Digital expansion and market competition remain regulatory priorities, while mobile usage fuels Morocco ICT expansion

Economic growth, coupled with the liberalisation of the sector in the 1990s, has led to the expansion of Morocco’s ICT sector, which is also underpinned by high penetration levels and policies conducive to the development of related services and their incorporation into everyday business activities. “The Fourth Industrial Revolution is already under way and solutions such as 3D printing will soon benefit Morocco and the rest of Africa,” Salah Ouardi, Morocco managing director of HP, told OBG.

Meanwhile, a focus on e-government and the digitisation of the economy – along with improvements to mobile data services, which are seeing an increasing role – are likely to lead to continuing positive performance. The mobile telecoms segment is the most dynamic in the industry, with mobile data services leading the way. The switch from traditional voice services to mobile data, which accelerated after the November 2016 lifting of a countrywide ban on voice over internet protocol (VoIP) services such as Skype, forced mobile operators to refocus their efforts on providing competitive data offerings that attract enough customers to make up for the loss in revenue from voice services (see analysis).

Performance

Mobile penetration in Morocco reached approximately 130.7% in September 2018, up from around 128% two years earlier, according to figures from the National Telecommunications Regulatory Agency (Agence Nationale de Réglementation des Télécommunications, ANRT). Over the same period internet access reached approximately 67.5% penetration in the kingdom, with mobile internet dominating the majority of subscriptions.

ICT has also become an important contributor to the economy, with the African Development Bank estimating in 2016 that communications, along with transport, accounted for some 6.5% of GDP.

Market Players

With high levels of mobile penetration highlighting a degree of saturation, market dynamics are anchored in ongoing competition between the country’s three operators: Maroc Telecom, Orange Morocco and Wana Corporate. As the country’s largest player, Maroc Telecom was founded after the 1998 disbanding of Morocco’s National Office of Post and Telecommunications. The company was originally owned by the state, but in 2001 it began undergoing a privatisation process when French firm Vivendi acquired a 35% stake in the company after it was tendered by the government. In 2014 an additional 14.9% of Maroc Telecom’s shares were floated on both the Casablanca and Paris stock exchanges through the company’s initial public offering. Today, the firm is majority owned by Emirati operator Etisalat, which acquired 53% of Vivendi’s stake in 2013 for €4.5bn.

The market’s second-largest player is Orange Morocco, which became the first fully private operator to enter the Moroccan market in 2000 after it was awarded a GSM licence in 1999. Since then, the operator’s shareholding structure has seen significant changes. When operations began, the company was owned by state-owned Caisse des Dépôts et des Garanties (CDG), Spanish operator Telefónica, local firm FinanceCom and Portugal Telecom. Although CDG and FinanceCom still each hold a 25.5% share, since 2015 Orange Morocco’s largest shareholder has been French operator Orange Telecom, which holds approximately 49% of shares and market offerings under its Orange brand in the kingdom.

Wana Corporate, which operates under the mobile telecoms brand Inwi, is the market’s third player and started operations in 2009. Moroccan holding company Société Nationale d’Investissement, managed by the royal family, owns a 69% stake in the operator. The remaining shares are held by Kuwaiti telecoms operator Zain. In March 2018 Inwi sued Maroc Telecom, alleging non-compliance of regulatory rules that govern the sharing of infrastructure. Inwi demanded Dh5.7bn (€512.7m) in damages. The suit underlines the challenges for the market’s second and third operators in accessing Maroc Telecom’s infrastructure. In 2014 the ANRT published a law to govern local loop unbundling, requiring Maroc Telecom to install multi-operator systems in its access infrastructure and set up a wholesale offer for third-party operators following a virtual unbundled local access system. However, as of early 2019 the operator had yet to comply with all of the regulator’s requirements.

Sector Oversight

Regulatory reforms and a hands-on approach to supervision have been key to Morocco’s ICT dynamism. The Ministry of Industry, Trade, Investment and Digital Economy is responsible for setting policy, establishing incentives for private firms and guiding the overall governmental strategy. Meanwhile, the ANRT operates as the telecoms regulator, setting out the rules for operators and sanctioning companies when needed. Encouraging competition has been a key priority for officials overseeing Morocco’s ICT sector. Growth within the sector can be traced back to liberalisation in the 1990s, notably with the implementation of Law No. 24-96 in 1997 that ended the monopoly of state-owned operator Maroc Telecom. At the time Maroc Telecom was the single provider of telecoms services in the country. For consumers, enhanced competition has helped reduce prices for both internet and mobile communications. The entrance of Wana’s Inwi into the market in 2010 resulted in average revenue per minute decreasing from over Dh1 (€0.09) in 2010 to Dh0.30 (€0.03) in 2015, according to a report by CFG Bank. In addition to liberalisation, the government established mechanisms to attract investment into the emerging ICT sector, improve infrastructure and coverage, and accelerate the development of human resources.

The ANRT has also continued to implement policies that encourage competition, such as number portability. In 2015 the agency announced the establishment of a legal basis for a number portability database and a reduction in the time necessary for mobile users to transfer their number. As of December 2017, some 382,957 users had successfully changed operators while keeping their numbers, a 33% increase from 2016 figures, according to the ANRT. In April 2018 the regulator moved to further upgrade the portability system, launching a tender for the supply, installation and management of a centralised number portability database. Officials have also implemented measures to organise the country’s radio spectrum. In April 2018 the ANRT published a national frequency strategy with the goal of specifying different categories of telecoms services allowed in spectrum bands. The plan also provides market players with a tool to plan spectrum resources and gives visibility of frequency allocation for a range of services such as maritime mobile, aeronautical mobile and radio navigation.

Mobile

Efficient use of digital infrastructure will be critical given the steady growth in mobile telephone use. The total number of mobile subscriptions more than tripled over 12 years, from approximately 14.9m in September 2006 to just over 46m in the same month of 2018. The market remains overwhelmingly skewed towards pre-paid subscriptions, which accounted for around 42.4m lines, according to September 2018 figures from the ANRT. The regulator accounted for a seasonality effect, which could inflate the number of pre-paid mobile subscriptions at the end of the summer. Post-paid subscriptions remain a minority, with March 2018 figures showing 40.2m pre-paid users and 3.4m post-paid users. Even so, the number of post-paid subscriptions are increasing, from 3.2m in September 2017 to just under 3.7m in September 2018. Although Maroc Telecom continues to be the dominant player, years of competition have led to a reduction in the firm’s market share within the mobile segment, while the other players have expanded their presence. As of the third quarter of 2018 Maroc Telecom held 42.7% of the mobile market, followed by Orange with 33.1% and Inwi with 24.2%. By comparison, in September 2012 the three operators respectively held 47%, 29.9% and 23% of the mobile market, according to the ANRT.

Data Rising

The switch from voice services to data has been challenging for operators. Reflecting this, in late 2015 the ANRT implemented a ban on the use of VoIP apps, a move that was criticised by Moroccan consumers as an attempt to protect operators’ revenue from falling due to voice services use, as well as for the economic impact it had on the poorer segments of the population. The ban was eventually lifted in November 2016. Since then, to make up for the acute reduction in revenue from voice, segment operators have accelerated the deployment of infrastructure to support data services and expand coverage rates. This trend has been further fuelled by the lowering of smartphone prices globally, which has driven increases in adoption levels. According to the ANRT, as of September 2018 roughly 92% of individuals over the age of five had a mobile phone, of which 73% were smartphones. Maroc Telecom held approximately half of all mobile internet subscriptions as of the third quarter of 2018, followed by Inwi with around 25.9% and Orange with a 24.1% market share. Of the total 23.7m internet subscriptions active in Morocco in September 2018 over 93% were mobile internet subscriptions.

“The previous model, based on voice communications, has been exhausted,” Brahim Sbai, vice-president of business-to-business and wholesale at Orange, told OBG. “Data has given the market a new growth model and there is no end to the applications and products you can provide using data.”

Fixed

Similar to global trends, the fixed communications segment in Morocco has stabilised, with penetration rates recorded at 5.9% in the third quarter of 2018, and the total number of fixed lines in the country just over 2m, down from some 3.5m during the same period in 2011. Maroc Telecom – which owns the majority of the last-mile infrastructure – dominated the segment with 89.1% of fixed lines as of September 2018, while Inwi, the segment’s second player, had 9.5% of fixed lines and Orange had 4.2%. With the rise of smartphones and a decrease in the cost of mobile calls, the percentage of Moroccan households with a fixed line fell considerably from 39% in 2010 to 19.7% in 2017, according to the ANRT.

In some markets the move towards maturity and the triple-play bundling of mobile, television, fixed and internet services into combined offers has led to growth in fixed lines. However, the conditions for this and other bundled offers in the kingdom remain limited. “Triple-play and quadruple-play offers are not very big in Morocco because there is a grey market in terms of satellite and cable television, with very competitive pricing,” Sbai told OBG.

IT

In addition to encouraging competition and growth in telecoms, Morocco’s government is also focused on expanding IT services, to not only to Moroccan homes but also to businesses, most notably to small and medium-sized enterprises (SMEs) that stand to gain from digital processes and improved business operations. As of 2017 the government estimated around 58.4% of Moroccan households had a computer or tablet, a 6% increase from 2016 levels and up 72% from 2010. Additionally, 70.2% of Moroccan homes had internet access in 2017. Access improved most notably in the country’s rural areas, although a significant gap remains: while the percentage of urban homes with some form of internet access rose from 76.3% to 78.5% between 2015 and 2017, it expanded from 47.3% to 53.1% over the same period in the rural parts of the country, according to figures from the ANRT.

Digital Strategy

IT is a pillar of Morocco’s economic development and the government has prioritised it as such, making it one of Africa’s frontrunners in utilising IT to boost social and economic development. This sentiment was backed by a 2018 OECD report: “In fact, since [the 1990s] and in line with the increasing attention that this topic assumed for public sectors worldwide, the government of Morocco has put significant efforts into integrating ICT properly in its development agenda.”

Efforts have continued with the launch of the Digital Morocco Plan 2020 in 2016, which aims to further incorporate IT into the public sector, improve internet access, transform the kingdom into a regional centre for IT and encourage IT entrepreneurship. As part of the plan, the government has targeted moving 50% of all administrative processes online and connecting 20% of the country’s SMEs to the internet. Moroccan authorities also implemented the National Broadband Strategy to connect 65% of Moroccans and 100% of public buildings to broadband internet by 2020 in line with the Digital Morocco Plan 2020.

Under the digital strategy, the government launched the Agency for Digital Development in September 2017 to equip the IT sector with a robust policy and regulatory environment, similar to the role of the ANRT in telecoms. In 2018 the agency established its governing bodies, and in January 2019 Saad-Eddine El Othmani, the head of government, gave the agency three months to develop a national strategy for digital development. The agency recently named royal appointee Mohamed Idrissi Meliani as its director and is expected to focus is expected to focus primarily on pushing for the establishment of e-government programmes, as well as on issues related to the digital economy. One of the agency’s most critical assignments will be to ensure the training of human resources aligns with market needs. Under the Digital Morocco Plan 2020, the kingdom plans to double the annual number of IT-trained professionals in universities and training centres from approximately 15,000 to 30,000. “One of the main assets of Morocco’s ICT ecosystem is the high availability of the workforce,” Abdellah Idrissi, CEO at Sicotel, told OBG. “Nonetheless, the current scarcity of management-level profiles is making them quite expensive to hire.”

Current challenges notwithstanding, the value per talent that international firms can acquire in the country continues to be a strong selling point, with the authorities attempting to attract a larger number of companies into the kingdom’s IT ecosystem. “A junior IT engineer starts with a salary of €500-600 per month in Morocco, while in France this figure would be three times higher,” Hicham El Habti, director-general at Digisoft, told OBG. “This is a big competitive advantage of opening in the kingdom,” he said.

BPO

A trained and professional workforce as well as geographic and cultural proximity to European markets has allowed the kingdom to establish a solid IT services and outsourcing sector. The segment is largely driven by call centres and business process outsourcing (BPO) activities. According to figures by the Moroccan Association of Customer Relations, call services and outsourcing activities employed 68,000 of the country’s citizens in 2016, up from 65,000 a year earlier, and showing consistent growth from only 5000 in 2004. In addition, these activities produced export revenues of Dh9bn (€809.5m). Early 2019 predictions by the Moroccan Federation of Outsourcing and local IT services firm Outsourcia estimated that the total sector turnover reached Dh10.5bn (€944.4m) in 2018, ranking it in the top-five industries in terms of foreign exchange contributions in Morocco.

“We can expect more and more jobs to be outsourced in segments such as customer services, sales and human resources. In that regard, Morocco’s geographical location is an asset for European companies, but it implies an upgrade of our workforce,” Karim Bernoussi, CEO of Intelcia, told OBG.

Moroccan outsourcing firms nonetheless face mounting competition from providers in other French-speaking countries with more competitive salaries, particularly in sub-Saharan Africa. This has encouraged local providers to expand their activities across the continent and into the Middle East. To take an example, Outsourcia commenced operations in Madagascar in 2015 and that same year another Moroccan IT services provider, Saham Services, bought a controlling stake in Ecco Outsourcing, a provider that is based in Egypt. More recently, Saham Services bought a majority stake in Pioneers Outsourcing, a BPO operator based in Saudi Arabia, in January 2018.

Despite its employment potential, the outsourcing segment is facing a brain drain, with an estimated 600 IT engineers leaving the country per year in search of better-paying jobs abroad. Over the coming years the outsourcing segment will need to maintain its competitiveness and go higher up the value chain in order to compete with firms emerging across the continent. Leveraging the country’s Spanish-, Frenchand Arabic-speaking workforce will be important in maintaining the segment’s strength.

IT Parks

The growth of the outsourcing industry has been critical in increasing employment opportunities and expanding IT infrastructure. An example of this is Casanearshore Park, a 53-ha technological park with over 300,000 sq metres of work and services space in the country’s economic capital city of Casablanca. Inaugurated in 2007, Casanearshore Park hosts around 100 domestic and foreign firms that employ some 20,000 people. The IT centre, which has attracted Dh3.4bn (€305.8m) in investment, was established by state-owned MEDZ Sourcing, which has since expanded the concept across several other regions of Morocco. Rabat Technopolis opened in 2008 and a similar IT park began operations in Fez in 2012. Established over an area of 22 ha, Fès Shore hosts 15,000 IT professionals. Another IT park is currently under development in the city of Oujda, near Morocco’s border with Algeria.

E-Government

A key priority under the current IT development strategy is to accelerate ongoing efforts related to e-government. One successful e-government initiative is Portnet, an online platform designed to ease foreign trade operations and simplify documentation processing. As of September 2016 Portnet connected all ports under the authority of the National Ports Agency. Morocco has also developed online services for tax returns for large and medium companies, construction permits and other Customs operations. Expanding the number of public administration processes that are digitised has the potential to cut costs, reduce the risk of waste and improve the link between Moroccan citizens and the state, and it has been prioritised by the authorities accordingly.

While there have been some successful e-government programmes, broader efforts have been slow. According to the latest UN E-Government Survey published in 2018, Morocco ranked 110th out of 193 countries for implementation of its e-government systems, 25 positions lower than the previous survey published in 2016, but still in the top-10 countries in Africa. The authorities expect that implementation of the Digital Morocco Plan 2020 will help the kingdom achieve its ambitions in this area.

Outlook

The ICT sector is likely to continue expanding over the coming years, although the pace of growth will hinge on several factors. Mobile telecoms are set to continue to be a key component of sector activity, buoyed to a large degree by the ongoing development of data services, which will need the support of local content development by operators for its potential to be fully harnessed. The ANRT’s business approach to regulation has helped the sector improve its competitiveness and ensure more people have access to telecoms services. However, to further improve the level of competition in the market, existing laws governing the sharing of infrastructure need to be adequately enforced, which will help put all of the market’s competitors on an even playing field.

Although it still lags behind telecoms in terms of dynamism, the IT sector will likely benefit from the implementation of the government’s Digital Morocco Plan 2020. By establishing its own dedicated agency for IT development, Moroccan authorities have underlined the importance of transitioning to a digital economy to the country’s future development.

However, for the strategy to succeed, efforts to bridge the digital divide and increase penetration must be kept on track. Although usage of the internet within Moroccan households has been augmented by the increased dissemination of smartphones, connecting a large number of Moroccan SMEs with online and digital tools remains a challenge.

The expansion of ICT will also be driven by the ongoing development of the BPO industry. Although export sales for the segment have increased each year, Morocco is facing competition from other francophone countries with lower-cost structures. This is starting to pose a problem for providers based in the kingdom, who will likely need to go further up the value chain in terms of service provision in order to compete with emerging IT outsourcing destinations in sub-Saharan Africa. Despite these challenges, it is likely that a mix of public policy and private sector dynamics, especially within the telecoms side, are likely to encourage growth for the foreseeable future.