of operators in Mozambique, telecom privatization appears to be going well. The presence of competition would normally underscore great growth in the telecom sector. But mobile phone penetration, which averages at about 70 percent of the population elsewhere in Africa, is closer to 34 percent in Mozambique. A dismal 4.9 percent of Mozambicans have access to internet, compared with 43 percent in neighbouring South Africa.
Although Mozambique has been one of the fastest growing economies in the world, it is still one of the poorest nations in the world with more than 50 percent of the population living on less than $1.25 per day. End users, as of 2010, spent $10 per month for mobile service in Mozambique, although experts argue that this number is skewed upwards by the number of businesspersons and government officials spending north of $75 per month.
Low Mobile Penetration
Since Vodacom’s entrance into Mozambique in 2003, mobile phone penetration has grown more than 1,500 percent. Yet the introduction of the third mobile operator Movitel in 2012 has yet to change the underlying challenges of the sector: inefficient cost structures and insufficient infrastructure. In recent years, growth has slowed to 6.5 percent growth in 2011 and less than 1 percent growth in 2012, according to the World Bank.
Boosting penetration requires cheaper mobile equipment in the market. Movitel introduced a low cost mobile phone for $15 in 2012. But that price can be as high as 30 percent of the monthly salary for many Mozambicans. And many employers do not provide a phone nor pay any share of the bill for their employee.
Movitel promised to invest more than $400 million in infrastructure over the next five years. Yet, at 3.6 meticais (or $0.08) per minute for prepaid calls, investment capital is hard to come by as many Mozambicans still cannot afford to absorb this cost (i.e. low per customer revenue). Teledensity in Mozambique consequently remains among the lowest in southern Africa. Little incentive has existed for those operating outside the capital city’s center to spend significantly on mobile infrastructure. But a growing oil and gas sector in newly booming cities, including Nampula and Tete, will change that. Currently 15 percent of Mozambican population can only be reached by GSM signal if subsidies are provided or mobile prices rise. Yet previous price wars between market players have effectively eliminated the option of raising prices.
Development of the internet market encounters similar challenges. A domestic fiber-optic backbone extends to all the provincial capitals in the country. But a lack of quality and insufficient fiber-based international connectivity undermines the entire system. Fixed broadband prices remain high and the lack of quality service outside the center of urban cities will not change the outlook for the sector.
The difference between the average call completion rate and internet bandwidth capacity at a local hotspot on Avenida de Julius Nyerere (downtown Maputo) and the Costa do Sol beach (only a short 20 minutes away) can be more than 15 percent. In emerging areas of the country, such as Nacala, network connectivity frustrates everyday business and life activity. Local executives complain that subpar service in the future will only stunt the country’s capabilities, particularly in the energy and agriculture sectors where market information and the dispensing of that information through fast and reliable communication are vital.
Investment and Privatization
According to the World Bank, the overall telecommunications sector in Mozambique requires more than $170 million per year in infrastructure investment through 2016. Only private sector participation can fulfil the funding gap. Bringing in Movitel was only a start in what is still an uphill climb.
What the Mozambican government also wants is a convergence of technology and service to lower cost and boost quality. But expanding the country’s ability to deliver media through the same medium of connection (i.e. fiber optic or wireless), is only a step in a right direction. Multiple players exist in other parts of the telecom sector, including internet and television. The disparate availability of information and services within each market player places many consumers at a confused disadvantage. It is not unusual for a company to provide two services in one part of city but not offer it only 15 minutes away in a different part of the city.
The biggest opportunity for moving the market could be the potential merger of state owned telecom giants mCel and Televisao de Mocambique (TVM) and their subsequent privatization. The country could set the standard for how the market should operate and secure access to more capital for infrastructure investment. A more consolidated media giant could decrease operational costs and leverage a different mix of telecom offerings to boost consumer participation and revenue. An injection of foreign capital and foreign blood would expand what a newly consolidated company could financially do and inject new thinking in a potential expansion strategy. The idea would not be new but rather late, considering the government’s apparent approvals and later rescission of prior privatization plans. But change is always better late than never.