New waves of growth: Coverage was only the start; quality and added services are now driving competition

As with many emerging markets, data is playing an ever more important role in Côte d’Ivoire’s telecoms sector. While many subscribers have multiple SIM cards, the mobile market is nonetheless rapidly nearing saturation, which means the country’s six operators are looking to sustain high growth rates by both expanding the uptake of value-added services and improving network quality.

The comparatively large number of operators, combined with slowing growth in new subscribers, means that competition is tight and capital-intensive. The release of four 3G licences in 2012 – only three of which have been issued – will also continue to impact market shares, particularly given the emphasis on data usage. The staggered deployment of 3G in 2012 by three major companies is expected to unleash new revenue streams, but challenges remain, such as the limited access to 3G-compliant terminals and 3G-enabled devices.

Increasingly operators are diversifying revenue streams in terms of content, with a shift into mobile banking and money transfer, in line with the growing trend throughout Africa. Operators are making sizable infrastructure investments to fix the damage done to their networks by the five-month post-election crisis that ended in April 2012, as the regulator stokes competition by periodically posting online reports comparing their quality.

PERFORMANCE: In 2012 the mobile segment of Côte d’Ivoire’s telecoms sector saw a total turnover of CFA692bn (€1.04bn), rising 15.8% over 2011. The growth was comparatively high given that it in part marked a resurgence following the previous year’s political crisis, which had gripped the country for several months. The instability not only impacted activities, but also resulted in damage to infrastructure, although the sector bounced back quickly. Mobile penetration rose from 76.7% in 2011 to 85.4% in 2012, compared to a fixed-line telephone density of 1.15% in 2012, revealing – as is the case in many African markets – that the mobile telephone is the primary telecoms device for the average Ivoirian.

The voice-based era is clearly behind operators, however, particularly as new subscriber enrolment slows. Overall mobile penetration rates had grown from 20.68% in 2006 to nearly 37% in 2007. In those boom years, total turnover increased 21.6% and 25.5%, respectively, eventually peaking at a rise of 29.7% in 2008. In the preceding decade, more than €2bn was spent in the sector. In 2012 mobile operators spent more than CFA113.1bn (€169.6m), with the two largest mobile operators accounting for roughly three-quarters of all investments. Still, in spite of a tightening market, the overall assessment for the sector remains positive, with additional expansion expected for operators providing 3G coverage.

SETBACK: The sector was hit hard by the unrest in 2010-11 following the last round of presidential elections. Violence and fighting stalled the economy, but also led to significant damage to infrastructure, including in the telecoms sector. Towers and generators were burnt or destroyed, leaving coverage patchy in many areas. Orange Côte d’Ivoire, a joint fixed-line and mobile operator owned by French telecoms giant Orange, was the worst affected by the unrest among the country’s six mobile operators, sustaining up to 60% of the total damage, according to industry lobby Union Nationale des Entreprises de Télécommunications (UNETEL).

“At the end of the war, 50% of our mobile capacity was affected, as well as 60% of our fixed-line capacity,” Mamadou Coulibaly, the deputy director of strategy at Orange Côte d’Ivoire, told OBG. Repairs were made quickly, however, and by December 2011 the country’s 2G mobile capacity had been completely restored for all operators, although fixedline repairs continued through 2012.

REGULATION: In 2013 the National Telecommunications Regulation Authority of Côte d'Ivoire (Autorité Nationale de Régulation des Télécommunications de Côte d'Ivoire, ARTCI) and the Ivoirian Radioelectric Frequency Management Agency (Agence Ivoirienne de Gestion des Fréquences Radioélectriques, AIGF) are to replace the Telecommunications Agency of Côte d’Ivoire (Agence des Télécommunications de Côte d’Ivoire, ATCI) and the Telecommunications Council of Côte d’Ivoire (Conseil des Télé communications de Côte d’Ivoire, CTCI), respectively, amid concerns that the original institutions did not have sufficient powers to regulate the sector efficiently. The Ministry of the Postal Service and Information and Communication Technology oversees the ARTCI and CTCI, providing direction for the telecoms sector, and is headed by Bruno Nabagné Koné.

SECTOR MANAGEMENT: ARTCI has greater authority than its predecessor, ATCI, with the right to punish operators for wrongdoing. Meanwhile, the AIGF is responsible for managing spectrum licences, which are now limited, compared to a prior policy that had allowed an unlimited number. This explains the presence of six mobile phone operators in Côte d’Ivoire as opposed to an average of three players in most countries; indeed, even much larger Nigeria has six players to serve its market of 160m.

ARTCI will also arbitrate disputes between operators, between an operator and the Ivoirian administration, and between an operator and its subscribers (complaints from subscribers can be taken up by one of several consumer associations via a formal referral letter). Subscriber-initiated disputes are rare, leaving administrator and inter-operator disputes as the main issues to be dealt with. According to a report entitled “Telecommunications in Côte d’Ivoire 1995-2011: Diagnostic of the First Phase of Liberalisation”, published by the government, since the liberalisation of the sector in 1995 the number of disputes involving the administrator has shrunk compared to those between operators.

DISPUTES: From 1997 to 2000 there were 28 major disputes, 28.57% of which involved only operators and 71.43% involved the administration. From 2000 to 2011 inter-operator disputes rose to 66.66%, while disputes involving the administrator fell to 33.33%. Of the 52 main disputes judged by the regulator since 1997, only one led to an appeal. Overall, most inter-operator disputes in recent years have had to do with value-added services and interconnection rates, making up 21% of the 52 reported disputes since 1997, according to the report.

Compared to emerging markets elsewhere, the fiscal burden faced by telecoms investors in Côte d’Ivoire is modest. According to local press reports, mobile operators pay an annual contribution of CFA40bn (€60m) towards the cost of licence management; a tax of up to 2% of the turnover for mobile operators; and 1% of turnover for landline operators, which is then used for the development of new technologies in rural areas. In addition, operators are responsible for an additional patent tax of 0.7% of their turnover; a special equipment tax of 0.08% of turnover; a 1.2% tax towards supporting regulatory oversight; and an interconnection tax worth 3% of turnover. In 2012, local press stated that the total amount of these taxes came to CFA19.5bn (€29.2m).

NEW CODE: Côte d’Ivoire passed a new telecoms code in March 2012 to replace the previous policy written in 1995. The old code opened the state-run sector to private interests.

This latest revision regulates the ICT sector in Côte d’Ivoire and its main update is intended to build on the development of internet protocol, which has allowed convergence and compatibility between various telecoms and ICT networks and services across the world since the 1990s. The code also harmonises Côte d’Ivoire’s regulatory framework with that of other countries in ECOWAS and the West African Economic and Monetary Union (Union Économique et Monétaire Ouest-Africaine, UEMOA).

The Assembly of Telecommunications Regulators of West Africa (Assemblée des Régulateurs des Télé- communications de l'Afrique de l'Ouest, ARTAO) voted in 2005 on a set of guidelines that would help harmonise ICT codes and policies in UEMOA and ECOWAS member states. The ARTAO includes Côte d’Ivoire, Benin, Burkina Faso, Ghana, Gambia, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal and Sierra Leone. The guidelines touch on such issues as promoting site-sharing among operators and simplifying the acquisition of licences. ICT Minister Koné told the international press that the licences issued under the new code, either to new operators or operators seeking to renew expired licences, will be internationally recognised independent of the technology, meaning that 3G operators will not have to apply for 4G licences.

MOBILE PHONES: In 2012 mobile phone subscribers numbered 19,826,837, according to ATCI. The top three mobile phone operators controlled 90.68% of the CFA692bn (€1.04bn) market in 2012: Orange Côte d’Ivoire led with a 41.1% market share, followed by South Africa’s MTN with 30.38% and Etisalat’s Moov with 20.20%. The two frontrunners have been jostling for the leading position, with one overtaking the other at different times.

Orange Côte d’Ivoire is partly owned by the Ivoirian state. In 1997 France’s Orange bought over 51% of the mobile operator’s state-owned parent company, Côte d’Ivoire Telecom, which once enjoyed a monopoly on the Ivoirian market. Meanwhile, MTN bought the operating licence of Loteny Telecom in 2005 and took a plurality share of the market for the first time in 2009, although the top spot has since switched again. Moov is owned by Emirati telecoms major Etisalat, which entered the market in 2010 following a buyout of Atlantique Telecom.

KEY MARKET: These three operators have a presence in several African countries, including major markets like Nigeria and Kenya. However, the Ivoirian market nonetheless represents a sizable chunk of their activity, in itself a testament to its overall attractiveness in spite of the challenging conditions. In terms of the companies’ subscriber bases in subSaharan Africa, Côte d’Ivoire represents about 5.2% for MTN and almost 15% for Etisalat, according to figures provided in the company’s financial reports for 2012. Furthermore, the country accounted for about 9% of the Orange group’s Africa-Middle East subscriber base. In its 2012 annual report, Orange highlighted Côte d'Ivoire’s contributions to the group’s earnings, boasting of 24.3% revenue growth there over 2012, leading the Africa-Middle East region, which as a whole grew by 5.3%.

The remaining three players, all of which are relatively new arrivals compared to Orange and MTN, operate with smaller shares of the market. Comium, a Lebanese-owned telecoms company that entered the Ivoirian market in 2007 under the name KoZ, accounts for 4.27% of the market share. Green, the brand name under which Libyan-owned Oricel, a subsidiary of the Libya Africa Investment Portfolio, has operated in Côte d’Ivoire since 2008 and holds 0.49%. Ivoirian-owned Niamoutie Telecom, which received its licence in 2006 and launched its brand Café Mobile only in April 2012 due to unspecified regulatory issues, has a 0.05% share. Meanwhile, Abu Dhabi-based Warid bought a licence in 2008 but has yet to begin operations.

COVERAGE: The overall coverage area for mobile operators is large, with all of the major urban areas blanketed by networks and widespread 2G and 3G internet coverage in Abidjan, although it is not quite comprehensive. According to ATCI, Orange Côte d’Ivoire’s coverage rate reaches roughly 65.2% of Ivoirian territory, while MTN reaches 74.01%, Moov reaches 59.42%, Comium reaches 45% and Green reaches 2.62% of Ivoirian territory. The government has also established a special fund that finances projects to extend coverage to rural areas, which operators are traditionally less keen to invest in due to the low average revenue per user among rural customers, high costs of network maintenance and reduced return on investment. As a result, for some services such as mobile internet access, for example, 90% of the coverage is concentrated in the city of Abidjan alone. The National Telecommunications Fund (Fonds National des Télécommunications, FNT), bankrolled by the Ivoirian state and operators, is under the stewardship of both the Ministry of the Economy and Finance and the Ministry of the Postal Service and Information and Communications Technology. Beyond the fund, infrastructure sharing among operators is also expected to facilitate the expansion of coverage in rural areas.

FIXED-LINE: As with many emerging markets, particularly in Africa, the country’s fixed-line sector has a much smaller scope of activity and has seen figures slide as mobile access and connectivity increases. Côte d’Ivoire has only about 277,548 fixed-line subscribers, based on ATCI figures from March 2013.

Côte d’Ivoire Telecom, which was bought by Orange, and Arobase Telecom, purchased by MTN in 2008, are the only two fixed-line operators in the country. Côte d’Ivoire Telecom had the monopoly until 2004. In addition to basic voice and internet services, it rents out infrastructure and manages access to the South Atlantic 3 (SAT3) fibre-optic cable gateway. Arobase Telecom offered various services before focusing on the fixed-line segment in 2005.

The incumbent fixed-line operator Côte d’Ivoire Telecom has 267,997 subscribers, or 96.56% of the fixed-line segment, while Arobase Telecom has 9551 subscribers and the remaining 3.4% of the market, according to the industry regulator. The total number of fixed-line users in Côte d’Ivoire has been decreasing since 2008, when it peaked at 356,502. In 2012 the number of subscribers increased by 3.5%, following a 5.2% drop to 268,162 in 2011 as post-election violence hit infrastructure, damaging the networks. According to Ubifrance, about 60% of the turnover in the fixed-line sector in recent years has come from contract services such as the installation of private virtual networks and cabling.

BROADBAND: Broadband development is expected to help sustain the sector across the medium and long term. The government is also looking to deploy fibre-optic cables through a partnership with Chinese communications company Huawei, with the first phase of its new national fibre system to be complete in 2013. The 6700-km fibre-optic backbone is expected to eventually connect the entire country, but the first two phases will only cover San Pédro, Tabou and Man, Odienné, Korhogo, Ferkessédougou, Abidjan, Bondoukou and Bouna.

GATEWAYS: New investments are expanding access to bandwidth in Côte d’Ivoire, diversifying from the 14,350-km-long SAT3/West African Submarine Cable (WASC) fibre-optic system that went live in 2002. It now has a capacity of 340 gigabits per second (Gbps), according to South Africa’s Telkom Group, one of the investors in the project. Alongside other major West African markets, Côte d’Ivoire had long been reliant on the SAT3/WASC cable, which cost more than $600m to build, as a primary gateway connection. Locally, it is managed by Côte d'Ivoire Telecom. Looking ahead, a number of recent and planned landings are now set to reshape the bandwidth market and reduce connection prices.

Since December 2012 Abidjan has had an active connection to the Africa Coast to Europe (ACE) submarine cable, a 17,000-km-long fibre-optic line that cost $700m. It has a design capacity of 5.12 terabytes per second (Tbps), so that when the cable reaches its potential, it will have as much as 15 times the capacity of SAT3/WASC. ACE’s current operational capacity is 1.92 Tbps and, like SAT3/WASC, it is locally managed by Côte d’Ivoire Telecom.

CABLES: The 14,400-km West Africa Cable System (WACS), which came on-line in July 2012, has a potential capacity of 5.12 Tbps, according to ATCI. However, the current operational capacity at the Côte d'Ivoire landing is 400 Gbps and can be raised to 960 Gbps, the regulator said in an April 2012 presentation. WACS cost $650m to build and has been deployed to 11 countries, nine of which are in Africa. The line is managed by Arobase Telecom.

The Glo-1 cable, owned by Nigeria telecoms company Globacom, with a capacity of 2.5 Tbps, and the Main One submarine cable, with a capacity of 1.92 Tbps, both connect other West African countries, but do not have active landing points in Côte d'Ivoire, although they could be added in future. For now, Main One and Glo-1 are accessible from Côte d'Ivoire through overland connections. The arrival of all these cables is expected to significantly reduce the cost of broadband internet. According to some estimates, the new cables are expected to reduce broadband prices by as much as 10% per year.

There is also the option of using satellite connections, which are used mainly in the interior of the country in areas that are not reachable by cable connections and as a backup for damaged cables. Its high cost, however, leads many to opt for ADSL connections, according to Fabrice Aguié, the director of integration solutions firm Barnoin Informatique.

MOBILE INTERNET: The arrival of new submarine cables will also help accommodate the expected jump in connectivity demand following the launch of 3G services. As in many markets throughout the continent, 3G is shaping up to provide a significant boost to operator bottom lines, as voice revenues fall, prices become tighter and competition increases. The main barrier to maximising the potential of faster mobile internet service and content is access to 3G-enabled phones. Currently, according to Coulibaly of Orange Côte d’Ivoire, most 3G subscribers continue to use the service via USB fobs or data cards, with only a handful using smartphones.

The government issued the first 3G licences in March 2012, with three of the four available permits allocated to MTN, Orange Côte d’Ivoire and Moov (see analysis). Each licence is valid for 10 years and costs CFA6bn (€9m), and operators are required to cover 95% of the population within four years. Orange Côte d’Ivoire led the pack and launched its 3G services in September 2012, offering mobile internet access at speeds of up to 42 megabytes per second; MTN and Moov followed shortly after with 3.5G and 3.75G connections, respectively. All operators had previously provided WiMAX and GPRS/EDGE technology to customers.

While the launch of 3G services in Côte d’Ivoire has been somewhat later than in other neighbouring countries, the impact on operator revenues has already been clear. In a quarterly report issued in March 2013, MTN Côte d’Ivoire said the performance of its data business improved significantly year-onyear, with an increase in revenue of 41.1%.

SIM CARD REGISTRATION: Many Ivoirians own multiple lines with different providers so they can switch networks when connections fail and enjoy discounted rates on calls – a common behaviour in cost-sensitive markets. However, it can lead to challenges in determining overall activity and demand for the telecoms sector, as well as for more basic issues of security. In 2011 the government passed Decree No. 2011-476 on December 21, 2011, which states that the owner of a SIM card must be identified.

This comes amid a wave of SIM card registration exercises across the continent from Algeria to Zimbabwe, which have ranged from providing passport identification to limiting the number of SIM cards a subscriber can hold, with an ostensible aim of improving security and gathering statistical information on the population. The deadline for the regulation was the end of December 2012. As of January 2013, all unregistered cards were deactivated.

A report from the identification exercise committee showed that 93.78% of subscribers have been registered. Users must now provide biographical information when purchasing a SIM card, including their address and their mother’s maiden name. In addition, registration will provide a database for investigators as well as a wealth of information in a country with outdated census figures.

CALL RATES: Affordability is a key issue in Côte d’Ivoire, especially as a decade of economic stagnation has slowed per capita income growth for Ivoirians, which has been exacerbated by the rising cost of oil and commodities. As is the trend in most of Africa, the majority of subscribers are off-plan, with roughly 93% using prepaid cards, which can be bought for as little as CFA1000 (€1.50), while only 6.64% are on post-paid plans. Moov accounts for the vast majority of post-paid subscribers, with almost 95% of that segment, according to ATCI.

The entry of new operators over the past seven years has driven call prices down significantly. From 2000 to 2006 Orange Côte d’Ivoire’s predecessor, Côte d’Ivoire Telecom, and MTN’s predecessor, Arobase Telecom, had practically the same prices, according to a 2012 government report. In 2006 Atlantique Telecom – Moov’s predecessor prior to Etisalat fully acquiring the firm – was able to bring down its competitors’ prices with its rate of CFA143 (€0.21) per minute. Côte d’Ivoire Telecom’s prices came down from CFA254 (€0.38) to CFA127 (€0.19), while Arobase Telecom’s tariffs dropped from CFA205 (€0.31) to CFA80 (€0.12) over 2007.

In 2007, Comium entered the market with an average price of CFA99 (€0.15) per minute. Today, the firm’s prepaid rates vary from CFA84 (€0.13) to CFA99 (€0.15). Operators have to publish their prices and general terms for offers, and are also required to send them to ATCI, which publishes them on its website.

NETWORK QUALITY: The Ivoirian government has been pushing aggressively to improve mobile phone quality. The regulator has published on its website the results of a 2012 audit, which all active operators failed, although Café Mobile, which had just relaunched its operations, was exempted.

The audit found that the call congestion rate was below 2%; SMS/MMS congestion rates were lower than 2%; the minimum call setup success rate was greater than 95%; and that dropped call rates were no greater than 2% in densely populated parts of Abidjan. When operators fall short of the regulator’s requirements, they are given 60 days to address any shortcomings, or face a penalty. Furthermore, the regulator can issue a monetary penalty if an operator is found to be non-compliant, with the fine being based on the infraction.

While authorities have stressed the need for operators to invest in infrastructure to improve the quality of their networks, Coulibaly said external causes are often to blame for the bulk of quality concerns, including power cuts that force them to run phone towers using batteries, which are then often vandalised or stolen. Cable thieves also disrupt phone lines, targeting the copper in the cable for its resale value. The crowded telecoms space and subsequent unavailability of frequencies, some of which are not being exploited, also leave little room to expand.

SITE SHARING: In a bid to promote rural coverage, the government is trying to reduce the cost of infrastructure development and operators have already started sharing towers to reduce capital costs. The recent $284m deal between MTN and Nigeria-based infrastructure provider IHS heralds a new level of collaboration. Under the October 2012 agreement, IHS acquired 931 towers in Côte d’Ivoire for $141m and it will be a 100% shareholder of the new tower management company that will be created. Under the deal, IHS owns and manages the towers, and leases space back mobile operators, like MTN, at a cost. A similar deal was signed with Orange in April 2013, which will see IHS manage 2000 transmission sites for Orange’s subsidiaries in both Côte d’Ivoire and Cameroon, although Orange retains tower ownership. Mamadou Bamba, the director-general of Orange Côte d’Ivoire, told OBG, “The IHS deal and infrastructure sharing are interesting, especially in cases where one operator has a tower where a competitor does not. With low ARPUs, infrastructure investments have represented 10-15% of revenue, and a great deal of money can be saved by sharing.”

SHARE TO SAVE: Sharing towers and other infrastructure will not only help improve the efficiency of mobile operators in the country’s competitive market, but will also help firms meet the government’s targets for comprehensive coverage. Moreover, operators in Côte d’Ivoire are obligated to invest in the expanding coverage in rural areas as part of the government’s push to provide “universal access” for Ivoirians regardless of where they live.

To lessen the financial burden on operators, the FNT has encouraged site-sharing and other forms of cost-cutting mutualisation among operators. MTN and Orange Côte d’Ivoire, for instance, have shared among themselves which areas they will be covering for fibre optics, Coulibaly told OBG. “There was a period when everyone would invest on their own. Nowadays, we are happy to split the cost and share what we can in order to increase profitability and efficiency, as well as reduce capital expenditure,” Coulibaly said. “This is especially the case as we start to get to areas with less income.”

A number of other third-party providers are also benefitting from the need for expanded networks and additional 3G coverage. In March 2013 Ericsson entered a five-year management services agreement with Etisalat’s subsidiary in Africa, Atlantique Telecom, across the group’s West and Central African markets and is helping to provide, among other things, a roll-out of the operators’ 3G base stations in Côte d’Ivoire. Other managed services and network players in the country include Alcatel-Lucent, Ericsson, Huawei and Nokia Siemens Networks.

MOBILE MONEY: One of the most noticeable trends of recent years in Africa has been the rise of mobile banking and mobile money products.

As operators increasingly look to diversify their service offerings, particularly in data-heavy segments, mobile banking has become one of the most appealing, based in large part on the success of Kenya’s Safaricom M-Pesa service, which now has a subscriber base of 17m and sees cash flows equivalent to nearly a quarter of the country’s GNP pass through its electronic portals. Operators elsewhere on the continent from South Africa to Senegal have sought to replicate that success, although take-up has generally been more modest.

Côte d’Ivoire is no exception and Orange Côte d’Ivoire, MTN and MOOV have all rolled out mobile banking services. Orange Côte d’Ivoire has Orange Money, MTN is pushing MTN Mobile Money and Moov has Flooz. In a country where bank penetration is around 14% – though estimates vary widely – financial services products are gaining popularity.

In May 2013 the International Finance Corporation, the private sector arm of the World Bank Group, and the MasterCard Foundation organised a seminar in Abidjan to bring together stakeholders in the emerging mobile money industry. This aimed to launch a four-year programme to contribute to the development and continued expansion of mobile financial services in the country in a bid to increase the financial inclusion of Ivoirians.

OUTLOOK: The dynamics of Côte d’Ivoire’s competitive telecoms sector match those of many other major emerging markets around the continent.

Although network providers are seeing a slowing rate of growth in revenues as price competition and saturation begin to take their toll, an increase in opportunities from the roll-out of improved data coverage and 3G networks should help boost revenues and enhance the medium-term outlook.

Furthermore, the sector appears to have taken an aggressive approach to reducing costs and increasing capital upgrades. By outsourcing non-core activities to specialised companies, the quality of services is expected to rapidly increase over the next few years while reducing the drag on company balance sheets. However, most of these outsourcing deals, such as those with IHS and Ericsson, remain at an embryonic stage, and these first experiments will likely determine the future of outsourcing models in the country over the next few years.

Ultimately, the market, tight though it may be, is healthy, and given the plans of the larger operators for expansion on the continent, with Etisalat pledging in 2011 to spend $15bn across its markets over the next five years and Orange midway through a nearly $10bn, five-year investment plan in Africa, Côte d’Ivoire’s telecoms sector is expected to see significant growth both in its demand and capacity.