During a visit from Tanzanian president Jakaya Mrisho Kikwete to its Vietnamese headquarters, multinational operator Viettel committed to investing US $1 billion to build a 3G network in Tanzania. Viettel won a license to operate in Tanzania in early October, and one of the conditions was connecting the country’s expansive rural areas with mobile service. On awarding the license, Tanzanian deputy communication, science and technology minster January Makamba stated, “They will roll out broadband through fibre-optic cable to rural Tanzania.” In announcing this sizable investment so soon after winning the license, Viettel appears to be preparing to make good on this commitment.
The strategy stands in contrast to the path Viettel pursued when it expanded into Peru, where a significant amount of time elapsed between acquiring the license and rolling out the network infrastructure. Viettel’s urgency is likely driven by the crowding of the Tanzanian market—there are already four sizable players, all of which are owned in part by major international telecom players—Bharti Airtel, Tigo (part of Millicom), Vodacom Tanzania and Zantel (part of Etisalat), as well as three smaller operators. Even given this volume of competition, there are still significant opportunities in Tanzania; only 64 percent of the country’s 49.25 million citizens have mobile service. Given the rapid uptake of mobile service in developing economies, however, it is unlikely that the penetration rate will stay this low for long.
In the future, there will likely come a point where some market consolidation is needed—we have seen numerous examples of the unsustainability of markets with five operators—however, with many Tanzanians still unconnected and significant opportunities existing to upsell others to higher-cost service packages, this type of M&A activity does not appear imminent. While Viettel may be getting a late start compared to its competition, it would be foolish to count it out, since the company has significant experience building and marketing mobile service in emerging economies from its operations in eight other markets across Southeast Asia, Africa and Latin America.
“With telcos in Europe and North America appearing locked in a constant cycle of increasing infrastructure costs and declining ARPU, companies like Viettel and Millicom, which have significant and expanding operations that are exclusively in emerging markets, could be poised to become among the most important international mobile players in the near future. Not only do the countries they operate in have much more room for growth, their success in these rapidly shifting and diverse markets has required operational flexibility and institutional creativity. This cultural difference has enabled these companies to capitalize on new revenue streams—like mobile money—much faster than many of the established telecom heavyweights.”
Research Analyst at Tarifica
The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world. To access all of the latest articles and issues: http://www.tarifica.com/TarificaAlert.aspx