Balancing the marked decrease in fixed-line traffic and continued growth in the mobile communications segment, Morocco’s telecoms players are grappling with a period of intense competition. Since the entry of a third operator, Wana, in 2010, the country’s two established operators, Maroc Telecom and Méditel, have been battling it out on several fronts, the most dynamic of which has been the mobile telecommunications segment. Frequent promotional offers and increased mobile phone penetration coupled with carefully crafted regulatory guidelines have all enhanced competition and reduced prices for consumers.
Despite a relative decrease competition, the sector’s dynamism is making itself manifest in other ways. The announced sale of a majority stake in leading operator Maroc Telecom before the end of 2013 is set to bring in a new actor. Furthermore, the opening of the sector to virtual telecoms operators, as well as the possible entry of a fourth full-fledged operator in the next few years all underline the sector’s attractiveness for investment in the near to medium term.
INCREASED MOBILITY: Much of the growth in the telecoms sector has been a natural consequence of targeted economic development and rising income levels. Government plans, stated in the Maroc Numeric 2013 plan were quickly surpassed. The plan, published in 2009, aimed to have 34m phone users by 2013, combining mobile and fixed-line. However, the country reached this goal in mid-2011, due to a faster-than-expected growth in mobile phone penetration. The number of mobile phone subscriptions exceeded 38m in 2012, according to figures from the National Agency for Telecommunications Regulation (Agence Nationale de Réglementation des Télécommunications, ANRT). “In the past few years, mobile operators have become a lot more aggressive through promotional offers. Since then we have seen some stabilisation. This probably means that the market is going towards a steadier year in 2013,” Karim Gharbi, the director of corporate finance at investment bank CFG Group, told OBG.
MAIN PLAYERS: The Moroccan mobile market is shared between three operators: Maroc Telecom, Méditel and Wana. All three firms offer mobile and fixed-line communications. Competition has been especially tight over the past three years, as Méditel and the last entrant Wana have been pushing for a more comfortable market share to recoup their investments. The result has been a strong increase in market share for Wana, which was able to rise to the detriment of Méditel and especially Maroc Telecom. This is particularly true in the mobile communications segment. When Wana entered the mobile market in 2010 Maroc Telecom had a 60.3% market share and Méditel was at 37.3%.
According to ANRT figures for the third quarter of 2012, Maroc Telecom now has a 47.1% market share in the mobile communications segment, Méditel is at 29.9% and after a jump to 14% in its first year of operation, Wana is now at 23%. Part of Wana’s rapid climb has to do with the country’s regulatory framework, which over the past two years has favoured harmonisation of infrastructure access fees, resulting in a reduction of tariff asymmetry between operators.
Maroc Telecom remains the largest operator in terms of number of customers and volume of revenues. It is also the largest Moroccan firm in terms of capitalisation in the Casablanca Stock Exchange – and the only of the telecoms players to be publicly listed. Although it is 53% owned by Paris-based Vivendi, the French majority shareholder has announced plans to sell its stake before the end of 2013. The Moroccan government, the second-largest shareholder, owns 30% of the Maroc Telecom, and remaining shares are openly traded on the market. The government considered selling part of its stake in the company in 2011, but the sale was eventually cancelled.
Nonetheless, attention has shifted to Vivendi’s decision to exit from the company, and the market is now waiting to see who will acquire the controlling stake and a solid foothold in the country’s telecom sector.
Maroc Telecom posted a 3.2% decrease in revenues for 2012 at Dh29.9bn (€2.65bn), down from Dh30.8bn (€2.73bn) in 2011, and profits were recorded at Dh6.7bn (€595.6m) for 2012, a 17% decrease from Dh8.1bn (€720.09m) in 2011. According to a February 2013 Reuters news report the company cited restructuring charges and a non-recurring contribution to the government in the form of a poverty-reduction levy.
Second-largest player Méditel got its operating licence for the Moroccan market in 1999. It biggest shareholder, France Telecom, bought its 40% share in 2010 from CDG and BMCE. In 2011 Méditel’s revenues reached Dh5.9bn (€524.51m) and profits were recorded at Dh854.5m (€75.96m).
Moroccan conglomerate Société Nationale de L’ Investissement (SNI) owns a majority 69% stake in Wana, the country’s newest operator. The remaining 31% of capital is divided between Al Ajial, a Kuwaiti investment company, and Zain, a Kuwaiti telecoms firm. In 2010 SNI announced it was looking to reduce its participation in Wana as part of a broader strategy to reduce its stakes in several businesses. An initial public offering for its participation in the third operator was considered, but plans seem to have been put on hold, at least for now, possibly due to the current financial situation.
FIXED-LINE SEGMENT: According to the ANRT, there were 3.2m fixed-lines in Morocco by the third quarter of 2012, which equals a national penetration rate of 10.2%. This is an increase on the number of existent fixed lines in 2003, 1.22m, but a decrease from the 2010 peak number of 3.8m phone connections. Growth in the fixed-line segment has been negative over the past two years.
Attesting to the market’s rapid adoption rate, Morocco jumped a step, quickly going from a country with very few fixed lines to one that has seen a surge in mobile phone users. Portable communications have been driving the market ever since and encouraging substitution of fixed lines for mobile ones. Ongoing expansion of ADSL internet connections seems to be the only factor preventing a steep reduction in fixed-line communications across the country.
Wana had a 60.49% market share in the fixed-line segment in 2012, according to figures published by the ANRT. Maroc Telecom is second with 37.6% of the market. Méditel accounts for only 0.8% of fixed lines.
A lot of the growth in the segment was prompted by Wana’s entry into fixed line. The third operator came out with a limited mobile product that allows users to speak from anywhere within a kilometre of where the fixed line is based, and it is a leading product in the segment. Judging from the reduction in the number of fixed lines, as well as minimal increases in Méditel’s fixed-line market share over the past three years, it is clear that competition in this segment has mostly been a battle between Wana and Maroc Telecom. Between 2010 and 2012, Maroc Telecom was able to increase its fixed-line market share from 32.8% to 37.6%. Over the same period, Wana’s market share lost ground, from 66.7% to 61.6% of the market.
MOBILE SEGMENT: The mobile market remains a prepaid affair, with pay-as-you-go accounting for more than 95% of overall mobile users. “This number is quite typical for Maghreb countries,” said Mohamed Elmandjra, the CEO of Méditel, further explaining that the high rate of prepaid customers in Morocco shows that people want to keep control over their expenses.
Although accounting for only 5% of the market, postpaid customers are at the high end of the market because of higher consumption patterns. Maroc Telecom has a strong presence among a small percentage of high-value, post-paid customers. In March 2012 it reported a 23% growth in its post-paid business, increasing the number of its mobile subscriptions to 1.08m contracted customers. This means that despite having a 47% market share in terms of total number of clients, Maroc Telecom has a market share of over 65% in terms of value, according to CFG figures.
Despite interest from operators in increasing the number of post-paid customers in their portfolio, rising purchasing power does not necessarily translate into a move from prepaid to post-paid mobile consumption, and firms expect pre-paid to largely remain the norm in the Moroccan market. “Over the next few years we do not expect an evolution on this, Morocco will remain a prepaid market. Italy, for example, is a G8 country that remains a pre-paid market, despite being economically developed,” said CFG’s Gharbi.
REGULATION: The ANRT is the sector’s regulating body. The agency falls directly under the prime minister’s office, as opposed to the Ministry of Communications. The ANRT is responsible for awarding new licences, managing the establishment of networks of private operators and solving customer complaints, as well as disputes between operators. It also has an essential role to play in adapting regulations and formulating new laws.
EXPANDING CONNECTIVITY: The ANRT charges operators a 2% revenue tax to further develop telecommunications access across the North African country through the Universal Service Fund for Telecommunications. Much of this has been done through Programme for Access to Telecommunications in Morocco (Programme d’Accès aux Télécoms, PACTE), which was first implemented in 2008 and has allowed for expanded services in isolated areas throughout the country. PACTE aims to expand telecoms infrastructure to 9263 towns and to cover some 2m Moroccans. Ahmed Khaouja, the director of competition and operator oversight at the ANRT, told OBG that 95% of the programme’s targets have been implemented. Indeed, Abdeslam Ahizoune, the CEO of Maroc Telecom, told OBG, “Rural telecommunications coverage is already very good in Morocco, given that apart from the most remote localities, virtually all rural zones in Morocco are now connected to the telecoms network.”
Over the past two years, much of the agency’s efforts have been directed at lowering the average price for communications. It has achieved success in this, practically halving the average price for mobile calls in the Moroccan market. Prices per minute went down from Dh1.12 (€0.099) in 2010 to Dh0.57 (€0.05) by September 2012. Since the ANRT cannot enforce retail prices that operators practice, this effort was achieved by influencing wholesale gross prices by reducing interconnection fees charged by Maroc Telecom to access its network. Average prices for fixed calls were also reduced from Dh1.02 (€0.09) per minute to and average of Dh0.82 (€0.07) by the third quarter of 2012.
SMOOTH TRANSITION: An early 2013 change in the law is making it easier for customers to switch operators and keep their original numbers. Under previous regulation, users had three days to change their mind after requesting number portability. “But we’ve had complaints that some customers were getting calls from operators, convincing them not to switch networks through promotional offers and deals,” said Khaouja. The new regulation has reduced the cancellation period to one day after the customer has submitted the portability request.
The ANRT is now focusing on establishing more legal instruments to further encourage infrastructure sharing between operators. This will be essential for fast deployment and implementation of a fibre optics network. In a recently signed agreement, Maroc Telecom committed Dh10.08bn (€896.11m) to expanding the existing infrastructure. A part of this investment will be geared towards the deployment of fibre optics across the country between 2013 and 2015.
Another change will be the entrance of new mobile virtual network operators (MVNOs), which will be able to buy minutes wholesale from existing operators and then resell them to customers under their own brand. This could bring increased dynamism to the sector, as MVNO’s do not need to invest in infrastructure to enter the market. In November 2012 Post Maroc, which manages the kingdom’s postal system and offers banking services through its Al Barid Bank, has announced it was interested in an MVNO licence. Although details regarding specific offers have not been released yet, this move could potentially allow Post Maroc to offer pre-paid mobile communications minutes bundled with other products such as postal or banking services.
The potential issuance of a fourth licence for a new fully fledged operator in the Moroccan telecoms market has also been discussed for the past several years. Although this is not entirely out of the picture, the ANRT believes that it might take a few more years and has stated that it will continue to look into this for the future. “We are still considering a fourth operating licence, but telecoms is no longer the river of gold it used to be. Investors are taking a wait-and-see attitude, and a fourth operator might not be what the Moroccan market needs right now,” Khaouja told OBG.
MAROC TELECOM DEAL: One major change in the sector will be the sale of Vivendi’s 53% stake in Maroc Telecom, set to be decided during the first half of 2013. The majority stake in Morocco’s leading operator is said to be worth around €5.5bn, and has attracted attention from potential investors. “Maroc Telecom is a cash cow,” said Gharbi. “It brings cash in regularly and has very little debt. Furthermore, it can be a good base to expand into sub-Saharan Africa.”
All these conditions make it an interesting target and a number of firms have been listed in the press as having indicated their interest in purchasing, including: Qatar’s Ooredoo, the newly rebranded Qtel, which has a presence in neighbouring Algeria; South Africa’s MTN, which has been growing in sub-Saharan Africa but lacks a footprint in North Africa; and Korea Telecom, which submitted a non-binding bid for Maroc Telecom in December 2012. In early 2013 UAE’s Etisalat submitted a preliminary expression of interest for the Maroc Telecom sale. According to international press, it is reportedly looking for a loan to help finance the deal. The buyer is expected to be announced in the first half of 2013.
In late February 2013 Nasser Marafih, the CEO of Ooredoo, told The Financial Times that the firm was moving forward with a bid as Maroc Telecom was a “strategic fit” given Ooredoo’s strategy to focus on the Middle East and emerging markets in Africa and Asia. Marafih also said in interviews with other media outlets that he expected Qatar’s good relations with Morocco to play a role in determining who secured the stake. “I think Qatar has a good relationship with Morocco, and Qtel has played an important role in the development of the countries where we are present,” said Marafih at the Mobile World Congress in Barcelona. Reuters also reported that JP Morgan was advising Ooredoo on its bid for the stake in the Moroccan telecoms giant.
Any deal should have the go ahead of the Moroccan government, which holds a 30% stake in the company. Despite meaning that a new competitor will enter the Moroccan market soon, most sector observers believe that not will change in Maroc Telecom’s current strategy. “We might see positive input in terms of technology if someone like Korea Telecom ends up being the buyer, knowing how developed the Korean telecoms sector is,” said CFG’s Gharbi. “But the strategy of the company will most likely remain the same with the entrance of a new shareholder, because it is the optimal strategy under the current conditions.”
HANDSET: With average revenue per minute for voice communications on a downwards trend over the past two years, the enhancement of mobile data is set to lead to more competition between operators looking to increase their revenues. Much of this rests, however, on the continued expansion of smartphones, which have been gaining ground in the Moroccan market lately and reached a penetration rate of 12% in late 2011.
The handset market in Morocco has typically been impacted by parallel imports. Due to the high level of penetration of mobile phone usage, the market is mostly geared towards substituting older equipment. Enhanced competition from low-cost units from Asia is also more prevalent and business is increasingly driven by open market retail points rather than operators’ name-brand stores. Fewer and fewer customers in Morocco are buying handsets from operators’ stores, because mobile operators have been substantially reducing the amount of money they use to subsidise handsets, according to Samsung. Customers may face having to buy their handsets at a slightly higher price, but they avoid having to sign a two-year contract with a mobile operator. Samsung currently imports between 2.5m and 3m handsets into Morocco every year. It estimates that 40% of these were smartphones in 2012, compared to only 5% three years ago.
The mobile segment is bound to be shaken up soon by the introduction of a 4G network, which has been one of the government’s top priorities for the sector for some time now. The frequencies for the 4G network were initially intended to be given to interested operators as far back as 2011, but the process has been delayed. The government expects to the country’s first 4G licence to be operational by the end of 2013 (see mobile analysis). This will most likely impact positively on smartphone sales and further enhance mobile internet convergence.
OUTLOOK: Governmental efforts to make communications available to all Moroccan have extended coverage to most areas of the country and expanded operators’ potential customer base. After a period of intense, promotion-driven competition, especially in the mobile segment, the telecoms market in Morocco is now going through a more protracted phase. Established market shares are encouraging operators to take advantage of this natural evolution of the marketplace and recoup their investments.
Nonetheless, changes in the sector will most likely bring added dynamism over the coming years. The sale of Vivendi’s 53% stake in Maroc Telecom is bound to bring new blood into the Moroccan market. The entry of MVNOs will also create new business models for mobile communications, increasing the presence of new branded mobile communications offers that will test established operators’ grip on the market.
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