ANALYSIS:Bharti’s entry signals new round of competition

The events in the last six months can be said to be momentous in the fast changing landscape within Rwanda’s telecoms industry. This follows the telecoms regulator’s decision to strip Rwandatel of its GSM license early February, to last week, when Indian telecoms trans-national, Bharti Airtel made a dramatic entry in Rwanda’s telecoms sector. Bharti announced its entry intoto the foray, itching for a fight for a piece of Rwanda’s telecoms pie, with a war chest of US$100m. Rwanda Utilities Regulatory Agency’s (RURA) move to revoke Rwandatel’s GSM license left the former’s cover blown off. Rwandatel was effectively knocked out from being a player in the voice segment after it was accused by RURA of failing to comply with the license obligations. RURA’s move came hot in the heels of a series of bad press that also coincided with the Libyan crisis. Prior to the Libyan crisis, Rwandatel was owned by Lap Green Networks- a Libyan Government operated special purpose vehicle for making telecoms investments across Africa. The decision by the telecoms regulator brought with it an immediate backlash as the penetration rates suffered. Total subscription went down from 3.7m in March to 3.5m in April, before dramatically bouncing back to 3.7m by May. However, the flip side is that it can now be said with some level of certainty that the RURA move provided the impetus that brought about the intense duopolistic tight race between rivals MTN and Tigo. In the two horse race that ensued, Tigo upped the ante by playing a tight catch up with voice leader MTN. The latest statistics by RURA portray that Tigo must have employed a “David and Goliath” strategy in order to play the tight catch up game. Tigo managed to register an increase of 24 per cent in its subscriptions in April which went up to 28.9 per cent by June eventually rising to 35 per cent by July this year. The rising trend in these figures translate into Tigo having 861,000 subscribers by April rising above the one million mark to settle at 1,100,000 in June and eventually topping up to over 1,300,000 by July this year. On the other hand, MTN has been having a rather fluctuating rate of subscription increase recorded at a declining rate over time. From the time the Libyan crisis started, MTN’s increment of new subscribers was 71.4 per cent in January this year, which reduced to 69.9 per cent in March but shot up to 76 per cent after Rwandatel lost its GSM license in April. From May, MTN has been witnessing a decline trend of its market share. By May, MTN’s market share had declined to 74.1 per cent and by July, it had settled at 68.5 per cent. The trend translates into MTN having 2.58 million subscribers by January which went to 2.63 million by March rising to 2.72 million by April. By May, MTN registered 2.76 million subscribers which rose to 2.82 million by July. As MTN and Tigo locked horns, Bharti was busy planning its entry. The decision to grant Bharti Airtel the green light to enter Rwanda is premised on the fact that time is now ripe for a new player capable of stoking a new round of competition to drive penetration rates to six million subscribers or 60 per cent penetration by 2012 as envisaged by the ICT development plan. Bharti Airtel is well known in East Africa for developing the kind of entry mechanisms based on aggressive price wars mainly driven by low cost business models. Even RURA seems to be gearing up for the new round of competition. RURA’s boss Regis Gatarayiha, is quoted as saying that inter-connection fees, which have been a major impediment to penetration, is to be slashed by more than 50 per cent over the next four years, from Rwf36 per minute to Rwf22 per minute, a prospect that will place the entry of Airtel in better position to comfortably unleash its famed but abrasive entry mechanism. Recently, top officials of Tigo Rwanda were all smiles at hitting the one million mark. “Yes, we have grabbed 12 percentage points of market share since March to July this year, and have been growing three times as fast as MTN,” Tigo’s acting CEO, Diego Camberos said, adding that this trend can be assessed by comparing Tigo’s additional cumulative subscribers that RURA puts at 582,000 as opposed to MTN’s 211,000. While the Tigo boss could not comment further, experts pointed out that RURA’s statistics imply that notching one million subscribers barely within two years of operations in Rwanda, Tigo made history of sorts, something that took its competitor MTN a much longer period of time to achieve. Rwandatel never went past 700,000 subscribers after being in the market for the longest period of time. “It would not be fair to comment on our competitor’s actions or results; what we know is that this is a great achievement for Tigo Rwanda.” What are the strategies that Tigo used to play catch up? “Dual-SIM phones are a good example of how we work. We listen and understand the needs of the customers and we act on it,” Camberos said, adding that, “We listened to complaints about our network and our customer care work being average outside Kigali. We have responded by increasing our cell sites by 50 per cent and opening 12 new customer care centres, bringing real telecom options to rural populations.” After the entry of Bharti Airtel, MTN sent a brief statement to Business Times, saying that it is ready for the new round of competition. “We welcome Airtel to Rwanda and look forward to working with them to increase the penetration of voice and data services in Rwanda. No doubt the entry of a player like Airtel ups the competition stakes in Rwanda, but it is for the greater good. Customers have a choice and our companies have the challenge to ensure that we are their preferred network of choice,” Khaled Mikkawi, CEO of MTN Rwanda said. The entry by Bharti Airtel is happening at a time when the penetration rate is witnessing the “hockey stick” effect, where its acceleration is driven by heightened competition marking its real growth phase. The author is an Editor with The New TimesOjiwah@gmail.com