Bharti Airtel’s investment of $100 million to launch its mobile operations in Rwanda has sparked a price war that will see prices fall even further for customers, increasing mobile penetration in what is already one of the fastest growing telecoms markets on the continent.
MTN Rwanda, the largest mobile provider in the country, has cut its data prices in half as it looks to maintain its leadership in the market after the entry of India’s Bharti Airtel.
The halving of the price of mobile data bundles for post-paid and top-up users comes just months after the operator cut its call prices. A price war has been underway in the country even prior to Airtel’s arrival, with MTN, which controls 65 percent of the market, seeking to ward off competition from rival Tigo. With Airtel having announced that it will follow its usual policy of seeking to undercut competitors in order to claim a larger market share, MTN’s price cuts takes the price war into the data sphere. Rwanda is amongst the fastest growing telecoms markets on the continent, with RURA reporting that penetration was up to 41.6 per cent in December 2011, up from 40.2 per cent in September and 25 percent from December 2010.
“We continued with our aggressive push for market penetration especially in rural areas,” said Yvonne Makolo, MTN’s Chief Marketing Officer.
The price of MTN’s 250MB data package has been cut from Rwf6,000 to Rwf3,000, with the 500MB and 5GB tariffs cut in half to Rwf5,000 and Rwf15,000 respectively.
Ranked amongst the top five telecoms companies globally, Airtel is looking to seriously challenge MTN, which controls 65 per cent of the market, and Tigo, which controls 35 per cent. It replaces Rwandatel, which had its licence revoked in April of last year for failure to meet operating standards.
The profile of Airtel looks set to seriously challenge the existing companies, while boosting mobile subscriptions and jobs within the East African country. Rwanda is amongst the fastest growing telecoms markets on the continent, with the industry regulator, the Rwanda Utilities Regulatory Agency (RURA) reporting that penetration was up to 41.86 per cent in December 2011, up from 40.2 per cent in September and 25 per cent from December 2010. A price war has already been underway amongst the two existing providers, but Airtel’s arrival into the market with its policy of undercutting its rivals is likely to see that intensify, lowering the cost of mobile phones for customers and aiding the spread of mobile communication, which the government hopes will reach 60 per cent (7 million subscribers) by the end of the year.
Even prior to Airtel’s arrival Rwanda’s telecoms sector was on the rise. “The overall target for mobile telephony by the end of 2011 which was 3,730,102 was already surpassed by 19 per cent,” the RURA report stated. “There were only 75,000 mobile phone subscribers in 2002, but this has grown by more than 55 times in less than a decade to over 4.3 million subscribers just prior to end of 2011,” said Claire Akamanzi, Chief Operating Officer (COO) at Rwanda Development Board (RDB). BuddeComm, a global independent telecommunications research and consultancy company, report that Rwanda is finally beginning to catch up when it comes to telecoms. Liberalisation of the sector began in 2006, when MTN’s monopoly on the sector was broken. Third-generation mobile services have been launched. Previously Rwanda’s internet and broadband sector suffered infrastructure and cost problems, but now operators are rolling out fibre-optic networks that allow them to connect to the international cables landing on the African coast. The Rwandan government, and Airtel, will be hoping that a new growth phase will be sparked by the arrival of a power such as Airtel into the market, with mobile market penetration still well below the regional average in spite of the progress made in the last few years.
“The aftermath of the 1994 genocide and a monopolistic market structure until 2006 have weighed on the Rwandan telecommunications sector, but the country is now rapidly catching up with other markets in Africa,” the BuddeComm report states. The report predicts that mobile subscriber growth will be above the regional average in the coming years.
The fight for the lion’s share of the market, and for the orphaned Rwandatel customers, has already seen a price war get underway in the country even prior to Airtel’s investment. MTN has reduced its prices by 33 per cent and 52 per cent for prepaid and post-paid customers respectively. Analysts attributed this to jitteriness in the face of Tigo’s rise and Airtel’s arrival. Yet Tigo remains the cheapest on both normal and promotional tariffs, and there is some evidence that it is eating into MTN’s majority share of the market. RURA statistics show that Tigo has been closing the gap fast, its 2.5 per cent increment easily outdoing MTN’s 0.8 per cent. Airtel will follow the model it set in Kenya to try to undercut their competitors, with introductory termination rates of Rwf35 set to fall to Rwf33 by next month and Rwf22 by January 2014. This could trigger price cuts by their competitors, as happened in Kenya when Airtel first undercut the competition. According to BuddeComm, Airtel is likely to continue to be aggressive in the price war. “Last year saw MTN’s unrivalled position being subjected to serious threats by Tigo,” their report on the Rwanda telecoms sector said. “The two companies will definitely find themselves being seriously challenged by Bharti during the course of the new year, if Bharti’s entry tactics in other parts of East Africa is anything to go by. “Judging by its performance in Kenya and India, Airtel is likely to put up a strong fight against its competitors in Rwanda,” the report went on to say. RURA has said that Airtel plans an aggressive strategy and hopes to corner 40 per cent on the market within three years of launching. Price decreases are only likely to persuade more Rwandan’s to enter the mobile world, making government penetration targets seem more obtainable.
The entrance of Airtel into the market, while surely driving down prices, may also force companies to up their game in order to retain customers. The fall of Rwandatel will already have sent a message that failure to meet operating standards will not to be tolerated. Airtel’s investment in infrastructure and strategic partners will certainly lay down the gauntlet two the big two in the market. In a bid to gain currently unsubscribed customers and challenge the existing companies, Airtel has partnered with IBM as it tries to offer better customer service. IBM will deploy and manage the IT infrastructure and applications of Airtel’s mobile network in the country. Eriksson will be managing the network from end-to-end, including OSS/BSS solutions and managed services. The company have also paid $15.5 million to take over the masks formerly owned by Rwandatel in order to have a pre-established infrastructure. Experts say that Airtel will be in a good position to negotiate a favourable termination rate for its customers due to the lower entry costs per unit as a result of taking over Rwandatel’s assets.
The Rwandan government moved to welcome Airtel to the country, saying it represented part of a wider movement to provide good telecoms services to Rwandans and connect Rwandan businesses with the region. The government has introduced a series of reforms designed at making Rwanda an attractive place to do business, and spreading the use of mobile across the whole country is an important plank of their wider plans.
“The government welcomes Airtel into our country. We are looking to partner with the private sector to provide good quality, accessible and affordable telecommunications services,” said Prime Minister Dr Pierre Damien Habumuremyi. “We are especially excited about the prospect of connecting Rwanda with the rest of the East African region and, indeed, with the rest of Africa. As Rwandans begin engaging in business ventures and looking for regional partners, telecommunications companies – like Airtel – that are able to provide access to a pan-African wireless network, become a crucial part of expansion.”
Akamanzi says private companies will continue to play a lead role in the growing sector.
“The mobile telephone sub-sector is one of the many examples where the entry of private investors has continuously buoyed the economy and the lives of countless Rwandans,” she said. “Airtel will not only encounter an already vibrant telecom industry, but will also have the opportunity to take the industry to even greater heights together with the two existing license holders-MTN and Tigo.”
Airtel’s CEO was pleased to be entering this growing market.
“We are delighted to launch our operations and bring Airtel to the people of Rwanda,” said the company’s CEO (International) and Joint Managing Director Manoj Kohli. “We believe that Rwanda is an extremely promising market and this launch further strengthens our footprint in eastern Africa. It will be our endeavour to bring world-class and affordable services to our customers in Rwanda and add value to the economy. We would like to thank the Rwandan government for giving us this opportunity, and we are committed to contributing to their aim of bridging the digital divide in the country.”
It has not been all smooth running for the growing sector. Recent statistics showed that mobile penetration actually declined between December of last year and this month, falling 0.05 per cent from 4,446,194 at the end of December to 4,422,181 at the end of February. RURA attributed this to diaspora returning to their countries of residence after the festive season and students returning to their studies, a seasonal explanation that appears to be confirmed by a similar lull last year. Meanwhile, as mentioned, in April of last year the license of Rwandatel, the second largest operator in the country at the time, was revoked for failure to meet operating standards, orphaning around 345,771 of Rwanda’s approximately four million mobile phone subscribers.
