The 4th/ 5th Mobile Operator: Is there room for other players in Zambia
The debate on whether or not there is room for 4th or even 5th network mobile operator (NMO)in Zambia is like the weather and blows hot and cold depending on who is pushing what agenda. A mobile operator by definition offers voice, SMS and data services, as opposed to an Internet Service Provider (ISP) who offer only data. This distinction is important. Navigating this economic and political minefield can be treacherous for those undertaking the journey. The romance with mobile telecommunications is so often misunderstood and more often than not operators, investors and authorities get burnt as the passions run high . It is an industry with rapidly changing dynamics where change and innovation are the only constants. Unless you’re wired for high stress and adrenalin best save your money and invest inline with your blood pressure. Allow us to highlight 7 mines least you tread on them;
1. Unlawful. Statutory Instrument 111 of 2009 prevents the regulator ZICTA from issuing a 4th mobile license but we all know that SIs that don’t work can be revoked, look what happened to SI 33 of 18th May 2012 and SI 55 of 22 June 2013. Should government find that it is not within the interests of the country it can and will revoke SI 111 of 2009. Should this happen the regulator at its discretion can and may issue licenses to pave the way for other players to enter the Zambian market.
2. Convergent Licenses. The worldwide trend is to offer technology neutral licenses. For example you do not need to get a new license every time the technology changes. In some countries the government makes a significant amount of money by charging for a separate license for each new technology. ZICTA have been advocates for convergent licenses. Should the regulator get their way this automatically allows any player to offer voice, SMS and Data services.
3. Limited Radio Spectrum. Zambia is governed by the International Telecommunications Union (ITU) and different parts of radio spectrum are sold to mobile operators, (900/1800/2100 MHz) radio stations (e.g 96.5 Rock FM, Phoenix 89.5) for different transmission services and applications. For example 2G technologies is commonly used on 900/1800 MHz whilst 3G on 2100 and LTE say 300/800. The role of the regulator is to efficiently allocate and manage spectrum amongst all the players including government. Spectrum is the single biggest deterrent for any new operator and or technology. If existing players monopolize and are allocated more spectrum than they are efficiently and effectively using there is no way another player can enter the market with or without a license. Managing existing players to prevent this behavior from strangling any new incumbent will always be a challenge for ZICTA.
4. Too much Competition. When there are too many players, prices fall, profitability is eroded, investment in new technologies slow down, quality of service actually DROPS and all stakeholders suffer. Uganda is always used as a case study. Here an excessive number of licenses were issued, and everybody suffered including the Revenue authorities who collected some 60% of the taxes they did when there were fewer players. Uganda are the pioneers of mobile telecommunications in Africa and provide a wealth of experience of what works, why and how. With a population a third of the size of Uganda, are 4 players one too many for Zambia? Maybe not. 5 players definitely will be an overkill. Uganda also shows what happens to low price players. Warid Telecom sold out to Airtel Uganda as a low-price cost-cutting approach does not work. Others are looking to exit Uganda whilst the older players bide their time as the small players collapse. Its important not to get caught up in the euphoria and novelty of entering well established markets without any significant product or service differentiation. Low price cost cutting is not a sustainable business strategy in a high tech environment requiring constant innovation. You go bust period!
5. Market Size. We know that there are 8 million plus users of mobile telecommunications in Zambia. Simply put it means that every person over the age of 18 years has a phone. Voice and SMS represent the Holy Grail of current revenue for mobile operators. As habits change and technology changes data will become important. We also know that there are some 3 million “smart phones” which are data enabled. Leaving a huge gap for more data enabled devices to be brought into the market space as the Ultra Low Cost Handsets are finally laid to rest. A convergent license rolling out LTE technology means starting the whole mobile revolution again! New handsets, new capabilities, new technology. Existing operators have failed to rule out any significant LTE platform in the market place to date. It is too costly and the returns in the short run have yet to be justified from players who have already deployed this technology. A new player with a different business model could and would change the industry, as we know it. Voice Over Long Term Evolution (VoLTE) maybe?
6. Existing Players. The playing field has changed form One dominant player to a 3 player market. Airtel and MTN in Zambia are now equal with neither dominant. Zamtel has emerged from a “small” player to a significant “third” player whom both Airtel and MTN cannot and do not ignore. Watch how they respond to any Zamtel marketing initiative. The fear that a 4th player would hurt Zamtel more than it would Airtel or MTN is no longer an issue. The pain will be equal across all 3 players. The protectionist argument for Zamtel is no longer applicable. All is fair in love and war!
7. People. We are the single biggest challenge. The skill pool in Zambia is way to small to support a 4th, let alone 5th Player. It struggles to support the existing infrastructure, hence all the challenges of Quality of Service,(QoS) both on networks and the customer. It is increasingly difficult to attract talented Zambians back home, as this is an international labour market whose remuneration is governed by international demand and supply. Spreading the labour pool thinner will not improve Quality of Service (QoS) overall. Bringing new people into the industry has its school fees and a steep learning curve before they can make a meaningful contribution and impact on the sector. Simply look at how some of the existing players struggle, enough said!
The question still begs to be answered, whether or not Zambia needs a 4th/5th mobile operator. Our view, if you are in it for money then focus on the Value Added Services. A time will come when mainstream voice will be for free. The full impact of Viber, WeChat , Skype and all the other Over The Tops (OTTs) has not yet taken root in Zambia.When it does you will be abandoned the same way the mobile customer dumped the fixed line.
Telecom as it is today will not be the same tomorrow. Unless you innovate and bet on the future, somebody will. If you are in any doubt take an Apple 101: How Steve Jobs changed the world course!