Zain, formerly known in Africa as Celtel, operates one of the continent's major mobile phone networks. AllAfrica's Cindy Shiner discussed the company's business with Mwambu Wanendeya, communications director for Africa, and Mohammed Sheikh, director of strategy for Africa.
She began by asking them about the company's introduction of a facility which allows customers to move freely across national borders while remaining part of the same network, without paying roaming charges.
How did "One Network" come about and what effect might it have on the lives of Africans?
Wanendeya: One Network came about as a result of an analysis of the movement of people across borders. The company saw where people were moving and addressed a product to benefit them directly because across Africa many of the borders – the colonial boundaries – do not really mark the way people live.
Lots of ethnic groups live across borders and they move freely within their communities [across borders]. The concept underlying One Network is that a customer in one country is a customer everywhere. So you stay with your home network wherever you move across Africa…
The first step towards this was taken many years ago. When our customers in Kinshasa wanted to call Brazzaville the call would be routed through Brussels. We decided this was ridiculous. We put in a microwave link and changed the calling structure so the call went directly, reducing the rate by about 80 percent.
The One Network was a natural progression of this: trying to get the people of Africa able to call in an easier way, reducing the calling cost, increasing the ability to communicate and thereby increasing trade that followed natural patterns that Africans had used for millennia.
What effect have you seen so far?
Wanendeya: One Network is more than just about abolishing roaming carriers. What used to happen before is if a trader in Nigeria went across the border he would swap Sims (Subscriber Identity Modules) – even within the Celtel network – which meant that you now had to communicate with the people at home and say this is the number I'm on [a different number].
Now what happens [with One Network] is that he moves across the border, keeps his Nigerian number and they know exactly how to get a hold of him. This has greatly increased his ability to trade.
When the Nigerian customer goes to Niger, he becomes a local Niger customer; however, the people in Nigeria who are calling him are still calling a Nigerian number, so the cost for them is much lower than if they were calling a number in Niger. So both sides benefit: the party who has traveled and the party who has stayed home.
The other thing that is important is the ability to buy air-time. We have more than one million points-of-sale for air-time across Africa. In a market where 99 percent is pre-paid this is of vital importance, the ability to top up whenever you want.
How have you dealt with regulatory issues in rolling out One Network?
Wanendeya: Naturally, such a new product – it's never been done anywhere else in the world – was really a challenge. But the regulators have been supportive. They recognize with pride that this is something that was the world's first that was developed in Africa and in a very highly competitive and technological industry. They wanted to support this to show that the talent that exists on the continent can compete on a global basis.
Sheikh: The simplicity of the One Network is one of its most powerful attractions. People are able to make calls at lower rates and receive incoming calls free of charge so it's really simple.
To what extent would you characterize the mobile phone as transformative in Africa?
Wanendeya: It has been one of the most transformational effects ever in Africa because it has meant that people who were not able to communicate can now communicate for many reasons: to trade, to stay in touch with friends and family …
A study by the London Business School states that an increase by 10 percent in mobile penetration directly increases the GDP of a country by 1.6 percent. There are other studies that say the indirect benefit is as high as four or five percent added to the GDP of a country.
Sheikh: Africa as a whole accounts for roughly 14 percent of the world's population but it has only about 5.6 percent of fixed and mobile subscribers worldwide. In 2001 the number of mobile customers overtook the number of fixed line customers. Now almost three-quarters of Africa's fixed lines can be found in just six countries. So the region is far from saturation, with tremendous growth potential. Growth in the last five years has averaged around 50 percent a year.
When you look at the Internet, Africa has over 22 million users, with an Internet penetration of around five percent. Europe's penetration is seven times higher. Quite differently from the developed world, half to two-thirds of Internet access is via a mobile phone.
The interesting demographic in Africa is that almost 64 percent of people live in rural areas and these regions don't have access to the Internet. So now it's not just having a mobile phone, it's actually the fact that you can access the Internet and information using a mobile phone, which is becoming a major tool for e-governance as well as e-commerce. It's a striking factor in Africa's development.
What are some of the challenges to increasing mobile phone and Internet access?
Wanendeya: On the mobile, one of the issues we face is the very, very high level of taxation. East Africa, for example, has the highest level of taxation on the mobile industry in the world. It is quite difficult to get governments to see that if they reduce the taxes they will reduce the cost of ownership of a handset, thereby increasing the number of people who own one. And if they reduce air-time tax, this will increase the number of people using air-time and overall will generate more money.
What we've tried to do is go around this by introducing lower-priced handsets. In less than six months of operation more than 1.5 million of these have been sold across our African operations. So we're trying to make the market more affordable for people.
Do you think that after so many years of controlling state-run telecommunications companies. governments need to adopt a new way of thinking?
Wanendeya: It's difficult to understand the thinking behind this high level of taxation. Perhaps it's because the industry is one in which it is easy for governments to measure economic activity and governments obviously wish to attract more tax revenue…
Sheikh: Besides what one would call endemic basic barriers such as taxes, import duties and so on, and infrastructure issues like road, rail and air and providing power to rural areas, [there are] the weak regulatory environments. For example, we have a case in one African country where we are being charged a fee to renew a license whereas other competitors have been given a license for a particular kind of network without being charged.
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When it comes to telecommunications and information technology, what you have is what I would call systemic barriers such as a lack of education and skills, and the actual cost of information technology. Although it's affordable for developed countries, relative to GDP per capita it's actually very expensive for many African countries. The lack of telecommunications backbones is a major inhibitor. Moving data traffic around across Africa is still very, very difficult. We have to use satellite quite a lot and it's very expensive.
And when it comes to telecommunications and data networks there is a lack of the Internet exchange points required for open connectivity. Many of the software applications that people want to use are actually very, very data heavy and require a lot of processing power and that's also quite expensive.
Also, quite a lot of content relies heavily on foreign data and foreign languages and there's not a lot of local content, especially community-based content. It's beginning to happen now but very, very slowly. Many governments and institutions have lots of initiatives in Africa but they lack focus in setting targets and really establishing good broadband communications for people.
Where does Zain see itself 10 years from now?
Wanendeya: The group aims to be a top-10 global telecommunications operator by 2011, with 110 million customers, and also to be one of the top 100 brands in the world. The re-branding is part of a process of deriving the benefit of being a global brand like Coca-Cola. Our customers will recognize us wherever we are and we'll be able to benefit from economies of scale in purchasing.
