Stay receptive: A move towards mobile technology is redefining the sector

In a country with a population of 1.5m, Gabon’s four operators are fiercely competing to grab market share. After an aborted attempt to introduce 3G technology through a biding process, the Regulatory Agency for Electronic Communications and Postal Services (Agence de Régulation des Communications Electroniques et des Postes, ARCEP) granted a licence to Celtel Gabon, known as Airtel, which is still to launch its 3G services. The launch of 3G could push Gabon’s telecoms sector towards the next stage of development. In a highly competitive market with true penetration of almost 100%, high growth rates cannot be sustained by tariff competition only. The development of a new range of services, such as mobile payment, will make a crucial difference.

PERFORMANCE: In 2011 the general turnover of all phone operators and/or internet service providers (ISPs) was CFA251bn (€376.5m), up by 4% compared to the previous year. Between 2007 and 2011, general turnover grew by 36%. The mobile segment is generating 81% of all the turnover, while fixed lines account for 15%. ISPs (excluding phone operators) account for 4%, indicating the market’s limited size. When including the revenues generated by digital television operators (Canal+, Sat Con and TNT Africa), the total turnover of the telecoms sector exceeded CFA369bn (€553.5m) in 2010, and in 2011 it represented 4.5% of GDP. More than 3000 people are currently employed by the industry.

MOBILE PHONES: In 2011 the total number of subscriptions to mobile phone services reached 2.37m, up by 5.8% compared to 2010. The growth of subscriptions is lower than preceding years – there was growth of 25% in 2009 and 27% in 2010. The sudden slowdown may indicate a high level of saturation in penetration terms. Future growth rates may be similar unless new services, such as 3G, are introduced. That being said, from 2007 to 2011, the number of subscriptions increased by 112% while the monthly average revenue per user (ARPU) decreased by 30%, in part due to the extent of new penetration in more rural and low-income communities and in part due to fierce competition between industry players. “There has been much more competition in the past two years, with few profitable players and more losses,” Frédéric Feraille, the managing director of Moov, told OBG. “There can at most be only two or three operators on the market, as prices need to be high enough for the companies to be profitable. With the actual four, it is impossible to invest in new technology, as ARPU has plunged.” The monthly ARPU in mobile phone services was estimated to be around CFA7021 (€10.53) in 2011.

As a result of low consumer behaviour, the number of mobile phone accounts in Gabon is much higher than population figures. In fact, it is estimated 35% of all customers own several cell phones and/or SIM cards, in order to enjoy the different advantages offered by each operator. As in many other African countries, these customers switch regularly from one operator to the other, based on tariffs and territorial coverage. Taking this into account, ARCEP calculates that the real penetration rate of mobile phones is around 97%.

As Gabon’s mobile phone market is highly competitive, the publicised total number of accounts might overstate the real size of the customer base. For example, these figures may include long-inactive accounts – during the first quarter of 2011 Gabon Telecom removed inactive accounts from its network, and subsequently announced over 300,000 accounts had been culled from its database.

FIXED LINES: According to ARCEP, the total number of subscriptions to fixed-line services was 22,499 in 2011. Since the telecoms market was liberalised, in 1999, the demand for fixed-line phones has been decreasing while the demand for mobile services has continued to grow. As reported by ARCEP, between 2010 and 2011, the customer base for fixed-line services fell by 26% due to a switch to mobile devices, causing a 5% fall in the overall customer base of the sector. The penetration rate of fixed lines is now estimated at 1% of the population.

The development of this segment in the coming years remains unsure, although Gabon Telecom’s monopoly on fixed lines is set to expire by the end of 2012. Not only is there a low demand for fixed lines, but fixed-line infrastructure investments are also not competitive with those for the mobile segment. Moreover, while businesses and state institutions account for an important share of fixed-line customers, the government’s move towards an internal network based on WiMAX technology will likely cause the segment to fall still further. However, reduced tariffs spurred by a new fibre-optic international cable could stimulate demand for cable-delivered internet and television services, which often come bundled along with fixed lines.

MOBILE INTERNET: Despite the widespread take-up of mobile phones, the use of mobile internet services remains low, as only 256,729 subscribers took advantage of mobile internet services in 2011. The high cost of internet has been the main obstacle to the growth of this segment.

The installation of the new international fibre-optic cable by the end of 2012 should lower access fees and contribute to expansion in the mobile internet segment. That said, in 2011 mobile internet represented 90.78% of the total internet market. Most operators offered a connection using 2.75G technology, known as EDGE, a transition technology towards 3G mobile phone services.

REGULATION: In February 2012, the regulatory agency was changed from the Telecoms Regulatory Agency (Agence de Régulation des Télé communications, ARTEL) to ARCEP. ARCEP is a merger between ARTEL and the Regulatory Agency of Postal Services, both created in 2001. It enjoys the status of an independent administrative body and is granted the authority of an administrative court. ARCEP’s role is to establish operating norms in the telecoms sector, to control their implementation and to sanction any firms that violate regulations.

In February 2012, ARCEP, based on its monitoring of the quality of services offered by all operators during the Africa Cup of Nations (Coupe d'Afrique des Nations, CAN), issued an audit due to detected deficiencies. With the audit, it imposed financial penalties for all operators due to serious infringements of their duties as spelled out in their licences. According to ARCEP, Airtel, Gabon Telecom, Moov and Azur did not ensure an appropriate amount of coverage, nor an appropriate quality and reliability of their voice services. The fines totalled CFA3.7bn (€5.55m), of which CFA2.47bn (€3.71m) was applied to Airtel, CFA611m (€916,500) to Gabon Telecom, CFA422m (€633,000) to Moov and CFA223m (€334,500) to Azur, representing 2% of the firms’ 2011 turnover.

Other recent decisions by the regulatory agency included an announcement in June 2012 that all fixed phones were switching to an eight-digit number, as per the international norm. (Mobile phones, had already been using the eight-digit standard.) KEY PLAYERS: With four competing operators, the mobile phone market is highly competitive. Gabon Telecom was the first operator to be granted a licence in 1999. (It had been the former state telecom company and was privatised that same year.) The firm is now 51% owned by Maroc Telecom (a subsidiary of France’s Vivendi) and 49% by the state of Gabon. It operates in the mobile sector under the Libertis brand. With 532,144 mobile phone subscribers at the end of 2011, it has a 22.45% market share, down from a 31% market share in 2010. Gabon Telecom’s turnover for the mobile segment was of CFA30.68bn (€46.02m) in 2011, up by 3.8% compared to 2010.

Gabon Telecom is still the only provider of landline phone services. Despite a decreasing number of subscribers in 2011 this segment generated more revenue than the company’s mobile section. The turnover for the fixed-line segment was CFA38.39bn (€57.59m) in 2011, up by 15% over 2010. The total turnover in 2011 was CFA69.07bn (€103.61m).

During the first quarter of 2012, Gabon Telecom managed to put a stop to the loss in its customer base, which reached 644,000 by the end of March 2012, stimulated by the CAN. However, during the same period, its fixed-line customer base decreased by 27% and its internet base by 72%.

The second operator to be awarded a licence was Celtel Gabon, in 2000. After being branded as Zain in 2007 following the Kuwaiti group’s purchase of Celtel’s Africa operations, it now operates as Airtel, since the Zain Group was acquired by India’s Bharti Airtel in 2010. In 2009, Airtel was officially labelled by the regulatory agency as the dominant operator and is thus bound to additional obligations, particularly with regard to infrastructure sharing and inter-network fees. With 1.3m mobile phone subscribers by the end of 2011, it has a 54.7% market share, up from the 47% market share of the previous year. These figures make of Airtel the fastest-growing company in terms of customer base. Its 2011 turnover was of CFA135.47bn (€203.21m), up by 1.5%. With a customer base growing at a much faster rate than its turnover, Airtel’s strategy consisted of greatly decreasing its tariffs to adjust to the competition.

In 2006, the West African operator Atlantique Telecom was the third company to enter the mobile market. It operates under the brand name of Moov. By the end of 2011 Moov had 373,773 mobile phone subscribers, and thus controlled 15.77% of the market, up from a 13% market share the year before. Its 2011 turnover was of CFA27.06bn (€40.59m), up by 24.5%, which makes Moov the fastest growing mobile operator in terms of income.

All of the licences mentioned above were renegotiated in 2007, after ARTEL evaluated the revenue generated by the mobile phone segment. New licences were awarded for 10 years at the cost of CFA11bn (€16.5m) each. The fourth operator to join the market in 2009 was Bahrain’s USAN. It operates under the brand name of Azur. By the end of 2011 Azur had 167,782 subscribers, and thus a 7% market share, down from a 9% market share in 2010. Its turnover in 2011 was of CFA10.36bn (€15.54m), down by 9.5% compared to the previous year. It is the only company that saw a decrease of both base and turnover in 2011. However, its marketing director, Vincent Wegmann, told OBG in June 2012 turnover was starting to rise again.

INTER-NETWORK FEES: Each operator applies additional fees for all calls made towards a competitor’s network. Apart from covering for due interoperability costs, these fees were also meant to retain customer loyalty. But they had the opposite effect: most consumers began constantly searching for the best deal on the market and started owning phone numbers from several operators to avoid these fees. In a country where the vast majority of phone subscriptions are made on a pay-as-you-go basis – according to ARCEP, in 2011 prepaid accounts were 99.24% of the market – and where the territorial coverage varies depending on operator, the deterrent aspect of high inter-network fees appears to be almost completely ineffective.

In 2009 the regulatory agency intervened in order to impose a standardised price list for inter-network calls. In 2011, the regulatory agency had to step in again, this time to facilitate agreements between operators on the payment of interconnection debts between one another.

In 2011 it also called all operators to modernise their equipment to facilitate inter-network calls during the CAN. Finally, in 2012, ARCEP conducted an audit, which covered the issue of interconnectivity and led to the sanctions mentioned above.

INFRASTRUCTURE: As per the licences granted by the regulatory agency, operators are obliged to provide widespread territorial coverage. Considering that most of the population is concentrated in the urban areas of Libreville, Port-Gentil and Franceville, the installation of base terminal stations (BTS) in all the provinces and on all main roads in rural areas may represent a heavy but necessary investment for operators. Private sector investments in telecoms amounted to CFA199.50bn (€299.25m) in 2010. Between 2007 and 2010, investments grew at an annual rate of 7.81%. In its digital economy strategy, the government highlighted as a priority the pooling and sharing of pylons and other infrastructures among mobile operators, particularly in rural areas, a move designed to bring down the cost of telecoms infrastructure and expand coverage.

EXPANDING ARRAY OF CHOICES: Until the end of 2012, mobile phone operators have to rely on satellite services and/or on the SAT3/WASC cable, managed by Gabon Telecom. As a consequence of ARCEP’s intervention in December 2010, Gabon Telecom was obliged to offer access to the SAT3/WASC cable in a more transparent and non-discriminatory manner, by publishing a list of prices and guaranteeing access to all operators that wanted it.

In December 2011, Airtel was thus able to sign an agreement with Gabon Telecom to have access to the SAT3/WASC cable, to be used for its future 3G services. The arrival of the new international fibre-optic cable will help lower connection tariffs and will open new opportunities for smaller operators as well, particularly in terms of both broadband and mobile data services.

3G SERVICES: In 2010, the government launched a tender for 3G licences. Although there is a growing demand for applications which require more bandwidth, no operator was interested at the time of the tender being offered. The price of the licence was set at CFA33bn (€49.5m), which represented a major investment compared to the number of potential users, which was believed to be limited.

In October 2011, the government finally awarded the first 3G licence to Airtel (Celtel Gabon). But Airtel is still to announce the start of its 3G services, and no other operator has yet decided to go ahead and buy a 3G licence (see analysis).

MOBILE PAYMENT: On March 30, 2012, Airtel launched the first mobile payment service in Gabon, known as Airtel Money. Airtel’s customers can now benefit from a mobile account which allows them to make deposits, order transfers and make payments, all for the cost of an SMS.

By the end of August 2012, 80,000 customers had registered with Airtel Money, and Airtel has already opened 900 points of service throughout the country, including in a large number of rural areas. Airtel Money is operated in partnership with the local bank BGFI, and Société d’Investissement pour l’Agriculture Tropicale Gabon, the largest private employer in the country, committed to using Airtel Money as a way to pay the salaries of their employees (see analysis).

OUTLOOK: Gabon’s telecoms market seems to be in a transition period. First, the leading operator has cemented its position by decreasing tariffs and expanding its customer base. Hence, with a penetration rate approaching the saturation point, younger competitors will have to adapt by offering new services in order to maintain and/or restore their growth from previous years.

Although Airtel acquired the first 3G licence in Gabon, the company has not chosen to release any 3G service, deeming it not yet prudent. If affordable for a large number of customers, the arrival of such services will probably contribute to a sustained growth of general turnover within the sector as a whole. Operators are also waiting to know more about the tariffs to access the newly installed international fibre-optic cable, which will be operational by the end of 2012.

In parallel with installing the fibre-optic cable, the government is developing a national backbone infrastructure that should help to benefit the operations of all four firms. The Ministry of Digital Economy has indicated a desire to mutualise pylons and thus increase the territorial coverage of all operators.

With the promise of more accessible services, newer technology, enhanced infrastructure and increased quality in the near future, Gabon’s telecom sector appears to be following the right path.