Bright future

Rising mobile penetration and a forward-thinking regulator are just two of the reasons why Middle East operators are keen to expand into Morocco. CommsMEA looks at the issues affecting the country's telecom sector.
Bright future
Alcatel-Lucent’s country manager for Morocco, Mounim Ghetreff, says Morocco is one of the most advanced telecom markets in Africa.
By George Bevir
Wed 07 Oct 2009 04:00 AM

Rising mobile penetration and a forward-thinking regulator are just two of the reasons why Middle East operators are keen to expand into Morocco. CommsMEA looks at the issues affecting the country's telecom sector.

When a stake in Morocco's second operator was put up for sale, operators from the Middle East eagerly lined up to bid for a share in the telco. Qtel, Etisalat and Batelco were all keen to relieve Portugal Telecom and Telefonica of their 32% stakes in Meditel, a move that would have given them access to a telecom market with mobile penetration of 76% from a population of 34.8 million.

Portugal Telecom and Telefonica eventually sold their shares in the firm to a group of Moroccan investors, who later said that a share of the telco could still be sold to a foreign investor.

That piqued the interest of Orascom Telecom, with the Egyptian operator now reported to be considering making an offer to the Meditel consortium to manage the mobile operation, after it had initially expressed an interest in bidding for a stake in Meditel.

Etisalat is also still keen to enter Morocco's telecom market, and appears undeterred by its failure to land a share of Meditel. The UAE operator's corporate communications VP, Ahmed Bin Ali, said Etisalat still considers Morocco to be a "good market", and that it remains interested in the country.

"Morocco is a growing market in a stable political and economic environment," says Motorola's country manager for Morocco, Rachid Al Ibrahimi. "The growth potential is here, and the presence of operators from the Middle East will in fact direct the next telecom cycle, that will be driven by the explosion in mobile data and media mobility. I believe we are at the beginning of that cycle."

For many telco groups, interest in Morocco is indicative of a wider desire to push deeper into North Africa. Batelco is said to be studying an acquisition in North Africa for up to $2 billion, chief executive Peter Kaliaropoulos told local press, with an announcement on a possible deal due before the end of the year. Qtel's CEO Dr Nasser Marafih has also singled out North Africa as a region that the Qatar-based group is keen to expand further into.

Praise for the regulator

Alcatel-Lucent's country senior officer for Morocco, Mounim Ghetreff, says Morocco is one of the most advanced telecom markets in Africa. "I think that Middle East operators could choose this country as a destination because of the high penetration rate and because of the competitive voice and broadband access rate, and last but not least an advantageous regulatory framework."

Ghetreff says the regulator has done a "good job" since its inception in 1998, and that following a raft of reforms the market has grown "very fast," with the Agence Nationale de Reglementation des Telecommunications (ANRT) playing a "crucial role" in the liberalisation of the sector. Some of the measures implemented by the ANRT include a new fixed connection rate that has allowed new entrants into the fixed segments, the setting of a new mobile termination rate and the award of the 3G licence.

Al Ibrahimi agrees that the ANRT has played a "very important role" in the development of the telecom market in Morocco. "It has created and maintained a healthy competition in the market, and they efficiently manage the country's spectrum," he says. "The ANRT has a very good reputation among the players for integrity, impartiality and competency. I believe they launched the right licenses at the right time, like the broadband 3G licence, the wireless licence and the fixed licence; all of these actions helped the broadband penetration in Morocco."

Growth signals

According to Pyramid Research analyst Badii Kechiche, Morocco's telecom market total revenue will increase by a compound annual growth rate of 4.9% over the next five years, from an estimated US$4.1 billion in 2009 to $5.1 billion in 2014. Such promise of growth is no doubt one of the factors attracting operators from the Middle East.

"The mobile market continues to show strong signs of growth," Alcatel-Lucent's Ghetreff, says. "In June it reached 23.5 million subscribers, which is a 10% increase compared to June 2008, and we have penetration of around 76%. We can say that we are at a certain maturity of the market but there is remaining organic growth left in the mobile market. Penetration will get to 100% or even more."

Maroc Telecom, with 14.2 million mobile subscribers, is the leader of the three telecom operators in Morocco. The 53% Vivendi-owned operator (with 30% held by the Kingdom of Morocco and private investors holding the remaining 17%) recorded marginal growth of its mobile subscriber base, which increased by 0.5% year-on-year, according to the firm's second half results. From its domestic base of a 60% share of its home market, Maroc Telecom is also pursuing expansion across northwest Africa, including Gabon, Mauritania and Burkina Faso.

Wana's gain

Second-placed Meditel has considerably less subscribers, with 8.5 million mobile users, but this figure grew by 21% year-on-year. Meditel, which started life in 2000, holds just over 36% of the market, according to UK-based research firm Oxford Business Group. Maroc Telecom and Meditel enjoyed a duopoly until 2008, when the ANRT licenced Wana, which now holds a 2.6% of the voice market.

Despite its small amount of voice users, Wana has a majority of the 3G market at 69%, according to research firm Oxford Business Group (OBG). The CDMA operator acquired its next generation wireline licence two years earlier in 2006, and in May this year Kuwait's Zain acquired a 32% share in the firm, with local investors and a Moroccan holding company in charge of the remaining stake.

"The entry of Wana to the mobile market in 2008 and its competitive offers are proving disruptive to market dynamics," says Kechiche. "New commercial initiatives and promotions at the beginning of 2009 have helped Meditel boost its market share, leaving Maroc Telecom to bear the cost of declining overall growth. The new environment is expected to significantly affect Maroc Telecom's share of revenue."

The new investors in Meditel have signaled that they are willing to challenge Maroc Telecom and Wana's dominance of the voice sector. According to a report from OBG, the investors have outlined a plan to invest $520 million between 2008-11, with the goal of "shifting the company into a "new development stage".

Maroc's loss

The introduction of new investors is expected to boost Meditel's already strong performance on the mobile side with a continued focus on the corporate segment on the fixed sector. "Meditel's revenue will reach $1.1 billion by 2014, from $710 million in 2009; in order to deal with the increasing pressure, Maroc Telecom focused its efforts on high ARPU and business subscribers by introducing very competitive international calling rates and prepaid bundles," according to Pyramid Research's Kechiche.

"The new environment is expected to significantly affect Maroc Telecom's share of revenue. The incumbent's share of revenue is expected to decrease by 19% over the next five years, reaching 57% by 2014; in the meantime, Wana will witness a significant increase in its revenue share, with $890 million expected in 2014, up from an expected $400 million in 2009."

Wana's large base of fixed subscribers, the anticipated launch of GSM services to complement its CDMA coverage and a strong hold on the mobile broadband market are expected to be the main drivers for the increased revenue share.

Motorola's Al Ibrahimi says that as in many maturing markets, competition among operators is driving prices down. "Operators have to look for a diversified source of revenue and to be more and more creative in order to attract more clients. In this climate, network performance enhancement and delivering quality helps to reduce churn," he says.

Maroc Telecom suffered from churn of 35% during the first half of the year, and in a bid to limit it in July it launched a new loyalty programme for prepaid customers called "Jawali".

Analysts agree that with the market maturing operators in Morocco will now look to focus on more new and innovative services in order to maintain ARPU, which has dropped over the past year. Maroc Telecom attributes the decline to the economic climate, competitive pressure and the "stringent regulatory environment". Mixed ARPU of MAD94.2 ($12.2) was 4.4% down on the first half of 2008, "chiefly due to a reduction in inbound call revenues". Meditel has also suffered from a drop, with ARPU standing at MAD49 ($6.3), down 16.8% over the same period.

Diversifying revenue

As of June 2009, Morocco had 10.3 million internet users, according to the ITU, with Wana the market leader in mobile broadband. It is one of the boom areas for the sector in Morocco; OBG notes that the total subscribers for mobile broadband increased 527% in 2008, underlining the "revival" of the fixed-line, whose subscribers increased 24.96% in 2008.

The internet has not only been a source of growth for the new entrant it has also been a fillip for the incumbent; Maroc Telecom's voice revenue was down 3% and interconnection charges fell by 22%, but revenue from internet and data services was up by 20%.

The number of fixed lines fell by 2.9% to 1.29 million (down 2.9%), with a drop in residential connections offset by a rise in enterprise usage. It counts some 486,000 ADSL accounts among its subscribers.

Low ADSL penetration

The growth in data connections is expected to continue, with analysts suggesting there is plenty of room for further increases in subscriber numbers and usage.

Motorola's Al Ibrahimi says that the total number of ADSL and wireless internet users is around 963,000 users, which he describes as "very low penetration".

"Wireless internet which started only two years ago constitutes half of the total internet usage in country, with rapid growth in one year. The best way to increase broadband penetration in Morocco is to have this," Ghetreff says.

"With the number of subscribers in broadband at roughly 960,000 across ADSL and 3G, this represents growth of 47% compared to June last year.

"We are seeing huge increase on this part of the network. This has been driven essentially by the mobile broadband and it will continue like this in the coming months," he says.

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