Telecom firms reposition for battle in data market

The new dynamics within Rwanda’s telecommunication sector have meant that customers enjoy cheaper calling tariffs. As the industry evolves, Business Times looks at how dominant players, Rwandatel and MTN Rwanda, have shifted the battle for market share to the data segment, a move that will possibly curb the high Internet costs. Fred Oluoch-Ojiwah writes. When Rwanda Utilities Regulatory Agency (RURA), the principal regulator of Rwanda’s telecommunication industry released its third quarter report for 2010 on the status of the country’s telecom industry, one item on this report seemed to have indicated the fast changing nature of this sector. RURA announced that MTN Rwanda’s internet market share had risen to 85.6 percent, on account of a drastic rise in the numbers of subscribers on company General Packet Radio Service (GPRS)—a packet-switching technology that enables data transfers through cellular networks. Also known as 2.5 G, it is used for mobile internet and other data communications. This meant that MTN had overtaken Rwandatel in internet service provision. The RURA statement was interpreted differently, especially given the fact that Rwandatel was regarded as the dominant player in Rwanda’s data segment while MTN consolidated its leading position in the voice segment. While the voice segment witnessed very intense competition during the course of 2010 in which price wars led to a drop call tariffs, a prospect that eventually hurt revenue streams of some of the operators, the data segment, was without doubt, going to be the new frontier of the competition within the sector as the year 2011 opened up. Industry analysts say that data infrastructure, which is key to enabling the growth of businesses, will form part of major revenue streams by telecom operators this year. “Rwandatel remains the largest provider of internet bandwidth in Rwanda in terms of the total bandwidth capacity available. We have (in) excess of 500MB of internet capacity in the country provided via undersea cable as well as satellite. We have created the most robust internet capacity between undersea cable and satellite and our plan for 2011 is to ensure that we procure more bandwidth via diverse routes. This will increase our availability and deliver better value per MB to our customers,” Gbeu Tia Florentin, Rwandatel’s incoming Chief Commercial Officer (CCO) said. The Ivorian national was responding to questions on how the company was going to regain lost ground, adding that it is important to note that customers are not only looking to make 16KB connections on their mobile phones alone. This is the area in which MTN has eaten into Rwandatel’s pie within the data segment. “Customers are looking, especially for the business segment; telecoms partners who can understand their business and make credible recommendations about how ICT infrastructure can enable their business deliver superior value to their end customers. This is an area, that we plan we will differentiate our offerings in 2011.” Rwandatel says it will invest $55 million (Rwf32.9 billion) in expansion of its mobile broadband service this year. “We want to essentially make every GSM voice customer a potential mobile broadband customer. Today, our customers can get GPRS connections, but we believe that due to customer demand for applications that require more than 32KB connections, mobile broadband should be as available as mobile voice service. This also raises another area of differentiation between us and the competition,” Florentin said. He explained that 2011 will see significant investment in working with content providers to develop local and relevant applications for the company’s subscriber base. “This plus the launch of our mobile money service (m-kash), we believe customers will have options and variety to use their mobile broadband service.”This is expected to have a significant impact within data pricing this year. There will be price changes in internet area, as the company expects to get additional bandwidth from other undersea fiber-optic cables, he says. Rwandatel is currently connected to Seacom’s undersea fiber-optic cable and its estimates suggest that customers will see better price per KB in the second quarter of 2011. Rwandatel says that it is working on a number of flexible pricing schemes that will make internet bundles the most affordable in the country. “We are extending our highly successful scheme of providing residential broadband to homes with existing landlines,” Florentin added. Under this scheme, he says, such customers will save over Rwf100,000 waived from connection fees. MTN’s foray into data, though it has largely been premised as a voice operator, seems to have started slightly over 3 years back. In the last few years MTN bosses are now saying that the company has been steadily building its data infrastructure that is now seriously posing a huge threat to Rwandatel’s key strength as data leader. “For us 2011 is going to be about consolidating our investments. While we have been primarily a mobile service provider, last year we started diversifying to other areas of the market such as fixed lines since our license as second national operator (SNO) allows us to diversify into other service provisions,” MTN’s Chief Operating Officer, Andrew Rugege told Business Times recently. “Now that we have a robust data service facility, the focus this year is to boost penetration,” Rugege added. MTN says that its fibre rollout project for the last 2 years has enabled it to have over 1,200 kilometres of fibre spread throughout the country. The company also says that it is now testing the EASSY submarine cable from Dar es Salaam that will get through Rusumo to Rwanda. “This should enable us boost our efforts in data service reliability as MTN connects via TEAMS sub marine carrier that passes through Kenya,’’ Rugege said. Previously, MTN used to rely principally on satellite back up but management says that the two independent fibre optic companies that the mobile operator has partnered with will enable it to provide formidable internet services. According to Rugege, while RURA says that MTN has surpassed its competitor, Rwandatel, they (MTN) are not satisfied with the performance. MTN also says that during the course of last year, it was able to upgrade from GPRS to EDGE countrywide which should be able to deliver on faster connectivity. MTN hot spots are currently available in all the major towns of Rwanda. In a bid to outcompete its rivals within the data market, MTN says that it has installed additional data service systems such as Worldwide Interoperability for Microwave Access (WiMAX)—a telecoms protocol that provides fixed and fully mobile Internet access—as a corporate product for offices with corporate local area networks (LANS). In addition MTN has rolled-out a fibre optic backbone around Kigali, which is set to be connected to other smaller towns. MTN says that as the year starts, it has infrastructure for both internet and data transport, which is technically referred to as Virtual Private Network(VPN) so that corporate entities such as banks that have branches throughout the country can be connected without necessarily having to go through the internet. MTN also says that it has built data hosting capabilities. Regarding pricing the company’s strategy will continue being progressive but affordable as technology costs is now going down and such reductions have naturally to be passed to the end users. The stage is set for a potentially bruising battle for data segment market share between the MTN and Rwandatel. The outcome of this war will definitely benefit businesses thereby fuelling growth of the economy, in line with Rwanda’s transformation agenda that depends of ICTs. Ends