Mobile market review – Namibia 2008

Namibia benefits from both a continuous positive GDP growth and a good-quality telecoms system that green-lights recurring investments in the sector. With a mobile market penetration of approximately 60% by the end of 2008, Namibia has seen a significant intensification of competition. Currently there are three mobile players: Cell One (Telecel Globe), MTC and Telecom Namibia. Mobile penetration has increased at a fast pace since Cell One entered the market, approximately two years ago, by about 30 p.p..

The entry time of Cell One in the market enabled the company to grow rapidly and capture the existing organic growth. It rapidly reached 150-200 thousand customers. However, the company has been struggling to keep up a similar growth pace after launch, remaining at a 20% market-share of active customers.

Derived from the intensification of competition, ARPU levels in the market have been decreasing and are expected to decrease even further. The two drivers behind this evolution are: (i) the aggressive competition in the form of price discounts and promotions for new acquisitions, particularly by MTC and; (ii) the addition of lower-value customers as a result of a more mature mobile market.

Under this scenario, the number of multi-SIMs (SIM cards that are not used exclusively by one individual customer) is increasing in the market. According to benchmarks performed by mmC GROUP, the total number of multi-SIMs could be in the interval of 20-30% of the total market. Despite the fact that Cell One does not actively reinforce consumer arbitrage at the point-of-sale – starting pack is priced above market value – the company faces the problem of its own base carrying SIMs from competitors. As such, Cell One needs to improve its share of customers’ spending.

In other African markets it is common to witness gaps in the commercial retail footprint and actual network coverage. This undermines seriously channel performance and has direct impact on EBITDA. Another important issue undermining sales is connected with the lack of logistics support and supply-chain control mechanisms.

This influences directly fraud levels, which remain very high in practically all-African mobile operations. In an effort to improve channel performance, companies are starting to place more emphasis on channel reporting and control. However, this situation is still largely underdeveloped. In this context, 2nd and 3rd entrant are faced with multiple challenges. In a revenue stagnant mobile market, they need to improve both the acquisition capacity of its operations, in order to break the 20% market-share ceiling, as well as the quality of these acquisitions. It will be key for future profitability to lays on extracting more value from its customer base.

Happy reading. CVA