Q&A : Tigo speaks out on Rwandan operation

Telecom company to commercially launch operations by end of year Tigo, the brand of Rwanda’s new telecom player is set to commercially launch by the end of the year. With an investment worth about Rwf50 billion ($100 million). Alex Kamara the CEO of Tigo Rwanda exclusively talked to Kezio-Musoke David about the company’s prospects in the Rwandan market. Who is Tigo and where do you come from? Tigo is a multi national telecommunications company. We have mobile telecommunications operations in 13 countries; 3 in Central America, 3 in South America and 7 in Africa. Currently we have 31 million subscribers across all of these regions. In Central America we are in Guatemala, El-Salvador and Honduras. In South America we are in Bolivia, Paraguay and Colombia and in Africa we are in Senegal, Chad, Ghana, the Democratic Republic of Congo (DRC), Tanzania, Mauritius and now Rwanda. Tigo has an emerging market focus. Our business model is designed to provide products and services where penetration rates are low and where the need for telecommunications services growing due to economic development. The brand Tigo was created and commercially launched in our Latin American operations in 2004. As a brand in Africa, Tigo has been here since 2006. Why did you choose to invest in Rwanda? Why this market? That’s a complex question. First of all, the license was offered through a tender at a time when the company as a whole was interested in looking for opportunities, so this was a highly strategic decision. Now the license is evaluated along many dimensions. So, before we completed the bid, we looked at the population, the size of the country, the political stability, the economic situation, the competitive environment, number of players, the penetration, numbers of subscribers covered and the regulatory environment. We also had to consider the government’s desire to make Rwanda a strong ICT player in the region. This goal was consistently communicated throughout the assessment period. When we completed this assessment, Rwanda was a very interesting opportunity for the company. This was something we wanted to pursue, so we had to take the bid. The selection process was competitive, and we won. But the decision to enter and compete was based on those above considerations. When you submitted your bid there were big players like Zain (former Celtel). We were surprised you got the licence in Rwanda. What was the trick behind that achievement? I can only comment on what we did. We submitted our bid in response to what was required. I can say we did the best we could to interpret the request and requirements. We put together a team which was multi-disciplined and was multi-national to look at all aspects of the bid and address them as best as we could. When are you commercially launching? I can’t tell you the exact time but what I can say is that we have been working extremely hard ever since we arrived. We are going to launch before the end of this year; that is our goal. Ten years down the road there are not more than 2 million subscribers on the Rwandan market, even with two players. With these kinds of figures what is your impression of the Rwandan market? I don’t want to spend much time talking about what was happening in the past, but definitely the competition is better for both operators and the consumer. The increased competition will drive the operators to improve the level of service delivery. It will also drive them to improve access, affordability and the number of products and services that they offer. This is because you must fight for the same subscriber who now has options. When a subscriber has no options the power sits with the supplier and the supplier can take advantage of those situations to support the business. This response to the competitive environment is not a situation unique to Rwanda. You need to open up a bit to force all operators to work harder for the customer. Don’t you think there is some kind of saturation? We are some distance away from saturation in the Rwandan Telecoms market. The interesting thing about Africa generally is that the mobile connection growth rates far exceed most places in the world. The reason of shortage of demand is not that people don’t need to talk or communicate. It is actually economical. It is more efficient to communicate across long distances cheaply by telephone than it is to physically go and share information. When mobile telephony started in Africa, it was post-paid and you had to have a lot of money to be able to participate. These advance payment or credit based packages only addressed a small segment of the population. The prepaid innovation allowed more people to participate. Now we have smaller dominations of airtime, per second billing and so on. These changes open doors for different kinds of people. This leads to an increase in the number of mobile subscribers in the population. Recently Huawei Technologies advised African Telcos to be more innovative and invest beyond voice and probably concentrate on data as a way of surviving the global financial crisis. Do you as Tigo have any intention of striking a balance between these two products? Let’s take it step by step! Huawei is a systems supplier so you have to look at the advice in the context of what it means for them. They are also talking about their business prospects as well and their future opportunities. In any market, the subscriber needs and consumption evolve over time. As a service provider we try to keep ahead of this curve so there is a need to innovate for our markets. But whatever we do must be relevant in the local context. Rwanda has between 1.5 million to 1.7 million subscribers on mobile networks depending on whose figures you are using. In Rwanda we have a population of about 10 million people, and 60 percent of the population the market which we could actually provide services to today. Some don’t even have voice services yet. So as a service provider we have start by teaching teach these new customers how to buy airtime, how to use a handset and a lot more before considering data which can require additional investment and more complicated education. In these cases, we (Tigo) want to ensure we do the basics well, keep the subscribers and convince them that the relationship between data and voice makes sense. Then later we can bring in other offers and see how they respond. This in a sense is how we will strike the balance. We will offer voice and data services and try to find the mix that is right for the different market segments. How much have you invested in the Rwandan market or lets say how much are you intending to invest? Generally, there is always sensitivity about the investment amounts. All stakeholders use it as a matrix to rate a competitor. Our strategies are focused on the service delivery and what we intend to bring. What I can tell you so far is that the whole project has cost in excess of $100 million. I don’t want to break it down but the plans we have executed are highly consistent with what we submitted during the negotiation for the licence. There is no deviation from the expectations that were set. What about in terms of technology? What platform are you operating? It makes no sense to do anything without GSM. This is what is happening now, and we have a network that is going to have 2G, 2.5G (GPRS), 3G (UMTS), and 3.5G (HSDPA) which is an advanced version of 3G. We had to commit to the type of technology and the distribution of that technology as part of the bidding process. Do you as Tigo have any interest in being a regional player, in a manner that Rwandans can cross the borders and keep roaming? Absolutely! We want to allow subscribers to travel to bordering countries and keep the same lines and affordable rates. Rwanda is landlocked so this is particularly a relevant situation. We are looking into setting up relationships in neighbouring countries to see how we can establish similar products to borderless roaming like that that Celtel (which became Zain) is offering. We need to take consideration of that fact we have Tigo in Tanzania and DRC, so we need to understand how we can work with Uganda, Kenya and Burundi and this will require some linkage partnerships. It is something we are excited about because this is an area we talk about; innovation in the local context. Any connection to any of the undersea optic fibre cables?Again in the competitive context, the point of optic fibre is that it’s supposed to provide access to the World Wide Web and access to the rest of the world at affordable rates. It is supposed to be cheaper than the satellite. We expect that the fibre landing in Tanzania and Kenya leads to increased capacity, increased supply and affordable rates down the line. All over Africa we are having cables landing. Tigo has spent eight months rolling out the network in Rwanda and we have a sister operation in Tanzania. So we are looking at how our relationship with Tanzania can allow us to have access to these cables. The whole point is not about the nature of the connection, but it’s about the possibility of being able to transmit the information affordably. What is your subscriber target in Rwanda? I don’t want to comment on subscriber targets, but let’s put it this way, if you compare the last ten years and the last 12 months, things have been different. If you compare any previous 12 months period of Rwandetel and MTN you will notice a dramatic difference. Basically when you have competition it makes people work to secure their market position. Increased competition has brought a change and it is affecting the penetration; this shows that competition is good, that it works for both the subscribers and the providers. You look at competition in two ways; in terms of improved services and increased access. If you take a look closely, there is lot of action, promotions and lowered prices and I hope things are going to improve even more. The price movements of MTN and Rwandatel are very interesting. There is a lot of action to stimulate the market to secure the subscriber base. Do you have any strategic plans for the Rwandan market?On Tigo’s side, our strategy in an emerging market is based on providing Availability of the network, Affordability products and Accessibility of our products and services. This is our 3 A’s Strategy. Network availability without question is the first step, and that is why we spend so much time trying to put up a network and trying to get the coverage. We are also committed to making our products and services accessible in as many places as possible. For Tigo the affordability is about the value we can offer to subscribers and how we consider subscribers needs. So we have also spent some time trying to devise ways to simplify products by making the utilisation clear and straight forward and by making the pricing easy to understand so that the subscriber can manage their consumption. We are also developing our Value Added Services which extend beyond voice to sms and data service. With the strong ICT focus in Rwanda, this is a natural evolution which we hope to participate in very positively. Rwanda’s fixed line telephone subscription is really low as compared to other telecoms. Do you have any plans to invest in this product? In Africa I look at this as something very interesting for Telecoms. Fixed telephony was there pretty much after independence in many African countries. And the fixed telephony penetration has always been very low. Every African country has found that fixed telephony has stagnated. In most of the cases I am aware of the, business case for fixed telephony is very difficult to defend because of the infrastructure and because of the maintenance of the network. The cost of deployment of Fixed Telephony and the limited flexibility makes it very difficult to compete with mobile telephone. But as Tigo we can look at it over a number of years. Given the size of Rwanda it is possible that every Rwandan should have real access to mobile communications over a few years. That would be impossible with fixed telephony. With the kind of investment it would take and all the constraints, it is just not viable. I think mobile telephony is perfect for Africa. It’s not an option and actually mobile telephony is the perfect investment. We have a licence for both fixed and mobile telephony but we prefer to use the fixed wireless approach where we will be doing some deployments in various locations. This is already happening around the country. In some villages and remote areas there are individuals who will buy or rent a phone for the people around the community to use. The entrepreneurs make money from that. So that is the model we are looking at. But I don’t see any business case for fixed telephony in the traditional sense. Is there any way that the prevailing global financial crisis is affecting your investment plans? We are a publicly listed company so we are definitely affected by economic movements, but very smart and strategic decisions have been made to secure the future of the company. As a start-up, we rely on the parent company to help secure funds and provide those funds to start the business. Of course we are working on our standalone model for the future. Ends

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Q&A : Tigo speaks out on Rwandan operation