of data offerings is opening up a new arena for competition and changing the operator’s revenue streams.
The local telecoms industry has expanded at a rapid rate, with the mobile segment driving growth in the number of users and serving as a catalyst for the sector overall. The number of mobile users expanded from 11.1m in 2010 to 14.5m by November 2017, according to the Tunisia’s National Telecommunications Agency (Instance Nationale des Télécommunications, INT).
After years of lacklustre performance, the sector registered a 6.2% increase in 2016, reaching revenues of TD2.7bn (€1bn), according to the INT. Part of this increase was led by rising revenues for data consumption, which grew by 35% between 2015 and 2016, and by the revenues for internet services, which expanded by 4% over the same period.
As in most countries with rising data consumption, voice revenues have decreased significantly. According to the INT, voice revenues sustained their fourth consecutive annual fall in 2016 in terms of revenues, registering a 0.3% reduction. This decline, however, happened as voice consumption rose by 1bn minutes in 2016, pointing to the difficulty in monetising voice services as the level of competitiveness increases with data services becoming a priority for users. To support rising data consumption, operators have invested in their 4G network offerings. This led to overall sector investment rising by 62.2% in 2016 to TD930m (€357.1m). The three main operators, Tunisie Telecom, Ooredoo Tunisie and Orange Tunisie were awarded 4G licences in mid-2016.
Although Tunisia has experienced a relatively smooth political transition since 2011, the industry has been impacted by the political environment, with each government having its own unique vision, affecting the scope of the sector’s long-term strategy. The industry is mostly under the management of the Ministry of Communication Technologies and Digital Economy (Ministère des Technologies de la Communication et de l’Economie Numérique, MINCOM), which is in charge of setting the overall government policy. As the leading sector authority, MINCOM has promoted infrastructure development, having established the necessary competitive boundaries for sector operators and strengthened conditions for cybersecurity as the country moves towards a more digitised economy.
Additionally, other government bodies with a role in the sector are also under ministerial oversight. Tunisia’s INT is the market regulator, supervising telecommunications licences, pricing and competition. The INT is also in charge of producing sector statistics about mobile, fixed-line and internet usage patterns, through its market observatory. Regulation is also supported through the Centre for Studies and Research of Telecommunications which is in charge of piloting regular quality-control assessments of service provision. Another body, the National Agency for Electronic Certification, is responsible for ensuring the safety of electronic transactions while managing electronic certificates.
The sector’s regulatory framework remains structured by the 2001 Telecommunications Code, although multiple amends to the law have been implemented. Reforms passed in 2013 added two important measures to sector regulation and competitiveness. First, it raised the fines for operators that break sector rules. Second, it laid down the legislation for private telecommunications companies to share excess infrastructure capacity with other firms. This latter measure opened the door for the arrival of Lycamobile, which began working within the local market as a mobile virtual network operator (MVNO) in late 2015 through an infrastructure-leasing agreement with Tunisie Telecom.
In terms of the overall number of customers and revenues, the sector remains dominated by the state operator, Tunisie Telecom. The firm, 65% of which is publicly owned, also posesses the country’s largest telecommunications infrastructure, as well as an international market presence. Additionally, Tunisie Telecom owns a 51% stake in Mattel, a Mauritanian telecommunications operator. Although it attempted to sell its participation in the West African operator in 2013, with France-based Orange Group positing an initial interest to buy the Mauritanian operator for a maximum €50m in 2015, no deal was finalised and the operator has remained under the control of Tunisie Telecom, which is seeking out a more competitive offer before undertaking a sale.
Similar to other public companies after 2011, Tunisie Telecom faced rising social demands in terms of hiring and salary increases, which has negatively affected its cost structure. Costs associated with human resources grew by 16% over the 2012-16 period, and amounted to 50% of total costs by the end of 2016, according to local media. The operator occupied the second position in the mobile segment, with over 4.4m users, and has a comfortable leadership position on the fixed-line segment with 892,539 customers. The incumbent operator has seen a slight decrease in its mobile segment market share in terms of subscriptions, which fell from 32.2% to 30.5% between January and December of 2017. In late 2017 private equity firm Abraaj Group announced it would acquire a 35% stake in Tunisie Telecom. The deal was signed with Dubai Holding’s Emirates International Telecommunications, which owned the stake after it had been acquired in 2006. At the time of press, values for the most recent deal had not yet been made public.
Also present in the market is Ooredoo Tunisie, owned by the Qatari telecommunications operator Ooredoo. As of December 2017, the firm dominated the mobile segment, with over 5.7m subscriptions, while holding a distant second position in the fixed-line market with a total of 122,805 users. The operator settled at a market share of 39.7% of the mobile market as of December 2017. French telecoms operator Orange operates through Orange Tunisie, which had 87,215 fixed-line customers and roughly 3.8m mobile users according to November 2017 figures by the INT. Between January and December 2017, the firm has seen its market share in the mobile market grow marginally from 25.9% to 26%, accounting for just over 28% of total national voice traffic in Tunisia, according to the recent INT figures.
With the high level of penetration evidence of customers’ penchant for acquiring several SIM cards and alternating their use according to specific offers, the market has also become flush with competitive MVNO offers. The first to enter was Lycamobile, which began country operations in 2015, and has been able to raise its number of mobile subscriptions from 247,545 in January 2017 to 549,263 by December that same year. This amounted to a jump in its market share, in terms of subscriptions, from 1.7% to 3.8%, according to recent data from the INT.
The segment is likely to welcome a new competitor in 2018. Watany Telecom has announced it would launch MVNO services in Tunisia during the first quarter of the year. The firm said it would focus on providing telecommunications services for the Libyan community that has moved to Tunisia after the 2011 popular revolts. Another MVNO that is reportedly looking to acquire a licence to operate in the local market is Virgin Mobile, which has been expanding in the Middle East and already has a presence in Jordan, Oman and Saudi Arabia.
The mobile market remains dominated by pre-paid customers, which accounted for over 13.2m users in November 2017. However, despite maintaining its position as the sector’s most valuable segment, revenues from mobile have been falling from TD1.7bn (€652.7m) in 2012 to TD1.6bn (€614.4m) by 2016. The implementation of number portability protocols in 2016 has also introduced some dynamism to the sector, allowing for small fluctuations in market shares as consumers can now switch service providers more easily.
The mobile segment is likely to become even more competitive with the arrival of a fifth mobile provider, and the second MVNO during 2018. Although virtual operators typically focus on a specific segment of the market, it is likely that the announced arrival of Watany Telecom may affect some of the current market positions.
The market’s dynamism, galvanised by the potential arrival of its fifth mobile operator, is also being influenced by the enactment of a host of portability measures from May 2016. A rule to allow users to switch telecommunications providers without having to relinquish their mobile number was first signed between the INT and the three main operators, with Lycamobile joining in the protocol in September 2016.
The measure has already started to have an impact on the market: between June 2016 and December 2017, the number of mobile phone users that switched operators through the number portability protocol totalled 314,746, according to the INT. This represented 2.2% of all subscriptions. Orange has benefitted most from the policy capturing 162,981 through number portability during that period, representing 4.4% of its subscriber base, followed by Ooredoo at 132,092 (2.3%) and Tunisie Telecom with 19,626 (0.4%). Lycamobile gained just 47 new users over the same period (0.008%).
In accordance with the expansion of mobile internet access, Tunisian consumers have also been allocating more time and resources to data usage. This has become a major selling point for the sector’s four leading operators, which have been expanding their offers through 3G and 4G networks. According to information from the INT, data usage increased by 30% between August 2016 and the same month in 2017. The weight of data in the sector’s overall revenue has also steadily increased, growing from 12.7% to 16.1% of total sector revenues from 2012 to 2016, progress that is projected to continue over the coming years.
As of November 2017, the total number of mobile data users in Tunisia neared 7.5m, illustrating that a margin for growth exists within the segment. According to the latest available figures from November 2017, Ooredoo was the market leader in terms of mobile data subscriptions with 39.7%, followed by Orange with 36.5% and Tunisie Telecom with 23.7%. In contrast to the uptake in mobile data services, fixed-internet connections in the country totalled 811,460 in November 2017, the majority of which were residential customers, at 728,416.
The fixed-line segment has undergone a decline in the face of rising mobile telecommunications, decreasing from 1.3m in 2010 to 1.1m by November 2017. Between 2015 and 2017, the number of fixed-telephone lines in Tunisia experienced a light upsurge of around 937,000 lines. The majority of fixed-line subscriptions, over 915,000, were accounted for by households. The segment has traditionally made a smaller contribution to overall revenues. From 2011 to 2016 revenues fell from TD364m (€139.8m) TD237m (€91m).
Despite its importance to economic development, the telecommunications sector is set to face additional difficulties as a result of Tunisia’s current financial environment.
In an ongoing effort to improve the country’s financial position, a new budget law for 2018 has added a handful of consumption taxes, many of which fall on telecommunications services, with elements critical to Tunisia’s digitalisation strategy becoming subject to higher taxes. Combined import taxes on mobile phones manufactured abroad, for example, have climbed from 11.3% to 62.43% under the new law, according to calculations by the Tunisian Federation of Telecommunications (Fédération Tunisienne des Télécommunications, FTT). This will make access to smartphones even more difficult for lower-income Tunisians.
Another measure causing concern is the increase on the tax on internet usage, which has risen from a flat TD0.50 (€0.19) per monthly bill to 14% the bill, according to the FTT. These tax hikes seem to act against the interests of the government’s declared aim of improving access to ICT services.
The telecommunications sector is certain to remain fundamentally important to Tunisia’s economic and social development in the years to come. A significant portion of the country’s existing regional disparities could be more easily bridged through a comprehensive public-private strategy that allows for both easy and affordable access to telecommunications for the whole of the population. However, the country’s continued sensitive fiscal position – which has pushed the government to look for additional revenue – presents a risk of lowering of the sector’s growth potential over the short-, medium and long term.
Despite the added consumption taxes, after returning to growth, the telecommunications sector is poised to continue its expansion over the short-term. This is most likely to be driven by the addition of new competition from MVNOs and the fast-paced development of new data consumption-patterns.
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