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How Tanzanians fingers create trillions

Discussion in 'Jukwaa la Siasa' started by Mtu66, Oct 18, 2009.

  1. Mtu66

    Mtu66 Senior Member

    Oct 18, 2009
    Joined: Jun 26, 2007
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    The emerging mobile moguls
    How your fingers create trillions
    Using mobile phone

    When Jacinta Akinyi bought her first mobile phone in May this year, the 65-year-old mother of five was thrilled to find a way to bridge the gap between her small village in Rorya district and Arusha, where two of her sons are living.

    It used to take an involved bus journey from Sudi village to Arusha to check up on her sons in the big city, but after purchasing a Nokia phone for Sh40,000 (about $30), she now can spend about Sh10,000 ($8) of her modest monthly income to stay in touch with them and make sure they are taking care of themselves.

    Akinyi is among the millions of Tanzanians who are connecting with friends and family across the country with mobile phones, pouring money into the country’s Sh3trillion a year mobile phone industry.

    The cell phone, once considered a fringe, elitist piece of technology that some said would never catch on in rural areas, has exploded in popularity over the past five years to build up the country’s most lucrative business.

    With the Tanzania Communications Regulatory Authority (TCRA) putting the total number of mobile phone subscribers at 14million by this June, the Average Revenue Per User (ARPU) surged to Sh66,000 during the second quarter of this year-a figure that means that subscribers spend Sh22,000($16) per month.

    However compared to the last quarter in 2008 when it reached $21per month, the ARPU has fallen down by 41perecent.

    Taking this figure as the basis for revenue measurement for this year, the mobile phone industry may earn an estimated $2.684billion(Sh3.6trillion) per year - that’s double what the mining sector earns yearly — making telecommunications now the country’s leading industry, The Guardian on Sunday has learnt.

    However the total revenues could go higher than that or fall below the estimated figures depending on how the sector will perform during the last two quarters of 2009.

    Average Revenue Per User is a measure often used by Telecommunications companies to measure how much money the company makes from the average user. This is the revenue from the services provided divided by the number of users buying those services.

    ARPU is important because it provides a breakdown of what is driving revenue growth, and it also gives some indications of what is driving margins. Growing by increasing revenues from users tends to be better for margins than increasing revenues by increasing the user base, as the latter incurs additional costs.

    According to official statistics from the TCRA, Tanzanian subscribers spend the second most on mobile phone use in the region, behind Kenya where ARPU is currently pegged at around $18. In Uganda, ARPU stands at $10 with about 10million users estimated in the country.

    Growing at more than 40 percent per annum, the industry has grown more competitive with each year. Now four major operators - Vodacom, Zain, Tigo and Zantel - are fighting to control the biggest chunk of the sector, with Vodacom leading with 40 percent of the market share, or 5.9 million users. Zain, formerly known as Celtel before it was taken over by the Middle Eastern telecoms giant, is closely behind with 4.4 million users, or 30 percent of the market share.

    Though it was the first cellular phone operator to introduce the service in the country about a decade ago, Tigo currently is trailing in third with 22 percent of market share, while the Etisalat-owned Zantel has 7 percent and TTCL controls only 2 percent of the industry’s customer base.

    The mobile phone industry is projected to mark record growth in the next three years, though the ARPU is expected to remain stable or even tumble slightly during that period.

    To put things in perspective, the mobile phone industry may be paying about $482million (Sh650billion) in Value Added Tax to the government annually -which is 12percent of the total tax collections per year currently.

    The TCRA figures also show that the cell phone industry’s contribution to the Gross Domestic Product reached 12.1percent by the middle of this year, surpassing the contributions of other key sectors like mining (2.7percent), livestock keeping (2.6percent) and fishing (1.3percent).

    From the intense media campaigns to the introduction of new products and special deals, mobile phone companies are now in cutthroat competition to get subscribers to increase spending to at least $20 a month-a figure that could double revenues to $3.3billion by mid next year.

    Still, the largely weak consumer purchasing power in the country - where half of the population still lives on less than a dollar a day - puts a looming ceiling over how high telecom executives can expect profits to climb.

    By comparison, for example, in South Africa where the country’s GDP stands at $280billion per year, the ARPU is $40 per month.

    As a senior official from Zain told The Guardian on Sunday this week, “Sometime what matters is not the size of your customer base, but their spending power…you could have few customers, but their spending is two times what ordinary subscribers spend.”

    “But to be honest, this industry has been very lucrative here and it has proved that even the poor will spend on communications,” said the official, who declined to be named because he is not an authorised spokesperson for Zain.

    As the industry records robust revenues and projections show an annual growth of 20 percent ahead, the country's mobile phone industry is gearing up for a battle - a battle not only to win over new customers, but to stay on the cutting edge to ensure that they keep their current customer base.

    For Vodacom, the biggest challenge is how to stay far ahead of its two biggest rivals, while Zain and Tigo make a break for the lead with new tactics.

    For three years now, Zain has introduced various strategies to outsmart Vodacom, and its efforts have begun to yield fruit, as the company’s customer base creeps ever closer to its rival.

    But as ARPUs for both companies remain relatively low and continue to fall in response to the corresponding growth in subscribers, it appears both firms are exploring new ways to secure stable revenue flow.

    Both companies have introduced mobile money transfer programmes, after seeing the success of similar programmes in South Africa and Kenya. In Tanzania, where only 9 percent of eligible people have access to the formal banking system, new services like Zain’s Zap and Vodacom’s M-Pesa could revolutionise the way people do business — and make both companies a lot of money.

    Efforts to get comments from authorized spokespersons of the top mobile phone operators proved futile as those contacted yesterday said they had no authority to comment about the situation of the Mobile industry.

    Those who declined to comment under the grounds that they are not authorized are George Rwehumbiza, Head of Marketing and Sponsorship and the Director of Marketing Ephraim Mafuru and Constantine Magavilla, Zain’s Marketing Manager.

    However Magavila added that he couldn’t comment unless he has seen and studied the data released by TCRA.

    According to a survey conducted by Tele World, across Africa, Latin America and Asia, the number of people who do not have a bank account but do have a mobile phone is set to grow from 1 billion today to 1.7 billion by 2012. These ‘unbanked mobile’ individuals represent a compelling market opportunity for operators.

    However, to successfully address this opportunity, operators-in Africa and beyond-must base mobile money offerings on a thorough understanding of the complex financial lives of the unbanked.


    Je kama hizi figure ni kweli je watu wa TRA hawaibiwi KODI....Nawakilisha