/ 9 May 2011

Zimbabwe’s mobile market seen at $1,34bn by 2016

New data out on Monday conducted by growth partnership company Frost & Sullivan puts the Zimbabwean mobile communications market at $1,34-billion in 2016, having earned revenues of $372,2-million in 2009.

This, the group said, represented a compound annual growth rate of 20,1%, considerably lower than the 40,6% revenue growth experienced from 2008 to 2009. “However, declining growth rates are expected when markets become increasingly saturated,” Frost & Sullivan said.

The report, called An Overview of Zimbabwe’s Vibrant Telecommunications Market, found that mobile subscriber numbers in Zimbabwe trebled from early 2009 to mid-2010, whereas fixed-line subscriptions remained stagnant. “With demand for voice services increasingly met, future growth is predicted to occur around mobile internet and broadband provision. Both mobile operators and internet access providers will benefit from this second wave of growth,” F&S predicted.

The research group warned, however, that increasing political instability in the run-up to elections expected to be held in 18 to 24 months and a business environment not always conducive to proper process were expected to have a negative impact on market prospects.

“Mobile operators are the largest contributors to telecommunications revenues in Zimbabwe,” noted Protea Hirschel, Frost & Sullivan’s information and communications technology analyst. “As 3G networks expand, mobile operators compete more directly with internet access providers. These, in turn, have entered the voice market, adding to competition.”

The group said that unfulfilled demand, initially for voice and increasingly for data services, was a key driver of growth for mobile communications. Fixed lines were unlikely to meet this demand in Zimbabwe.

Mobile subscriber numbers trebled from less than two-million at the end of 2008 to 6,9-million in mid-2010. The uptake of 3G by subscribers had also been very high and, at the end of 2010, exceeded the number of fixed-line subscriptions. Fixed lines have remained stagnant at 390 000, as the incumbent has struggled for resources to maintain its network.

Poor quality
Nonetheless, very high unemployment rates, estimated to be in excess of 80%, meant that consumer spending on communications competed with spending on basic necessities. Affordability, therefore, ultimately constrained average revenue per user (Arpu), F&S said.

“The success of several promotions over the past 18 months has, however, shown the importance of affordable pricing in Zimbabwe,” said Hirschel. “Offering subscribers a compelling value proposition will continue to be of importance in this market.”

The quality of mobile networks in Zimbabwe is generally considered to be poor by subscribers. Perceived low network quality has also resulted in a high incidence of the use of multiple SIMs as subscribers hedge their bets between networks.

After the dollarisation of the economy in 2009, network capacity of all mobile operators was unable to keep up with demand from consumers, contributing to poor network quality. Capacity constraints had, to an extent, been overcome, according to the report.

However, erratic power supply remained a significant challenge for all telecommunications operators. Not only did it result in a degraded service experience for subscribers, but it also added to operating costs as multiple power sources had to be factored into the cost base, the group said.

“Networks offering a higher quality service with fewer dropped connections have an advantage over competitors,” stated Hirschel. “As erratic power supply is a major contributor to poor network quality, decreasing reliance on grid electricity and back-up diesel generators by using alternative energy, such as solar, wind or hybrid-powered base station designs, will result in long-term operating expenditure reductions. This will also help to preserve profit margins in the long term as Arpu is expected to decline.” — I-Net Bridge