Internet and mobile services play an important role in Tunisia's ICT sector

Internet services are playing an increasingly important role in supporting economic growth and social development across the world. In line with this trend, Tunisia’s ICT sector continued to grow in 2018. The country already has sophisticated telecoms and broadband infrastructure in place, which is quickly evolving to support the ongoing expansion of the digital economy and growing demand for high-quality ICT services. Mobile and internet penetration is increasing steadily, with mobile subscription rates almost doubling between 2008 and 2018, but there remains room for improvement. Indeed, while internet penetration is the highest in North Africa, 33% of the population remains without access to the internet, according to the “Global Digital Report 2019”, published by Canada’s social media management platform Hootsuite and the UK’s digital marketing agency We Are Social.

Structure & Oversight

Despite a challenging macroeconomic environment, ICT is one of Tunisia’s most promising sectors. The high level of mobile penetration is driving a shift from voice services to data, encouraging digital inclusion across the country. However, as it is a fairly new subsector in the country, the regulatory environment for data service providers is yet to be fully defined, with the government only beginning to establish the role it plays within the digital economy.

The leading authority for the sector is the Ministry of Communication Technologies and Digital Economy (Ministère des Technologies de la Communication et de l’Economie Numérique, MTCEN), which is responsible for setting government policies and promoting digital development. MTCEN is also tasked with the rollout of the Digital Tunisia 2020 programme, which is the government’s National Strategic Plan (Plan National Stratégique, PNS) in promoting economic growth.

Digital Tunisia 2020 – which was first launched in 2014 – aims to position Tunisia as an international centre for ICT. Specifically, the strategy aimed to have three out of five families connected to broadband, a 50% mobile broadband penetration rate and the digitalisation of all government administration by 2020. To achieve these goals Digital Tunisia 2020 envisioned a third of the investment coming from the state and two thirds from the private sector. Meanwhile, MTCEN aims to make ongoing improvements to the country’s mobile internet framework and support the growth of the human capital needed for the sector’s expansion.

Performance

The telecoms market has continued to expand since the sector was liberalised in 2001, with the mobile segment leading the way. According to a report by the National Telecommunications Agency (Instance Nationale des Télécommunications, INT), in the fourth quarter of 2018 the sector expanded by 12.4% year-on-year (y-o-y). This increase was largely driven by mobile internet and fixed-line data, which grew by 24.8% and 28.3%, respectively. At the end of 2018 total revenue from telecoms stood at TD2.8bn ($972.5m), a 3.7% increase on TD2.7bn ($937.8m) in 2017. Mobile subscriptions generated TD2.1bn ($729m) in 2018, with 87% of these being residential rather than business subscriptions. Meanwhile, the data segment accounted for nearly 45% of total market activity, and is set to expand further as penetration rates continue to rise. However, revenue generated by fixed-line telephone subscriptions fell 7.8%, suggesting that Tunisians are increasingly favouring mobile options.

Size

There are three main telecoms operators, but the sector is dominated by Tunisie Telecom, which is 65% publicly owned. With respect to fixed-line telephone services, the firm has 75.6% of the market as of March 2019. In addition, Tunisie Telecom controls 60.3% of the fixed-line broadband market through its subsidiary. The other two players offering fixed and mobile plans are Ooredoo Tunisie, a subsidiary of the Qatari telecommunications operator, and Orange Tunisie, owned by France’s Orange. Given increasing competition and market saturation at home, Tunisie Telecom has been looking abroad as a way to increase its revenue. In addition to its international subsidiary Sotetel, which operates in Malta, Algeria and Libya, and its 51% stake in Mattel, a Mauritanian telecommunications operator, in 2016 the company acquired 65.4% of the Maltese telecoms group GO – which in turns owns Cablenet, a Cypriot subsidiary. While GO saw a 12% increase in operating profits in 2018, Sotetel has had a more muted performance and Mattel has experienced operational issues. In January 2019 the company was fined $330,000 by the Mauritanian regulator for service deficiencies. However, Tunisie Telecom’s overall financial health remains strong, with 9.5% y-o-y growth in the last quarter of 2018, bringing its yearly turnover to TD297.7m ($103.4m). In addition, the company appears set to expand its operations into the burgeoning fibre-optic network segment.

Fixed Line

According to the INT, in April 2019 the total number of fixed-line subscriptions stood at 1.36m. Although this represents a 15.5% y-o-y growth, revenue from fixed-line telephone subscriptions has fallen in recent years as mobile phones become more popular. However, the number of fixed-telephone lines in Tunisia increased by around 937,000 between 2015 and 2017, despite high prices as a result of tax duty increases. Nevertheless, voice usage has fallen in recent years, from 69m minutes in April 2017 to 56.8m minutes in April 2019. This is expected to continue given the increasing number of voice services offered by online providers such as Skype and WhatsApp.

In terms of the structure of the overall market, in April 2019 the main fixed-line network, Tunisie Telecom, continued to dominate with a 75.2% share, followed by Ooredoo with 17.8% and Orange with 7%. Although Tunisie Telecom remains the most significant player, Ooredoo had increased its share by 10 percentage points between March 2017 and March 2019.

Mobile Players

Following a trend of strong growth across the region, the number of mobile subscribers in Tunisia increased from 4.7m in 2008 to 8.8m in 2018, reaching an individual subscriber penetration rate of around 75%. In April 2019 the INT estimated that the total number of active mobile connections – used within three months – reached 14.6m, equivalent to 125.3% of the population. The majority of subscribers, at 89.7%, used pre-paid SIM cards, with the remainder using post-paid plans. Approximately 90% of mobile connections were private residential users and the remaining 10% were businesses.

According to the INT, the market was fairly evenly distributed across the three main operators. In April 2019 Ooredoo held the controlling share of the market, at 41.9%, followed by Tunisie Telecom with 30.8% and Orange with 25.8%. Lycamobile, a mobile virtual network operator, held a 1.5% market share. Despite being a fairly new subsector, having only come into existence a decade ago, mobile subscriptions have had an impact on the market. The INT estimated that the segment contributed $432m in revenue in 2017, making up over half of ICT market revenues for that year.

Network Upgrades

The three main operators have all invested heavily in their infrastructure in recent years as the market moves away from voice and SMS services to focus on data. The auction of the country’s first 4G networks in 2015 led to a spike in expenditure in the following year as major players in the industry pushed to install the first 4G infrastructure in Tunisia. Indeed, INT figures show that overall investment increased by 62.2% between 2015 and 2016, rising from TD573m ($199m) to TD930m ($323m) over the period. However, this fell by 48.4% in 2017 to TD480m ($166.7m). Industry players have commented that, despite the benefits of increasing connection speeds, the 4G licence was very expensive for operators. In 2018 the government introduced measures to raise taxes on mobile phone manufacturers, increasing import duties on phones made abroad from 11.3% to 62.4%, as well as raising duties for 4G infrastructure equipment from 0% to 15-30%. This decision led to criticism from both operators and consumers. As a social measure for households, the government has since lowered value-added tax for fixed-line telephone and broadband services from 19% to 7% in the 2019 budget. Nevertheless, in the short to medium term, significant investment and government support will be needed to bring data prices down and work towards achieving universal internet access. Foreign operators Ooredoo and Orange have leveraged their global knowledge to modernise their networks in line with growing demand. This has included rolling out fibre-optic networks in some areas of the country, including Tunis, Ennasr and Sfax El Jadida. As a result, Tunisie Telecom has been looking to forge partnerships with international players in order to improve its network infrastructure and remain a competitive player.

In July 2018 the company announced a three-year partnership with UK-based service provider Vodafone, which would allow Tunisie Telecom to tap into its expertise in return for the extension of its network to Vodafone for roaming purposes. In June 2018 Tunisie Telecom also signed a memorandum of understanding with Chinese company Huawei to build and maintain an LTE network. In addition, in January 2019 the governments of Algeria and Tunisia announced an agreement to end mobile roaming surcharges for users travelling between the two countries. Discussions also took place regarding the possibility of Tunisia using the spare capacity of Algeria’s Alcomsat-1 telecoms satellite, which has been in operation since 2017. This would support the rollout of Tunisia’s fibre-optic network and upgrade of the country’s telecoms infrastructure.

Data & Internet

Tunisia’s broadband and mobile internet subsector is overseen by the MTCEN. The MTCEN’s responsibilities include managing the national domain (.tn) and regulating all of the country’s network providers, except for Tunisie Telecom. As the nation still possesses significant and widespread fixed-line infrastructure, the development of internet access has followed a slightly more traditional path than other countries within the region.

As of April 2019 there were around 1.1m fixed-line broadband subscriptions, increasing 22.4% y-o-y and representing some 36% of households. There are six companies in operation: Tunisie Telecom, which has a 61.1% market share; GlobalNet (15.5%); Orange Internet (11.7%); HexaByte (7.2%); Ooredoo Internet (2.9%); and BEE (1.6%). BEE was the most recent firm to enter the market, in 2019, and is reportedly planning to expand into offering telephone plans.

Although fixed-line offers faster connection speeds, mobile internet is significantly more popular, with around 8.7m subscribers in April 2019. Within the subsector, Tunisie Telecom claimed a 37.5% share of the market, while Orange and Ooredoo vied for second place with 32.3% and 30.2%, respectively. In terms of network coverage, 100% of Tunisia is served by 2G, and 3G connection is available in around 99% of the country’s territory, while 4G is available in 75% of Tunisia. However, connectivity to mobile broadband is still lagging behind. In April 2019, 55.8% of Tunisian mobile users were able to access mobile broadband, and only 5.5% were connected to either 3G or 4G, according to the INT. The quality of Tunisia’s mobile internet remains inconsistent, which is one factor preventing the wider uptake of 3G and 4G networks. An analysis by global network performance monitor Speedtest Intelligence ranked Tunisia 71st out of 144 countries in terms of mobile download and upload speed in July 2019, with an average of 24 Mbps. While this is significantly slower than many developed and developing countries, Tunisia still had the fourth fastest mobile speeds in Africa. In comparison, the country with the fastest mobile internet was South Korea, with an average speed of 97.4 Mbps. However, while download and upload speeds may be low by global standards, the price of data is comparatively affordable. Tunisia ranked 59th out of 230 countries and territories in terms of the cost of 1 GB of mobile data in the ranking of mobile data prices published by the international telecoms price comparison website cable.co.uk in November 2018. “In general, prices are very competitive in Tunisia, in such a way that quality can sometimes be sacrificed in the process,” Samir Barkia, the head of strategic studies at the domestic civil-engineering firm Somatra-GET, told OBG. In order to improve mobile internet speeds, the INT has established step-by-step targets for 3G and 4G data speeds. These guidelines, which were introduced in 2017, require 3G providers to reach 7 Mbps between March 2019 and March 2021, and 10 Mbps after that. Meanwhile, 4G speeds must reach 20 Mbps between 2019 and 2021, and 30 Mbps thereafter.

One way to increase data consumption is to tap into the growing popularity of mobile apps. It is not yet possible to purchase foreign apps on Tunisian devices, therefore sector players are increasingly pushing for operators to develop the local app market. “More apps serving Tunisian customers are needed in order to generate business,” Kerim Benzarti, president of the Chamber of IT Equipment, told OBG. “The three main operators need to set up promotional platforms for mobile apps, as currently only Orange Labs is doing so.”

Data & Internet

The growth in Tunisia’s data consumption presents a major opportunity for the digitalisation of services, which will help to boost socio-economic development and drive major improvements in the efficiency of public sector administration. The Digital Tunisia 2020 strategy will prove an important part of these efforts. The programme was drawn up after consultations between the government, the private sector and members of the public, and aims to implement 64 projects in five key areas. These include improving telecoms infrastructure to ensure universal high-speed connectivity; promoting a digital culture within the private sector by supporting education and encouraging competition; digitising government services; promoting entrepreneurship and innovation; and establishing an effective regulatory framework.

The wider aims of the strategy include increasing the sector’s total contribution to GDP from TD4.2bn ($1.5bn) in 2016 to TD13.5bn ($4.7bn), raising the value of digital exports from TD950m ($330m) to TD5bn ($1.7bn), creating 17,500 new jobs in the sector and increasing the percentage of households with internet access from 20% to 60%. The programme was initially scheduled to run from 2014 until 2018, but in 2016 it was delayed by two years in order to tie in with the fiveyear plan, which runs from 2016 until 2020. However, according to Benzarti, the Digital Tunisia 2020 strategy is set to be postponed to 2025, as only 10 projects out of a total of 70 had been partially executed as of July 2019.

Nonetheless, Digital Tunisia 2020 has received major international attention and financial support. The African Development Bank provided an $83m loan in July 2018 and the World Bank agreed to a two-tranche loan of $175m in June 2019. The first $100m is set to be allocated towards e-government reforms, while the second will be aimed at mechanisms to facilitate access to financing for start-ups. International media reported in April 2019 that three new e-government services will be rolled out between 2019 and 2020 by the Ministry of Local Affairs and Environment. The reforms aim to replace paper documents with digital forms and processes, enabling the electronic issuance of birth certificates and building permits, and online payment for municipal taxes. However, challenges remain for Tunisia as it attempts to capitalise on the opportunities created by its burgeoning digital economy. The ecosystem is still poorly regulated and there is little barrier to entry for firms. Consumers tend to make decisions based on price rather than quality, particularly in the case of business-to-consumer offerings, which can lead to unregulated and informal activities.

E-services

Within the business-to-business segment there is growing demand for offshore and outsourced e-services, particularly within sectors such as banking and insurance. However, local providers increasingly require certified security technology in order to operate or market themselves abroad. The government faces the challenge of providing an effective regulatory framework without stifling innovation. The macroeconomic slowdown in recent years has resulted in an exodus of qualified technical personnel, many of whom would be well placed to lead the country’s digitalisation efforts. “Around 70,000 computer and telecoms engineers have left the country in the last eight years,” Imed Elabed, president of the National Chamber of IT Services and Software Engineering Companies, told OBG. This is partly due to the economic climate in Tunisia – particularly the devaluation of the Tunisian dinar – but mainly due to attractive opportunities in Europe and Canada, Elabed added. Nevertheless, as of July 2019 the government was drawing up a comprehensive plan aimed at reducing the impact of this problem and balancing the flow of talented migrants. However, the window of opportunity is small as it is vital that the state can train and retain the 12,000 technology students that graduate each year. This is likely to become more challenging as the global labour market becomes more competitive. Nevertheless, if the country can overcome these obstacles it is well positioned to take advantage of new opportunities in neighbouring markets. “Tunisian ICT services appeal to both EU and African consumers,” Kais Sellami, president of the National Federation of ICT, told OBG. “Europeans need high-quality support at a competitive price, whereas Tunisia has a competitive edge in Africa, as a result of the mastery of certain skills and the generally positive image of the sector.”

Outlook

With rising mobile usage rates and ongoing improvements to telecoms infrastructure, the expansion of digital services is opening up new opportunities for Tunisia’s economic growth. In order for the sector to transition from an underserved market to a central driver of socio-economic development, the government has a vital role to play. As the largest customer for e-services, the public sector is responsible for supporting the implementation of new technology on a local level as well as promoting foreign investment.

While tax reform in the telecoms sector demonstrates the government is willing to listen to the needs of the private sector, the elections scheduled for October 2019 are likely to slow down its decision-making abilities. In addition, the delay of the Digital Tunisia 2020 strategy will continue to weigh on the sector over the short term. Nonetheless, with promising mobile and internet penetration rates, and steady growth for the three major telecoms providers, the outlook for Tunisia’s ICT sector remains strong over the medium term.