Vodacom and Tigo Bring Mobile Money Interoperability to Tanzania

Stockholm-based telecommunications and media company Millicom announced this week that the 4 million customers of its Tigo Pesa mobile money service in Tanzania will be the first in Africa to be able to exchange money with the 6 million customers of Vodacom’s M-Pesa mobile money service. A similar launch in 2014 allowed Tigo’s customers to transact similar services with Airtel’s Money and Zantel’s Ezy Pesa customers. “With Tigo Pesa, customers will now have Africa’s first universal mobile money exchange system,” said Millicom Executive Vice President for Africa Arthur Bastings. “They will be able to safely and securely transact with millions more people across the country. It’s another first for Tigo Pesa and Tanzania.” Other Tigo Pesa innovations in the past year include cross-border mobile money exchange with currency conversion included and quarterly returns on Tigo Pesa balances.

Mobile money services offered by the four main MNOs in Tanzania—Airtel, Vodacom, Tigo and Zantel—have been growing steadily for the past five years. In a country where 90 percent of the population do not have bank accounts but cell phone penetration is 75 percent, it is not surprising that roughly half the adult population is already using the mobile money services offered by mobile operators. Last year Tigo, the second-largest operator in Tanzania, was able to broker interoperability deals with the next two smaller operators, Airtel and Zantel, giving their subscribers a wider range for their mobile money transactions. This recent deal with Vodacom, Tanzania’s largest MNO, was brokered after more than a year of negotiations and is a huge win for subscribers.

It is interesting to note that it is the smaller MNOs that stand to gain more from interoperability than the larger ones, as the smaller networks gain access to a proportionately larger subscriber base and the larger ones lose some of their market advantage. However, as we have written before, it is clear that everyone stands to gain from interoperability: the consumers, merchants and government agencies who can make and accept payments more easily, as well as the banks, MNOs and other service providers that can grow revenue by offering more products. So while there will be significant challenges ahead from competing interests in less developed markets, as those mobile money markets mature and MNOs reach the saturation point with their own mobile money users, we expect to see more interoperability deals brokered in other African countries.

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 or to speak with the research team: http://www.tarifica.com/contactus.aspx

Viettel Announces US $1 Billion 3G Investment in Tanzania

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.”

Jamie Davella,

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

Tanzanian MNOs Enable Cross- Network Mobile Money

In a joint press release, three Tanzanian MNOs announced that their mobile money services, Airtel Money, Tigo Pesa and EzyPesa (offered by Zantel), will be fully interoperable by the end of June. While there have been other examples outside the continent, notably in Sri Lanka, this announcement marks the first instance of mobile money interoperability in Africa. Hans-Holger Albrecht, president and CEO of Millicom (Tigo’s parent company), stated, “With this agreement we can help make Tanzania a global pioneer in digital financial inclusion. Interoperability will be a catalyst for growth in the mobile money sector and is long overdue.” Helping to facilitate the agreement were the Bank of Tanzania, the Bill and Melinda Gates Foundation and the International Finance Corporation (an arm of the World Bank). Notably absent from the deal was Vodafone’s Tanzanian subsidiary Vodacom. Regarding this absence, Diego Gutierrez, general manager for Tigo Tanzania, stated, “There has been a commitment at group level including Vodafone to pursue interoperability.” He continued, “The conversations with Airtel and Zantel have moved quite fast but I think eventually everyone is going to be integrated.”

The willingness of three MNOs to come together and make a deal on mobile money is likely driven, in part, by their observations of the mobile market in Kenya, Tanzania’s neighbor to the north. There, Safaricom Kenya (in which Vodafone owns a 40 percent stake, making Vodacom’s absence from the initial deal in Tanzania probably not coincidental) has achieved a dominant position in the mobile money marketplace. Safaricom’s M-Pesa system is used in 98 percent of mobile money transactions in Kenya, with nearly a third of the nation’s total GDP flowing through it. The system is used for school fees, utility bills, money transfers and sometimes even to pay salaries. The near-universal acceptance of M-Pesa has prevented other mobile money platforms from gaining traction, and Safaricom has leveraged this position to expand its market share for more traditional mobile services.

Clearly, Tanzanian operators have every incentive to prevent this situation from being replicated in their country, and we believe that this program is a strong move toward that goal. The success of mobile money is predominantly driven by two factors—ease of use and the number of businesses and individuals that accept it as a viable cash alternative. While this program removes the possibility that any of these operators will be able to achieve the degree of dominance (and all the associated benefits) that Safaricom has in Kenya, it will likely expand the reach of mobile money in Tanzania, thereby increasing revenues for all stakeholders.

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