Benefitting from a penetration rate of more than 100% in what is the second-largest consumer market in North Africa, along with high levels of geographic coverage in the densely populated coastal areas, Algeria’s telecoms sector is in the early stages of a rapid shift to high-volume data consumption. Home to three mobile telephone network operators as well as a state-owned fixed-line operator, the sector reached a milestone in late 2013 with the launch of 3G mobile internet services. This was followed by the rollout of 4G in 2016.
A further change could soon bring about another transformation of the telecoms landscape, if some much-anticipated revisions to the current telecoms law are implemented. Among other proposed measures, the law is expected to introduce competition into the fixed-line telephone and broadband segment through the unbundling of local loops, though the amendments are still under development and have raised some concerns.
The sector’s regulator, the Post and Telecommunications Regulatory Authority (Autorité de Regulation de la Poste et des Télécommunications, ARPT), put the GDP contribution of Algeria’s telecoms industry at 3.17% in 2015, while the sector’s turnover stood at AD532bn (€4.4bn), of which mobile and fixed-line operators accounted for 81%. Total turnover was up 6.6% on 2014’s figure of AD499bn (€4.1bn).
Fixed-line usage across the MENA region has been declining in recent years, with mobile voice and data consuming an ever-higher share of both connections and usage. Algeria has not been immune to this trend, although 2015 saw a turnaround in the fixed-line segment, with customers and revenues both rising.
State-owned operator Algérie Télécom (AT) is currently the sole player in the fixed-line segment. However, a new ICT law currently being worked on is widely expected to unbundle the country’s local loops, which should bring about competition in the segment. Following several years of slow decline, in 2015 the number of fixed-line subscribers in Algeria rose by 5.5% to reach 3.27m – the highest number in the country’s history – according to figures from the ARPT. The surprising reversal was driven by residential connections, which stood at 2.83m in 2015, up 6% on 2014 figures and equivalent to 86.7% of total fixed-line subscriptions.
This brought the per-person penetration rate to 8.1%, up from 7.85% the previous year, though it was still down on the 2012 figure of 8.55% and a peak of 9.1% in 2007. Household penetration stood at 41.65% in 2015. Connections are divided between land-line subscriptions, which stood at 3.01m in 2015, up from 2m in 2009, and wireless local loop connections, which stood at 0.25m and have been steadily declining since 2008, when they peaked at 0.86m.
The increased number of customers has not stemmed the decline in usage, but has led to a bump in average revenue per user (ARPU). Average monthly use stood at 101 minutes per user per month in 2015, down from 103 minutes in 2014 and 114 minutes the year before that. However, segment revenues were up for the year: ARPU was recorded at AD2435 (€20.14) per month, up from AD2178 (€18.02) the previous year and AD1919 (€15.87) in 2013. This helped to raise the segment’s turnover from AD81.7bn (€675.8m) in 2014 to a total of AD93bn (€769.3m) in 2015. While fixed-line revenues have declined since their peak in 2005, when they reached AD103.6bn (€857m), they have nonetheless been rising steadily since 2009, when they bottomed out at AD58bn (€479.8m).
Algeria is home to three mobile phone and data network operators. The largest of these by subscriptions is Optimum Télécom Algérie, which operates under the brand name of Djezzy and launched its service in 2002. The firm’s largest shareholder is the state-owned National Investment Fund (Fonds National d’Investissement, FNI), which acquired its 51% stake in early 2015 from VimpelCom, which is headquartered in Amsterdam. The transaction marked the successful resolution of a long running discussion between the government and Djezzy over back taxes and other issues, which saw the operator face sanctions and import bans for new equipment, delaying the rollout of its 3G network. VimpelCom retains both responsibility for day-to-day management of the company as well as a 45.6% ownership stake; the remaining 3.4% is held by Algeria’s largest private conglomerate, Cevital.
The next-largest mobile operator in the market is also its oldest – Algérie Télécom Mobile – a wholly owned subsidiary of AT, which launched its mobile service in 1999, marking the birth of the Algerian mobile phone segment. The firm operates under the brand name Mobilis. The third operator and most recent entrant to the market is Wataniya Telecom Algérie. The firm entered the Algerian market in 2004 as a subsidiary of Kuwaiti firm Wataniya and was initially known as Nedjma. It rebranded as Ooredoo in 2013 after its Qatari owner of the same name (formerly Qtel) acquired a controlling stake in Wataniya in 2007.
Like so many emerging economies, Algeria’s mobile telecoms sector has grown rapidly since its inception, passing a penetration rate of 100% in 2012-13, a result made possible by multi-SIM card ownership, which customers use to take advantage of in-network calling rates and sales. However, there are now signs that the market is reaching saturation.
According to figures from the ARPT, the total number of mobile subscriptions in the country fell by 0.18% between 2014 and 2015, from 43.3m to 43.22m. This followed rises in subscription numbers of 9.6% in 2014 and around 5.6% in each of the two previous years. The drop in overall subscription numbers combined with population growth saw market penetration fall from 109.6% in 2014 to 107%. The slight fall in subscriptions and penetration indicate that the market is reaching full capacity, though subscriptions also levelled off twice in the late 2000s before resuming growth.
The drop was driven by a fall in GSM subscriptions, which stood at 26.91m in 2015, down 22.7% as subscribers shifted over to 3G connections. These rose by 91.8% over the period to reach 16.32m. The changes saw the GSM penetration rate fall from 88.1% in 2015 to 66.6%, while the 3G rate rose from 21.6% to 40.4%. Industry figures say that since the launch of 3G, clients are now making fewer and fewer voice calls as they use voice over internet protocol (VOIP) services, such as WhatsApp and Skype, to make calls.
In the mobile segment ARPU stood at AD655 (€5.42) in 2015, up slightly from AD652 (€5.39) the previous year. ARPU has risen slowly but steadily every year since 2010. Between 2002 and 2010 ARPU declined sharply, from AD3996 (€33.05) to AD566 (€4.98), due to competition. In contrast, the total turnover of the mobile segment has been growing steadily since its launch and stood at AD340bn (€2.8bn) at the end of 2015, up from AD324.3bn (€2.7bn) the year before.
The mobile sector has become increasingly competitive following the launch of 3G. In 2015 Djezzy was the largest operator by subscription, according to ARPT, with a 38.4% share of the market, ahead of Mobilis with 33.1% and Ooredoo with 28.5%. However, Djezzy’s market share was down significantly on 2014, when it accounted for 43% of total subscribers, while Mobilis and Ooredoo gained around three and two percentage points in market share, respectively.
The increased competition as a result of 3G usage is easier to see when broken down by segment. Djezzy was the clear leader in the GSM market in 2015, with a 46.3% subscriber base market share, down from 49.9% a year previously, compared to 28.9% for Mobilis and 24.8% for Ooredoo. However, Mobilis is the market leader as regards mobile data, with a 40.1% take in the market, ahead of Ooredoo on 34.5% and Djezzy on 25.4%. Djezzy’s lower market share is likely attributable in part to its delay in launching 3G services compared to the other two operators, which slowed its expansion of mobile internet coverage across the country. However, Djezzy’s 2015 data market share was up from 14.7% in 2014, while Mobilis and Ooredoo lost 4.7 and 5.9 percentage points of market share, respectively.
Pre-Paid Remains Dominant
As is the norm throughout the region, pre-paid accounts made up 89.8% of the market, compared to 10.2% for post-paid contracts, with the breakdown for GSM and 3G subscriptions showing similar splits. Among the reasons for this include the underdeveloped nature of the local banking system, which traditionally required clients to go into their banks every month to pay phone bills. Now, however, electronic payments are being developed and may allow for greater development of the postpaid sector. Ooredoo is the market leader in post-paid accounts, which are dominated by corporate clients, with 1.88m subscriptions, ahead of Mobilis and Djezzy with 1.27m and 1.25m, respectively.
AT, which dominates the fixed-line internet segment, has invested heavily in a major rollout of fibre-optic cabling in recent years, in order to boost internet access and speeds for consumers. In September 2015 the firm announced that it had laid 70,000 km of fibre, and that it plans to lay a further 10,000-15,000 km a year, a goal which has been in place for three years. The network upgrades could in part be responsible for the upturn in residential fixed line subscriptions in 2015, and could also have positive benefits for the wider economy, especially local industry. “A total of 90% of fibre-optic cables are made with plastics, so the development of Algeria’s petrochemical sector could support the development of fibre-optic production,” Rabah Hazi, CEO of Catel, a local telecoms cabling manufacturer, told OBG.
The upgrades also reflect the changing dynamic of the sector, as competition increases with the rapid expansion of high-speed wireless broadband, which began in 2013, when Mobilis and Ooredoo launched their 3G networks. While coverage was initially limited, in January 2016 Mobilis announced that its network had become available in all 48 of Algeria’s provinces, or wilayas. Ooredoo followed suit in July 2016, saying that it had provided coverage to 90% of the population.
Djezzy’s launch of its 3G network came in April 2014, following the conclusion of negotiations with the government on tax-related issues, and it launched mobile internet services the following July, initially covering seven wilayas. As of the beginning of December 2016 2016 the company had extended its 3G network to cover all 48 wilayas. Following on from this, 4G LTE networks were launched by all three mobile network operators in the second half of 2016 (see analysis). While uptake is not expected to be as fast as that of 3G, the rollout of 4G represents a significant growth opportunity for operators. Hendrink Kasteel, CEO of Ooredoo Algeria, told OBG, “The launch of 4G has opened up new prospects for the development of the Algerian mobile telephony sector, and it will ultimately contribute to the diversification of the economy.”
Two submarine cables currently connect Algeria to the international internet, namely the Sea-Me-We 4 international cable, which links Annaba to Europe, and the ALPAL-2 cable between Algiers and Palma in Spain. Together, the two cables provided the country with international bandwidth of 12,460 bits per second (bps) per internet user in 2014, according to latest available data from the International Telecommunication Union, up from 7771 bps four years previously. This compared to a figure of 25,972 bps for Tunisia and 10,768 for Morocco.
A third fibre-optic submarine cable, known as ORVAL, running from Oran to Valencia, Spain, is expected to enter into operations in February 2017. According to Abdelhakim Bensaoula, director-general of the National Agency for the Promotion and Development of Technoparks (Agence Nationale de Promotion et de Développement des Parcs Technologiques, ANPT), the implementation of the cable would greatly improve the prospects for ICT outsourcing to Algeria. “Segments such as offshoring and call centres are already developing, and there are a large number of European firms outsourcing work, such as web design, to Algerians. While progress has been held back by connectivity risks, the multiplication of cables will reduce this risk.”
At present, AT controls the two gateways which, according to Ali Azzouz, owner of local ICT firm Icosnet, keeps costs high, citing a figure of approximately €30,000 per month for an STN1 connection from Algiers to Marseille, via the Sea-Me-We 4 cable.
New Telecoms Law
In August 2015 Iman Houda Feraoun, minister of post and ICT, announced plans to draft a new post and telecoms law to replace the existing law, which dates from 2000. In keeping with reported changes contained in previous drafts of the law, the proposed legislation would put an end to AT’s monopoly in the fixed-line telephone and broadband sector by unbundling local loops, and could lessen the firm’s control of international bandwidth. In October 2016 Feraoun told Parliament this would help boost internet access by introducing competition to the sector and thereby reducing prices.
However, the proposed amendments have raised concerns. In November the Post and ICT Federation trades union, which represents workers at AT, said it opposed the plans and argued that unbundling local loops would contravene Article 17 of the country’s constitution, which designates the postal and telecoms sector as a collective and sovereign national good. The union has said that it fears such loop unbundling could threaten the future of the company’s 23,000 employees and lead to the privatisation of AT.
According to local press reports, previous versions of the law also contained plans for the launch of mobile virtual network operators (MVNOs), which buy up capacity in bulk from network operators and then resell it under their own brand to consumers. “MVNOs represent additional business for the operators whose networks they use and are effectively another form of marketing for them,” Azzouz told OBG. According to Azzouz there is also a need for a fourth full and fixed mobile network operator in the market, providing it was backed by a major international telecoms firm capable of large-scale investment. However, the authorities have given little indication that they would be willing to issue licences for further operators and, according to Azzouz, some characteristics of the current market were also likely to reduce its attractiveness to prospective investors. “Firms are reluctant to enter the market given the existence of two state-backed operators,” he told OBG, referring to the takeover of Djezzy by the government-owned FNI.
Plans to liberalise the telecoms sector via measures such as local loop unbundling could significantly increase competition, pushing down prices and improving services and uptake of fixed-line telephony and broadband services in particular. The arrival of 4G LTE mobile broadband in the country, as well as the imminent launch of a new data cable, will further help to improve the state of Algeria’s IT infrastructure, which will help with the development of industries reliant on such technology, such as outsourcing, and improve the competitiveness and efficiency of the whole economy.
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