With no less than six operators in a market of close to 20m inhabitants, Côte d’Ivoire’s telecommunications industry is competitive. However, with limited data usage, the scope for growth in revenues is sizeable. Demand for voice services may be plateauing, but with 3G technologies deployed by the country’s biggest players, the short- and medium-term outlook is bright. On top of mobile broadband developments, fixed line connections are also seeing new dynamism with a slate of initiatives aimed at reinvigorating the segment.
The scope for growth is not unbridled, and regulatory constraints have affected operators’ fiscal burden. According to the sector’s regulator, the Telecommunications/ICT Regulation Authority of Côte d’Ivoire (Autorité de Regulation des Telecommunications/TIC de Côte d’Ivoire, ARTCI), combined revenues from the mobile, fixed and internet segments reached CFA994.9bn (€1.49bn) in 2014, double the 2009 figure, and contributed up to 7% to the economy.
Following privatisations in 1995, the number of active SIM-cards rose rapidly, reaching 7.5m in 2007 before nearly tripling to 22.1m as of the end of 2014, according to ARTCI, a 97.5% penetration rate. Nearly all of these accounts were prepaid. Local media put subscriberships closer to 24m, since many people have more than one account. Strip multiple accounts from the data, and ARTCI reckons the penetration rate is more like 50%. Thus, while overall growth may be slowing, operators still have room to expand their client base. Revenues from mobile telecoms reached CFA782bn (€1.17bn) in 2014, up 5.4% on 2013, with voice-related income making up close to 90%. Average monthly revenues were CFA62.7bn (€94m) in the first quarter of 2014, the latest for which data were available, up from CFA60bn (€90m) in the first half of 2013.
Out of the five main operators present in the market, the mobile segment is dominated by three players which together made up 92.1% of subscribership and 95.8% of revenues as of the end of 2014, according to ARTCI. French provider Orange led with a 39.7% share of subscribers and 48.7% of revenues. South Africa’s MTN comes second, with 36.1% of SIM cards and 34.6% of revenues. Both firms have competed head-to-head over the past few years, growing at similar speed from a subscriber base of just over 400,000 each in 2007 to 8.8m and 8m respectively at present. Over the course of 2014, Orange saw a larger expansion of its client base, with its market share gaining three points while MTN’s stayed flat. Alongside their presence in the mobile segment, both operators have a stake in the country’s fixed-line telephony and internet service providers (ISPs), as will be considered below. The sector’s third main provider, UAE-based Etisalat, operating its Moov brand, had 16.3% of SIM cards and 12.5% of revenues as of the end of 2014.
Splitting The Pie
The high level of competition between the three main operators is reflected in the total amount of investments they rolled out in 2014. Orange disbursed some CFA45.5bn (€68m) on top of the CFA50.7bn (€76m) it spent in 2013, while MTN’s outlay reached CFA50bn (€76m), up from CFA41bn (€61.5m) in 2013. In both cases, the 2014 investment figures represented a large portion of their mobile revenues: 12.3% for Orange and 18.1% for MTN. For its part, Moov allocated 21.4% of its mobile revenues to investment in 2013 and another 8.6% in 2014.
The remainder of the market is divided between Lebanese firm Comium’s KoZ brand; GreenN, controlled by Libyan investment fund Libya Africa Portfolio; and locally owned Niamoutié Telecom, which entered the market in 2012 under its Café Mobile brand. These operators have subscriber shares of 4%, 3.8% and 0.1%, respectively, and revenue shares of 2.8% and 1.4%.
Over the course of 2014, Orange and MTN saw strong increases in their subscriber bases, as did GreenN albeit from a low base, while Moov’s and Comium’s declined partly due to lower intra-network tariffs. Comium’s subscribership dropped from more than 1.5m in 2012 to 820,000 in 2013, according to ARTCI, yet much of this was due to the firm’s annulment of inactive lines, as illustrated by growth in its average revenue per user (ARPU) from CFA20,000 (€30) in 2012 to CFA33,000 (€49.50) in 2013. In 2014, ARPU roughly correlated with market share: Orange led with CFA42,121 (€63.18), followed by MTN with CFA34,573 (€51.86), Moov with CFA29,169 (€43.75), Comium with CFA24,357 (€36.54) and GreenN with CFA11,139 (€16.71).
With call rates at the bottom end of the industry, tariffs have fallen from CFA800 (€1.20) in 1997 to CFA70 (€0.11) in recent years, limiting providers’ ability to offset losses from shrinking subscriber bases. “Our presence in the market has led to a downward trend in call rates, but we have reached a point below which we risk damaging our own margins as well as those of the industry,” Michel Hebert, managing director at Comium, told OBG. This sentiment is shared by Moov and GreenN, whose calling rates stayed flat in 2013.
Data usage is growing rapidly following delayed introduction of 3G licences in 2012. Supported by the three biggest operators’, coverage has reached nearly 90% and mobile broadband services have found their way into a range of cities including Abidjan, Yamoussoukro, San Pédro, Bouake and Bassam.
Despite low ARPU levels of around $4-6 per month, operators are keen to launch 4G services. In April 2014, Swiss-owned YooMee tested 4G in Abidjan, followed by a pilot launch by Orange in June. However, as of early 2015 the regulator had not issued authorisation for its commercial use. The current 3G licences are up for renewal in 2016, and expectations are that the issuance of 4G mobile permits will be held off until then.
On the regulatory side, some work remains before the sector can make a full migration to new-generation technologies, especailly regarding spectrum availability. “With every new mobile technology generation, the number of required frequencies typically doubles and, as it stands, ample capacity cannot be guaranteed,” Alpin Verlet, CEO of Alcatel-Lucent’s West and Central Africa operations, told OBG. Sitll, the potential for rapid adoption of broadband internet is evident. “4G would open the door to value-adding services like high-definition voice and triple play, not only widening the scope for users, but also creating incremental value and jobs for Côte d’Ivoire,” Hebert said.
Potential Market Movements
In recent years, the government has taken a tougher stance towards operators to improve access and quality of networks. In line with such policies, in 2014 the government expressed a preference for consolidation among the sector’s three smallest players. At the end of May 2014, Bruno Nabagné Koné, minister of post, information technology and communication, openly requested a merger of Comium, GreenN and Café Mobile, but so far the government has stopped short of taking a more direct involvement in the matter, including providing leniency to the smaller operators. As André Apete, the ministry’s cabinet director, told OBG, “Ongoing defaults on government fees or quality standards may leave the authorities no other option than to suspend activity. Operators are urged to take responsibility.” Aside from a possible merger, the interest for acquisition by external players drives potential consolidation.
With just under 210,000 subscribers, the fixed-line segment is marginal compared to mobile. It is also gradually declining, having cancelled more than 12,000 lines in 2009-13 and another wave in 2014. As of the second quarter of 2014, Côte d’Ivoire Telecom (CIT), majority-held by Orange, served 94.5% of these customers, while MTN’s Arobase Telecom held the rest. The downtrend is mirrored in the declining investments into the segment: in 2013, the two providers spent a total of CFA14.7bn (€22m), down sharply from CFA27.2bn (€40.8m) in 2011, though this rose slightly in 2014 to CFA15.5bn (€23.2m). Bilé Diéméléou, ARTCI’s director-general, told OBG, “As more customers use mobile devices, the fixed-line market is declining. However, 3G devices remain expensive for the average user, hence the slow growth in data consumption.”
Despite a drop in clientele, CIT saw a rise in turnover in each of the last three years, reaching 99% of the segment’s revenues as of end-2014. This is largely thanks to income from non-core services like terminal sales and infrastructure rental, which drive half the segment’s receipts (call rates draw 28%). Other market movements may be triggered by the partial sale of the state’s 48% share in CIT. In December 2013 the government announced it would divest its stakes in 15 formerly state-owned enterprises in line with its plans to raise competition and cut public debt. As part of the strategy, it is seeking buyers for 28% of its share in the telecoms firm at an estimated value of CFA4.3bn (€6.45m). However, as of January 2015, further details on the state’s divestment had yet to be announced.
At around 0.5%, internet penetration rates are much lower than those in neighbouring countries. Nigeria scores 32%, Senegal 19% and Ghana 16%, according to World Bank figures in 2012. Reasons include delayed uptake of operator investment plans following the 2010-11 conflict and a lack of competition in bandwidth provision. Presently, there is a variety of public and private plans to raise usage levels.
One example is the National Broadband Project, which is currently close to halfway to meeting its objective to roll-out close to 7000 km of fibre-optics across the nation. Following western, eastern and central axes, the project will see instalment of a broadband connection between some 1000 communities. In line with the ongoing roll-out of the country’s e-government strategy, public offices and social services will benefit from the advanced high-speed connections, while a private operator will supervise its commercial exploitation.
Another boon for the sector will come from the rollout of 4G, following the issue of permits to Swiss-based YooMee, a newcomer in Côte d’Ivoire, and VIPN et, which currently holds a market share of 2.5%. Launching the region’s first time-division long-term evolution ( TDLTE) service, both players are entering a market predominantly held by Orange’s Aviso and MTN’s Afnet, which held the majority of the market in 2013. The existing offering largely caters to the corporate market sup-ported by ADSL, in the case of Aviso, and WiMAX, in the case of Afnet. In addition, domestic player IZINET recently joined the sector and officially started the promotion of ADSL and VSAT technologies in 2013.
After its introduction in 2012, the impact of Côte d’Ivoire’s new telecommunications law was tested over the course of 2013. The law overhauled the previous code from 1995. In addition to better incorporating modern technologies, the law has put in place a series of checks and balances on operators’ quality standards. Following a decade of unrest, telecoms infrastructure is damaged and underdeveloped, which has led to a degradation of call quality.
A key objective of the new law is to monitor operators’ commitment to agreed investment plans and their respect for minimum quality standards. Fines for nonabiding operators and ongoing quality audits have become the norm under the new regulations. Although not often used, both ARTCI and the Ministry of Post and Information and Communications Technology have the power to issue financial penalties of a maximum of 3% of annual turnover to pressure operators to accelerate network upgrades and expansion.
Penalties are linked to ongoing audits, conducted by ARTCI, and will likely become a more common tool to encourage infrastructure investment. Audit results will also be published so users can track operators’ performance and choose preferred providers. According to Diéméléou, in 2014 ARTCI installed equipment across the country that allowed for monitoring of quality standards. For any shortcomings found, penalties are issued. A demonstration of this renewed regulatory oversight came in June 2014 when ARTCI issued fines to all six operators for a combined value close to CFA3bn (€4.5m) due to network performance below quality standards.
Mobile money programmes face an uphill battle in most African countries, with the notable exception of Safaricom’s M-PESA project in Kenya, which by some estimates handles annual transactions worth as much as one-third of the country’s GDP.
However, the operating environment in Côte d’Ivoire bodes well for the adoption of mobile money services. Its comparatively large population, high GDP per capital and low financial sector penetration make mobile transactions a viable way to increase financial inclusion. In 2006 the Central Bank of West African States was among Africa’s first to issue regulations on electronic money for non-banks. Since, five firms have introduced mobile money services in Côte d’Ivoire, including Orange, MTN and Moov, as well as two independent e-money institutions, CelPaid and Qash Services.
The post-electoral crisis delayed preparations for the first e-money products, not only due to the unrest, but also due to subsequent liquidity shortages as commercial banks temporarily shut down, affecting consumer confidence in the financial system. Since stability has returned, mobile money has shown steady growth. From 2m registered accounts in December 2011, 22% of which were active, the five operators have grown their market to 5m in June 2013, of which 35% were active.
In recent years, operators have adopted mobile money in the core of their commercial strategies either designating it as a stand-alone business units, in the case of Orange, or attracting a specialised third party for its management, such as MTN does, in a bid to optimise development and attention towards its distribution agent network. Meanwhile, Orange invested in a network of ATMs allowing for cash withdrawals without agent intervention. Aside from direct sales, partnerships with established local companies on money transfers and billing have become the norm. For example, Orange has teamed up with the Compagnie Ivoirienne d’Electricite and the Société de Distribution d’Eau de la Côte d’Ivoire, the national electricity and water suppliers, to provide bill payments.
In line with outsourcing trends across the continent, Côte d’Ivoire’s telecoms sector has recently seen the entrance of mobile tower management firms. Infrastructure sharing is becoming more prevalent in West Africa, with operators including American Tower Corporation and UK-based Eaton Towers already present in Ghana.
In late 2012 UK-based IHS Towers entered the market through the acquisition of the majority of MTN’s towers, followed by a management contract on those of Orange for a period of 15 years. The firm’s intentions to expand its footprint via acquisition of Moov’s towers has reportedly been delayed by Etisalat’s acquisition of a majority share of Maroc Telecom, signed in May 2014 and finalised in January of 2015, as part of a sale of its West African operations to the Moroccan firm. This may, in turn, affect the UK company’s regional strategy. “Tower sharing in Côte d’Ivoire is a recent development and will remain attractive in years to come,” Amihai Revah, business development manager of Société de Télécommunication Africaine, told OBG.
Infrastructure sharing greatly reduces fixed costs from operators’ balance sheets. According to Revah, the costs for tower construction in Côte d’Ivoire range between $100,000 to $150,000 per asset in urban areas, and $70,000 to $80,000 in rural areas.
“Infrastructure sharing is not really helping to bring down end-users costs, but it is a convenient way for operators to outsource technical work and maintenance linked to infrastructures,” Yves Mao, director-general of Orange Global Services, told OBG. Rather than add new towers, the outsourced parties focus on reinforcing installed capacity and can mount new equipment to support the roll-out of technology solutions.
Mobile voice is by far the biggest generator of revenues in Côte d’Ivoire’s telecoms sector, representing close to 75% of revenues in 2013. Significant potential therefore remains in the sector to complement call tariffs, particularly in fixed-line and mobile internet segments. Despite high access costs, internet usage rates are gradually rising and the National Broadband Project should help further raise connection levels while at the same time putting downward pressure on tariffs. Growth in data will require localisation and adaptation of content. Sound growth fundamentals of the mobile money segment are testament to the potential popularity of e-services in the market and bode well for those with an appetite to deepen it.
Meanwhile, fiscal and regulatory pressures aimed at optimising service standards are expected to become a more regular feature of the market, especially in light of the upcoming presidential elections in 2105 and the public drive to raise funding to complete ongoing, large-scale infrastructure projects. While this is likely to affect operating margins to some extent, efficiencies in other areas should help operators to mitigate its impact. The trend in tower sharing, for example, should facilitate both better coverage and lower costs.