Generation game: Many opportunities should result from the arrival of 3G and 4G

The launch of 3G and 4G in 2014 should provide new revenue streams for Gabon’s telecoms sector, crucially for the four operators that contend for market share among a population of just 1.7m. The expected consolidation of two of the operators should yield some structural changes in the sector, but the focus in the near term is set to be on improving data capacity and network quality, both of which the regulator has stressed. With 4G infrastructure in place less than a year after the launch of 3G, expanded access to undersea cables should help sustain sufficient growth in bandwidth usage as the services are rolled out.

GROWTH: The telecoms sector did well in 2014, with notable growth in mobile services, and the combined turnover of operators reached CFA247.5bn (€371m), up 2.4% year-on-year (y-o-y). Gabon became one of the first countries in Africa to surpass 100% mobile penetration in 2008. It then rose from 148% in 2010 to 193% by the end of 2014. Penetration rates are inflated due to the common practice of owning multiple SIM cards by clients taking advantage of coverage disparities and pricing promotions offered by different providers, as well as inactive prepaid accounts.

While the past decade saw mobile subscriptions rise substantially, annual growth has slowed in recent years as the market becomes increasingly saturated. The number of subscribers fell for the first time in 2014, with an estimated 2.93m mobile subscribers compared to 2.95m in 2013, according to the Regulatory Agency for Electronic Communications and Postal Services (Autorité de Régulation des Communications Électroniques et des Postes, ARCEP).

While operators are keen to increase the number of post-paid contracts, demand remains low, with just 1% of customers using this service in 2014. Average revenue per user (ARPU) on post-paid contracts was more than six times that of prepaid services. After declining by around 30% between 2007 and 2011, prepaid mobile ARPU has stabilised, rising slightly from a monthly average of CFA5763 (€8.64) in 2013 to CFA5799 (€8.70) in 2014. In contrast, ARPU on postpaid mobile services fell by 34% y-o-y to CFA35,996 (€53.99) in 2014, according to ARCEP data. As ARPU has slowed, future growth is expected to come from new products and value-added services.

MOBILE: Previously under state monopolistic control, the Gabonese telecoms market was liberalised in 1999, sparking a rapid expansion into what is now one of Africa’s more competitive markets, with Gabon Telecom, Airtel, Moov and Azur vying for market share.

State-owned incumbent Gabon Telecom, which was the first operator in Central Africa to introduce 4G, now has the most mobile subscribers, at 1.18m by the fourth quarter of 2014 – some 40% of the market, up from 36% in 2013. Partially privatised in 1999, it sold a 51% stake to Morocco’s Maroc Telecom in 2007, and rebranded from Libertis in 2014 to operate through Gabon Telecom Mobile (GT Mobile). The company’s turnover for 2014 reached CFA72.2bn (€108m), accounting for 29% of total sector turnover, up from 18% in 2013 (CFA51.7bn, €78m).

Airtel – the country’s second operator following the acquisition of a licence in 2000, and formerly known as Celtel and then Zain – also saw its market share rise slightly to 39% in 2014, up from 38.1% in 2013. Its subscriber numbers grew back to 1.13m after a 6% drop in 2013. While it has the second-largest number of subscribers, Airtel held the lead in terms of turnover, which reached CFA124.2bn (€186m) in 2014, accounting for 50% of total sector turnover.

Atlantique Telecom, an Ivoirian company owned by UAE-based Etisalat, became the country’s third mobile operator in 2006, operating under the name Moov. Following the purchase of a majority stake by Etisalat in Maroc Telecom, the latter took over control of Etisalat’s African subsidiaries, including Moov, in May 2014. Moov maintained the third-largest market share in 2014 with 404,692 mobile subscribers, representing 14% of the market, down from 19% in 2013 (561,500). Turnover was also down 8.8% y-o-y to CFA31bn (€47m), though the operator increased its share of sector turnover slightly to 13%, up from 12%.

Bahrain-based Usan, subsidiary of the Lebanese group BinTel, obtained the fourth mobile licence in 2009 and operates under the brand Azur. The company saw a relatively stable performance in terms of overall subscriber volumes, with only a slight decline y-o-y of 2.2% to 217,280. Turnover rose to CFA19.8bn (€29.7m), representing 8% of total sector turnover. BinTel formed a partnership with Monaco Telecom in 2014, aiming to increase Azur’s share in the market to 20% by 2019 through fund-raising, marketing and infrastructure improvements.

MERGERS & ACQUISITIONS: The creation of a new operator is imminent following approval of plans to merge Libertis with Moov. Now majority-owned by Etisalat, Maroc Telecom is the principal shareholder in both GT Mobile – in which it holds a 51% share – and Moov, so consolidation is a natural development. The combined unit will potentially have a double-digit lead over its competitors in terms of subscriber numbers. Furthermore, the potential disappearance of an operator has prompted the government to consider exploring the potential of licensing a mobile virtual network operator with a virtual operator concession.

DATA: Mobile web usage has grown substantially in recent years, with subscriber numbers nearly doubling in 2014 to 1.11m, up from 582,964 in 2013. Most internet users are mobile customers (fixed-line subscribers represent less than 10% of the market), and the sector is seeing a major transition with the launch of 3G/4G services in 2014. The absence of high-speed mobile data coverage has slowed progress towards the government’s objective of transitioning to a digital economy by 2016. Yet after delays, mostly due to a prolonged licensing process – an initial 3G tender was held in 2010 – and insufficient fibre-optic connectivity, both 3G and 4G networks were introduced in 2014. “The rise of 3G/4G, along with the development of mobile banking services and other applications, will be the major outlet for growth over the course of the next few years,” Olivier Hervé Njapoum, former managing director of Airtel, told OBG. After being awarded the first 3G/4G licence in Gabon at a cost of CFA5bn (€7.5m), Airtel launched 3G services in Libreville in April 2014, reaching 117,272 subscribers by the end of the year. Gabon Telecom’s GT Mobile was issued the second licence in March 2014 and directly launched a 4G network in October in Libreville, the first of its kind in Central Africa.

INFRASTRUCTURE INVESTMENT: In recent years operators have invested substantially in network expansion and upgrades to infrastructure in anticipation of the 3G/4G launch that took place in 2014. With an estimated urbanisation rate of 87%, half of the Gabonese population lives in one of the two main cities, Libreville and Port-Gentil, where network density is naturally concentrated. However, the cost of maintaining networks outside of the main cities is exponentially higher as a result of the country’s minimal population in rural areas and technical difficulties related to the terrain, 85% of which is dense rainforest.

While 3G and 4G licensing agreements require operators to provide coverage in all provincial capitals, satellite-based VSAT and private VPN technology remain the most viable and cost-effective ways to ensure stable cellular and internet connections in rural areas, until 3G and 4G coverage is expanded throughout the country. In partnership with UAE’s Thuraya Telecommunications Company, Airtel began providing universal satellite coverage in Gabon in May 2014.

Sharing infrastructure, as is increasingly the case in other African markets such as Nigeria and Ghana, would reduce operators’ costs and facilitate the expansion of services to rural populations. Yet as operators continue to invest heavily in developing their own networks, future plans for infrastructure sharing are likely to require major incentives from the state.

FIXED LINE: The fixed-line segment is fairly limited, partly due its static nature: Gabon Telecom is the sole provider, and is likely to remain so due to its existing client base and infrastructure. According to ARCEP, fixed-line subscriber numbers have dropped steadily for years as growth in mobile has eroded demand, reaching 18,498 in 2014, down 4% y-o-y. Penetration declined to 1.2%. However, growth continued in broadband and fibre-optic lines for companies, and segment income held steady at 13% of sector turnover, with revenues of CFA36.5bn (€54.8m) in 2014. The public sector is the main client for fixed-line services, though the government is introducing a new internal communications system using WiMAX technology, which will switch to 4G once the Africa Coast to Europe (ACE) fibre-optic cable and backbone are completed – a move likely to increase pressure on fixed-line activity. At the end of 2014 broadband subscribership in Gabon reached 135,767, up nearly five-fold from the first quarter and comprising 12% of internet users, with their number and share expected to rise throughout 2015. The launch of new services bodes well for a further uptick in broadband demand.

FIBRE-OPTIC: Central to the expansion of 3G and 4G coverage, as well as fixed-line broadband, is Gabon’s international connectivity. Africa as a whole has seen a significant improvement in connections to Europe and Asia through several new submarine data cables that run the length of the continent, many of which have landings. The new ACE cable quadrupled national broadband capacity to 4.9 Gbps, improving the speed and accessibility of internet connections for a broader clientele. Until 2012 Gabon Telecom had a monopoly on access to the South Atlantic 3/West Africa Submarine Cable, formerly the country’s sole submarine fibre-optic cable, enabling it to be Gabon’s only provider of fixed-line telephone services.

Cable landings in Libreville and Port-Gentil were completed in 2012, but access was delayed by the process of identifying a company to operate the cable and establishing a public authority to manage the infrastructure, the National Digital Infrastructure Company (Société de Patrimoine des Infrastructures Numériques, SPIN). In February 2015 SPIN awarded Axione, part of France’s Bouygues Energies and Services group, a contract to operate and maintain Gabon’s submarine and terrestrial fibre-optics network. A $68m government investment plan will extend cable access to Franceville and on to the Congolese border in an effort to expand fibre-optics across the country. The World Bank contributed a $58m loan for this initiative, part of the Central African Backbone project, which is expected to increase coverage and reduce the cost of telecoms services. In October 2014 the National Agency for Digital Infrastructure and Frequencies awarded a contract for the installation of the cross-country fibre-optic connection to China Communications Service International. The total cost of the 1075-km connection, which will cross five provinces, is estimated at $109m.

ADDED VALUE: Use of new services and products such as mobile apps, voiceover internet protocol, mobile television, data sharing and videoconferencing is expected to increase with 3G and 4G coverage, which will boost connection speeds. Gabon Telecom, in addition to its MobiCash mobile banking service and its special “parental control” service for DSL offered in partnership with global internet security firm Symantec, is now gearing up to launch its new television-on-demand product, which has up to now been available in Gabon. Since the mobile market has virtually reached saturation and ARPU has begun to decline, value-added services, which bring in higher revenues than conventional activities, are key to future growth. As prices drop and speeds rise, higher-value data services are likely to drive turnover in the future.

MOBILE MONEY: Operators have begun rolling out value-added services, allowing users to make payments, purchases and transfers on a mobile phone without a formal bank account. Mobile money became a hot topic in Africa following the success of Safaricom’s M-PESA programme in Kenya, which within five years of its launch was processing transaction volumes equivalent to one-third of the country’s GDP. Gabon Telecom launched its Mobicash programme in 2014 with Union Gabonaise de Banque, allowing customers to transfer money and pay for products and services online, in a bid to increase financial inclusion for those who do not have a bank account. Airtel launched its Airtel Money programme in 2012 with BGFI Bank, expanded it in 2014, and will launch another service in partnership with Visa that will enable credit card payments by mobile phone. Moov also introduced a mobile money transfer service, Flooz, in 2014. Azur is working on its Azur Money programme. “Mobile money represents a great opportunity for operators. Customers will soon be able to use local bank ATMs for cash-outs and also make international transfers via their mobile phone, which would benefit operators with a higher volume of transactions,” Abdoulaye Cissé, managing director of Moov, told OBG.

QUALITY: Improving service quality has been a priority in recent years, with efforts to reverse the trend of decline highlighted in 2012 during the Africa Cup of Nations, when mobile networks could not accommodate the rise in call volumes and data use. ARCEP has since introduced biannual audits to test connection quality and network coverage. Since the first audit in March 2012, which resulted in CFA3.7bn (€5.6m) in fines on the four mobile operators for failing to meet the quality requirements outlined in their licences, improvements have been noted. “There are still a lot of obstacles which prevent Gabon from boasting a competitive offer in terms of offshoring as telecoms coverage is neither affordable or reliable,” Mohamed Ahmed, the managing director of Solsi, told OBG.

OUTLOOK: The telecoms sector in Gabon is undergoing an important shift as two of its four operators merge. The long-awaited launch of 3G and 4G coverage, combined with the commercialisation of the ACE cable, are opening new doors as connection speeds increase. Prices are also falling even as services improve: Gabon Telecom, for example, has committed itself to lowering prices in an effort to increase access to telecoms services, cutting fixed-line rates by 50% in 2014 and reducing fees for fibre-optic access in 2015 in a bid to help extend the service to more SMEs and boost the competitiveness of Gabonese companies. Continued expansion of valued-added products and services such as mobile money will be key to boosting inclusion and securing future growth.