Following over a decade of high growth rates in the wake of liberalisation efforts in the late 1990s, Morocco’s telecoms sector is currently experiencing a slower rate of expansion. As operators and mobile users adopt new forms of mobile communication, the kingdom’s market is progressively moving away from the traditional voice-based business model. This is leading to new challenges in terms of regulation and market competition, but is also setting the stage for a new phase as data becomes a critical part of telecoms services.
Despite slower growth, the industry remains an important component of the economy, and not merely because of its trickle-down impact on other sectors. According to the most recent World Bank figures, the telecoms sector accounted for 3% of GDP in 2015, up to 1% of employment and as much as 12% of the state’s tax revenues. Government data for 2016 shows that post and telecommunications made up 2% of GDP that year.
Competition has kept prices relatively stable, especially for the voice segment, although this has affected revenues. The introduction of 4G networks, coupled with rising usage of smartphones, is pointing towards the potential that expansion of data offers can represent for operators over the coming years.
IMPACT: The dynamism of the telecoms industry has had a palpable effect on Moroccan society and on the overall economy. Between 2000 and 2015 mobile penetration rates rose from 8% to 128%, according to sector watchdog the National Telecommunications Regulatory Agency (Agence Nationale de Ré glementation des Télécommunications, ANRT).
Additionally, sector liberalisation allowed for significant capital inflows in the telecoms industry, with operators investing as much as $16.9bn between 1999 and 2015, according to the World Bank. These investments were also felt in other sectors, such as construction, retail, marketing and infrastructure, although the impact of the industry has understandably decreased over time. “The telecoms sector has led to significant growth in Morocco’s GDP for a long time, but now that growth will be lower,” Karim Gharbi, partner and head of research at CFG bank, told OBG.
MARKET STRUCTURE: Morocco’s telecoms sector is made up of three competitors. The biggest operator, Maroc Telecom, resulted from the 1998 dissolution of Morocco’s National Office of Post and Telecommunications. Initially state-owned, the operator underwent several phases of privatisation. In 2001 the authorities launched a tender to attract private capital, which led to the acquisition of 35% of Maroc Telecom by French media group Vivendi. A further 14.9% of the firm’s shares were floated on the Casablanca and Paris stock exchanges in a 2004 initial public offering. Additional changes have since been made to its shareholding structure, and today Maroc Telecom is majority-owned by UAE-based telecoms operator Etisalat, which acquired all of Vivendi’s share and holds a 53% stake. The Moroccan state owns an additional 30% and the remaining 17% is listed on the stock exchanges of Casablanca and Paris. Maroc Telecom has been able to maintain a dominant position in Morocco.
The second-largest operator in the market is Médi Telecom, the first private operator to enter the local telecoms industry in 2000 following the acquisition of a GSM licence in 1999. Like Maroc Telecom, Médi Telecom’s shareholding structure has undergone several changes. Initially, the operator was owned by state firm Caisse des Dépôts et des Garanties (CDG), Moroccan financial group FinanceCom, Spanish operator Telefonica and Portugal Telecom. Since 2015 Médi Telecom has been 49% owned by France’s Orange Telecom, although the other 51% remains equally split between CDG and FinanceCom. Médi Telecom has been able to increase its mobile market share from 31.7% in September 2015 to 34.8% in the third quarter of 2017. However, the firm had the smallest market share of the three operators in the fixed telephony segment, with 2.81% of lines as of September 2017, according to the ANRT.
The third operator is Wana Corporate, which has operated under the brand name Inwi since its launch in 2009. The firm is majority owned by Morocco’s Société Nationale d’Investissement, which holds a 69% stake. Kuwait-based Zain owns the remainder of the company. As of September 2017 Inwi had a mobile market share of 22.6%, down from 26.5% in September 2015.
MOBILE: For the better part of the past decade, Morocco’s mobile segment has been the most productive performer in telecoms, with a penetration rate of 127% in the third quarter of 2017. However, growth in mobile communications appears to be slowing: the number of mobile lines fell from 43.3m in September 2016 to 42m in June 2017. In September 2017 the number of lines increased again to 44.3m. Slower growth is a result of the successive years of rapid expansion, and part of a normal process that all maturing mobile telecoms markets go through. The segment remains dominated by Maroc Telecom, which has a 42.64% market share, followed by Médi Telecom with 34.76% and Wana at 22.6%, according to the ANRT. For the market overall, pre-paid customers remain the majority, with 41m in the third quarter of 2017.
Voice consumption volumes fell between the third quarter of 2016 and the same period in 2017 from 15.1bn minutes to 14.8bn minutes. A more significant reduction was registered in text message traffic over the same period. The total number of messages sent through all the market’s operators per quarter went from 2bn to 1.6bn over the same one-year period. Much of this drop in both voice and text messages is likely related to the end of a ban on voice over internet protocol (VoIP) apps implemented first by operators and then the ANRT between late 2015 and November 2016. The move was criticised by Moroccan consumers as an attempt by the regulator to protect operators’ revenues, as well as for the economic impact it had on the poorest segments of the population. According to an October 2016 report published by the Brookings Institution, the temporary ban on VoIP usage cost the Moroccan economy as much as $320m (see analysis).
The segment remains dominated by pre-paid customers, and there was a small increase between September 2016 and September 2017 from 40.4m users to 41m, according to the ANRT. The post-paid segment remains the most attractive for operators, although the growth rate in the number of users has been relatively slow, going from 2.9m to just over 3.2m in the same period. According to September 2017 figures from the ANRT, Maroc Telecom accounted for 53.87% of the post-paid segment, followed by Médi Telecom at 28.4% and Inwi with 17.72%.
The market leader is not as dominant in the prepaid mobile segment, where it accounted for 41.76% of users as of September 2017, followed by Médi Telecom with 35.25% and Inwi at 22.98%.
PRICES: The arrival of third operator Inwi in 2009 improved competition, with penetration rates and prices moving in opposite directions. The ANRT has also played an important role in promoting lower mobile tariffs by regulating interconnection rates. Although reduced tariffs have generally been beneficial for the expansion of mobile communications, especially among lower-income segments, they also affect operators’ turnover. Much of this is also linked to the underlying reduction of voice usage visible in most telecoms markets. Between the third quarter of 2013 and the third quarter of 2017 average revenues per voice minute fell by almost 50% from Dh0.43 (€0.04) to Dh0.23 (€0.021), according to the ANRT. The drop was more acute in the pre-paid mobile segment, which accounts for the large majority of Moroccan mobile users. Average revenue per minute for pre-paid mobile communication also fell from Dh0.43 (€0.03) in September 2013 to Dh0.23 (€0.02) by September 2017.
“Telecoms has suffered greatly in recent years because the three operators have engaged in unhealthy competition. This significantly lowered prices and had a notable impact on margins,” Reda Iben Chekroun, managing director at Tenor Distrib, told OBG.
Tariffs have become increasingly important. Besides the regulatory efforts to reduce average prices for calls, the ongoing implementation of number portability is likely to strengthen the weight of marketing strategies for customer acquisition. Number portability regulations were first implemented in 2007, and the three operators are now legally required to allow a user to keep their mobile number and switch providers.
However, implementation has been marred by technical difficulties, leading the ANRT to extend the deadline for operators to set up the necessary systems. Under Decision No. 04/15 of 2015, published by the ANRT after consulting with sector players, the watchdog established new legislation reducing the time needed to transfer a number to another operator. In line with this regulation, the ANRT is also set to establish a number portability database to further improve conditions, which is expected to be operational in 2018. During the first quarter of 2017 a total of 23,854 mobile users requested to port their numbers, compared to 22,884 in the fourth quarter of 2016, according to ANRT figures.
INTERNET ACCESS: A growing number of Moroccans have opted for internet access via their mobile phones. This has had a considerable impact on the country’s development, both by improving business operations and by better allowing citizens to access information and state services. The number of internet connections in the kingdom has risen from just over 5.2m in the third quarter of 2013 to 22.6m in September 2017, according to ANRT figures, reaching a penetration rate of 65%, up from 16%. This rise attests to long-standing efforts by the government to increase digitalisation through programmes such as Digital Morocco 2013 or the more recent Digital Morocco Plan 2020.
However, it is also a further indication of the role that mobile communications currently play in the country. According to the ANRT, as much as 94% of internet connections in Morocco were via mobile as of September 2017. The large majority of mobile connections, at 98%, or 20.8m, were included in voice and internet subscriptions, with just 423,346 contracted through data-only subscriptions, according to the ANRT. This reflects a gradual reduction in data-only subscriptions, which saw a 35% drop in comparison to the third quarter of 2016. Over the same period, mobile internet and voice subscriptions increased by 38% from 15m in June 2016.
Maroc Telecom accounted for 45.83% of mobile internet connections, followed by Médi Telecom with 30.8% and Inwi with 23.37%. The average revenue per user (ARPU) per month for internet access reached Dh25 (€2.32) in September 2017, according to the ANRT. However, the figure is skewed by the price of ADSL connections in Morocco, which could be as high as Dh103 (€9.54), compared to Dh20 (€1.85) for mobile internet customers, according to ANRT figures.
DATA CONSUMPTION: With international telecoms trends registering a move from voice into data consumption, Moroccan operators are increasingly adapting to this new reality. According to September 2017 figures from the ANRT, ARPU per month for mobile internet services moved slightly upwards compared to the same period in 2016, from Dh18 (€1.67) to Dh20 (€1.85). The average number of mobile internet minutes accessed per customer per month rose from 101 to 113 between 2015 and 2016, according to the ANRT. Growing usage of data services is being driven by the broad adoption of smartphones, which accounted for 67% of all mobile phones by the end of 2016, compared to 55% in 2015, according to the ANRT. Their prevalence is especially apparent among young Moroccans, with 86% of the population between 12 and 24 years of age using a smartphone. The continued popularity of smartphones throughout the kingdom is expected to continue to bolster data consumption volumes over the coming years.
4G EXPANSION: Following a tendering process, the kingdom’s three operators were awarded 20-year LTE licences in early 2015. Market leader Maroc Telecom paid Dh1bn (€92.6m), while Médi Telecom and Inwi bought their licences for a little over Dh500m (€46.3m) each. Allocation of the 4G licences came with a set of requirements. The three firms were also expected to pool an additional Dh860m (€79.6m) to be invested in the reorganisation of the nation’s spectrum. Furthermore, they were given until 2020 to establish the necessary 4G capacity and coverage to service 65% of the population. The three players have also been requested to provide average downloading speed of at least 2 Mbps for 90% of Moroccans.
The regulatory requirements and increasing demand for reliable data services from consumers has led the three operators to invest in infrastructure deployment. In the third quarter of 2017 the number of 4G users totalled 6.5m, according to the ANRT.
“4G rollout has been challenging in rural Morocco notably due to infrastructure project delays in 2016-17, lack of investor interest and unhealthy competition between Morocco’s major telecoms providers,” Abdellah Idrissi, CEO of Sicotel, told OBG.
The expansion of data services and the improvement in quality is relegating other segments to a secondary role. The number of exchanged text messages, for example, fell by 51% between 2015 and 2016 to 8bn.
MOBILE BANKING: In the meantime, other segments of the mobile sector are expected to come into play. In mid-2017 Maroc Telecom announced it would be applying for a financial services operator licence from Morocco’s central bank, Bank Al Maghrib. Mobile banking has become an important source of income for mobile companies in sub-Saharan Africa. Although the Moroccan banking sector is well developed in comparison to the rest of the continent, taking advantage of their existing customer base to expand into new segments should prove to be lucrative for mobile firms. Maroc Telecom has announced it will offer mobile money transfers, deposits and payment services.
The expansion of mobile banking services would greatly boost financial inclusion in more secluded regions where brick-and-mortar banking is less prevalent. In a 2017 joint report, Bank Al Maghrib and the World Bank estimated that as many as 13m Moroccans do not have access to financial services.
Maroc Telecom has offered a mobile money transfer service through the e-payment platform Mobicash since 2010, but the financial services licence would allow the operator to expand and use physical retailers as access points. Maroc Telecom already runs mobile banking operations through its subsidiaries in sub-Saharan Africa, where it had 11m customers as of mid-2017, according to local media reports.
“Large operators are exerting pressure on transforming the digital infrastructure to facilitate the growth of e-commerce in Morocco,” Fahd Bennani, managing director at T-Man Group’s distribution centre, told OBG. “Though Law No. 103-12 was much better known for its introduction of Islamic banking, it transformed fintech in Morocco, as the concept of mobile payments was introduced,” he added.
FIXED LINES: Similar to worldwide trends, the prevalence of fixed lines has been decreasing in Morocco for several years now. The total number of fixed lines fell from 2.12m in the third quarter of 2016 to a little over 2.04m in the same period of 2017, according to figures from the ANRT. The significant development of mobile voice and data is one of the main reasons for the drop, but equally important has been the lack of dynamism in fixed-line offerings, where low competition and rising prices dampen any prospect of a revival of the segment in the near term.
The ARPU per minute in the fixed-line segment has risen from Dh0.77 (€0.07) in the third quarter of 2014 to Dh10.02 (€0.09) in September 2017. Fixed line has become increasingly dominated by Maroc Telecom, which saw its market share jump from 56.5% to 82.3% between September 2014 and September 2017. The two other competitors, Mèdi Telecom and Inwi, had market shares of 2.8% and 14.9%, respectively, in September 2017, according to the ANRT.
OUTLOOK: A combination of international trends and local conditions have brought the Moroccan telecoms market to a crossroads. With a nationwide mobile penetration rate that surpasses 120%, combined with downward pressure on prices over the past several years, Morocco’s operators will have to focus on developing comprehensive data-based strategies in order to accelerate growth over the near term.
These efforts will require continued investment in infrastructure, especially to improve rural service. In tandem, the expansion of mobile internet access has been essential to connecting a greater number of Moroccans, with fixed internet connections accounting for a minimal part of the market today. The growth in smartphone penetration is setting the stage for growing competition between operators. Establishing effective strategies for the data segment will be critical toward compensating for the continuing loss in voice volumes. Despite these challenges, the telecoms sector is expected to expand, albeit with less impressive growth rates than those registered previously.