Archive for September, 2013

Momentum of the reform process in Nepal’s telecom sector is showing fresh signs of a slowdown

Saturday, September 28th, 2013

A number of factors had been slowing the early development of Nepal’s telecom network. Certainly the country’s mountainous topography has made it extremely difficult to develop its telecommunications infrastructure. Furthermore, Nepal had been struggling under an adverse economic situation caused largely by political instability. Over the years, acts of terrorism and the activity of the Maoist rebels operating throughout the country have taken their toll on the telecom network – both directly and indirectly. But of late the tardiness of the government in addressing market reforms and developing national policies has been weighing on the overall development of the telecom sector.

The country has certainly been on a road to recovery from the long years of civil unrest. Nepal’s transition to a considerably more stable nation had begun by 2007. The country’s first elections for over nine years were held in 2008; a clear victory going to the Maoists who were as a result to become a party of government. Although the way forward was not necessarily going to be smooth, with this remarkable turnaround following years of great difficulty, the scene was set to build on the considerable progress already made in recent times in meeting the growing demand for telephone services. Not only has there been strong subscriber growth, especially in the mobile sector, but there was evidence of a clear vision in the sector, including putting a reform process in place and planning for the building of necessary telecommunications infrastructure. Most importantly, the Ministry of Information and Communications (MoIC) and the telecom regulator, the National Telecommunications Authority (NTA), both became very active in the performance of their respective roles. However, as already noted, by 2013 there was evident concern that some of the momentum of the reform process had been lost.

The Nepal Telecom Company, the state-owned incumbent operator, has been the major builder and operator of the national telecom network. For a long time it held a monopoly over all aspects of telecom in the country. With the opening up of the market, Nepal Telecom lost its monopoly on basic telecom services a little more than a decade ago with the licensing of United Telecom Ltd (UTL). It subsequently surrendered its monopoly on mobile services with the licensing of Spice Nepal Pvt Ltd, later known as Ncell, in 2004. The period after 2006 saw notably strong subscriber growth, especially in the mobile segment of the market. Mobile penetration went from 5% in 2007 to more than 60% in 2013.

Despite all the energy that has gone into the sector, there was still a significant disparity between the high coverage levels in the cities and the coverage available in the underdeveloped rural regions. Progress on providing some minimum access had been good, however.

For detailed information, table of contents and pricing see:

Nepal – Telecoms, Mobile, Internet and Forecasts

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Rwanda – Joint venture with Korea Telecom to provide national LTE network by 2016

Friday, September 27th, 2013

The Rwandan telecom sector has shown particularly strong growth in recent years, buttressed by a vibrant economy and a GDP which has sustained growth of between 7% and 8% annually since 2008. As a result, the country is rapidly catching up with other markets in Africa, with increased penetration particularly evident in the internet and mobile sectors.

Although the country was slow to liberalise the mobile sector, allowing South Africa’s MTN a monopoly until 2006 when the fixed-line incumbent, Rwandatel became the second mobile operator, there is effective competition among the three current operators, each of which provides wide geographic coverage. The launch of services from Millicom/Tigo in 2009 sparked renewed subscriber growth, though competition has eroded mobile services revenue and ARPU since then.

Rwanda’s internet and broadband sector has suffered from limited fixed-line infrastructure and high prices, but developments in the fixed network market are beginning to change this. The operators are rolling out national fibre-optic backbone networks which also allow them to connect to the international submarine fibre-optic cables that landed on the African east coast in 2009 and 2010. These cables have given the entire region fibre-based international bandwidth for the first time and brought to an end its dependency on satellites.

Interest from investors in the country’s ICT sector remains strong, particularly during the last few years. An existing deal with Korea Telecom to build a national fibre backbone was supplemented in September 2013 with a deal by which Korea Telecom will build a national LTE network, for which it has secured spectrum and an exclusive licence to operate the network for 25 years.

This report contains an overview and analysis of Rwanda’s telecommunications market, profiles of the major players in all market sectors, relevant statistics and analysis, and scenario forecasts to 2013 and 2016 for the country’s mobile market.

For detailed information, table of contents and pricing see:

Rwanda – Telecoms, Mobile, Broadband and Forecasts

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NBN Co faces the Australian economic dilemma

Friday, September 27th, 2013

Last week I was in Europe, and earlier this year I was in the USA, Mexico and a handful of different European countries.

Talk about pleasant bill shocks! Whatever you buy over there is a third and sometimes even 50% cheaper than in Australia. An espresso coffee is 50% cheaper, restaurant meals a third. My mother needed a plumber – hourly rate $25. Groceries and services are all cheaper.

What does this mean for the Australian NBN?

Let me say first of all that I am extremely pleased with the latest figures from NBN Co – that they have been able to reduce their rollout costs. When the company started its rollout in the first release sites the initial cost was A$2,400 per home passed and A$5,000 per connection. Those costs have now fallen to A$1,100 and A$1,100-1,400 respectively – so, in total, around $2,400 per home. This certainly will not lead to a cost blowout of $90 billion as was suggested by Mr Turnbull when he was in Opposition.

From a technology cost perspective we are now on a par with the rest of the world. What is ‘killing’ us in Australia is the very high cost of labour, currently the highest in the developed economies.

So no matter what happens, if people have to dig holes or climb on poles to install fibre – or, in the event of FttN, install 70,000 VDSL cabinets – the labour costs will always make these projects perhaps as much as one-third more expensive than if they were run in other parts of the world.

Of course, there is something that can be done about this – labour can be imported. This is currently being done on a massive scale in, of all places, Africa and some parts of Asia. Complete armies of Chinese workers are installing telecom networks and lots of other infrastructure in those countries. So in a truly liberal fashion one could argue that this is what we should do in order to deliver the NBN more cheaply (and perhaps more quickly, if we employ as many people as possible). We could simply import cheap labour.

However, I am afraid that something like that would not be politically palatable.

But if we don’t import overseas workers for political reasons then we should not blame NBN Co for the high costs. And we also then need to be realistic about these costs and accept the economic situation in Australia. Because of our strong economy we will simply have to pay more for the construction of our broadband infrastructure than elsewhere in the world.

It is also important to mention that the economic situation in Australia does not only affect NBN Co. It affects everybody, and that is why economists are talking about a two-tiered economy. Interestingly, it is that same NBN that will allow us assisting to become more productive – the new government is itself talking about the digital productivity benefits that the NBN has on offer for the Australian economy.  The national broadband network, in combination with related ICT technologies such as cloud computing, big data and M2M, will allow us to better position ourselves in the global economy (where Australia has been showing the lowest levels of productivity growth for several years in a row).

Paul Budde

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Amazon’s rising threat to ad revenue stream

Thursday, September 26th, 2013

With Google continuing to move further and further into the e-commerce sector (Google Shopping); it is speculated that the competition between Amazon and Google is going to increase. Advertising linked to product searches is a key revenue source for Google and in the past it was able to generate this revenue by relying on advertising linked to searches conducted on its search engine.

Many Internet users are now online consumers as well and are turning directly to e-retail websites to search fpr goods and products. Significantly Amazon has evolved far from a book seller to offer a complete suite of products that consumers would usually buy in one-stop shop department stores, ranging from fashion, beauty, to sporting goods.

So with more and more consumers going directly to Amazon to search for products (linked to advertising) it becomes apparent that Google is missing this slice of advertising spending. It also poses threat to other sites which rely on advertising like Facebook.

In 2012 eMarketer estimated Amazon’s advertising revenue reached almost $610 million, a 45% increase over a year earlier. eMarketer expects it to reach $835 million by the end of 2013. While it still has a way to go to rival Google (over $43 billion) and Facebook (almost $4.3 billion) it cannot be ignored that Amazon is very well positioned to capitalise upon ecommerce related ad-spending.

Kylie Wansink, Senior Analyst – Global Markets

For related information, see separate report:

BuddeComm Intelligence Report – Digital Media – Advertising and Marketing in the Digital Age;
BuddeComm Intelligence Report – E-Commerce, E-Payments and M-Commerce.

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Consolidation in Uganda’s overcrowded mobile sector, Internet growing at more than 200% per year

Wednesday, September 25th, 2013

Uganda is one of the fastest and most consistently growing economies in Africa. The introduction of mobile telephony has revolutionised the country’s telecommunications industry, but with eight networks the market is now considered overcrowded. This had led to consolidation among the operators, culminating in the takeover of Warid Telecom by Bharti Airtel in 2013. Other players include regional heavyweights MTN from South Africa and France Telecom/Orange.

The intensified competition led to a price war which has accelerated subscriber growth but also reduced the average revenue per user (ARPU) and quality of service (QoS). The network operators started raising their tariffs again and are trying to find ways of generating additional revenue streams. 3G and 4G mobile broadband services as well as mobile money transfer and m-banking services are at the forefront of this development in a country where less than 20% of the population currently has internet access or holds a traditional bank account.

Fixed-line and DSL penetration is low but saw a renaissance recently on the back of wireless local loop (WLL) rollouts, prepaid services and an increasing demand for broadband access. Fixed GSM and WiMAX in combination with VoIP now make up more than half of the fixed telephony market.

Being landlocked, the country depended entirely on satellites for its international connectivity until 2009 when several international submarine fibre optic cables landed on the African east coast. Uganda is now connected via a national fibre backbone extending to its borders with neighbouring coastal countries. By 2013, prices for international bandwidth had fallen to a fraction of their original cost, but retail pricing of broadband services is still relatively expensive, especially when considering purchasing power parity. However, wireless and mobile technologies such as WiMAX, EV-DO, HSPA and LTE are now putting the internet within reach of a much wider part of the population than traditional fixed-line DSL services have in the past. These improvements in infrastructure are revolutionising the market and enabling converged voice, data and digital media services.

At around 50%, total teledensity is still below the African average, and all market segments are experiencing strong growth. A simplified and converged licensing regime has significantly reduced barriers to market entry and increased competition. With annual GDP growth forecast to rise from currently 4% to 7% in 2015 and the following years, growth prospects for Uganda’s telecoms sector are excellent.

Market highlights:

  • Consolidation in the overcrowded mobile sector;
  • Opportunities for MVNOs and tower outsourcing companies;
  • Three 4G (LTE) networks launched;
  • Internet subscriptions growing at more than 200% per year;
  • More than 95% of internet connections are mobile;
  • 3G mobile broadband pricing varies widely, consolidation expected;
  • New legislation and regulations;
  • WiMAX/VoIP provides more than 10% of fixed telephone connections;
  • Fibre optic network rollouts continue;
  • New fibre links to international submarine cables.

For detailed information, table of contents and pricing see:

Uganda – Telecoms, Mobile, Broadband and Forecasts

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