Malawi’s Access Communications targets fixed line niche market with CDMA2000 EVDO Rev A network

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With Africa’s mobile markets becoming increasingly crowded for operators and the mobile players planting their big feet on the Internet space, there’s not much room left for new entrants. That is unless you look differently at African markets and start to search for profitable niches rather than mass markets. Russell Southwood talked to Access Communications CEO Faizal Okhai about the niche he wants to occupy in Malawi.

Access Communications is currently rolling out its CDMA 2000 EVDO Rev A network (which will operate on 800 mghz) in 4 cities in Malawi: Blantyre, Lilongwe, Muzuzu and Zomba. By the end of this month the capital will be covered and the others by April 2010.

The network will have an overall capacity capable of taking 35,000 subscribers: 14,000 each in Blantyre and Lilongwe with rest split equally between Muzuzu and Zomba. This is what Faizal Okhai describes as phase one with phase two starting in July next year, which will take capacity up to 70,000 subscribers.

Its operator licence is for fixed voice and data and is geographically limited to the cities identified above. However, it can, for example, operate within a 40 kms radius of Blantyre. The licence cost was US$100,000 plus 2% of gross turnover and a commitment to contribute to the Universal Access Fund (being set up by an Act of Parliament) which is likely to cost another US$100,000.

EVDO Rev A provides 3G data which has a theoretical download speed of 3.1 mbps but within 2-5 kms of a base station can still deliver 2-2.2 mbps.

So how will it do its pricing? Okhai is understandably cagy as its launch is some months away:”We haven’t released general plans to the market but the incumbent seems really worried. To meet the requirements of our business plan we need rates that are higher than the fixed line incumbent.”

But the obvious question is why would a user buy a service that had a higher price in markets that are dominated by price as the deciding factor? Okhai is pitching service and quality:”There are issues around speed of supply for incumbent fixed lines. What we’re offering is ‘double play’ (voice and data) with SMS services.”

“Thus far competitor data services have been very expensive because of the cost of CPE equipment, usually US$400-500. With our service, the CPE is bundled depending on the contract you take.” Also in a market with very complicated calling plans, Access Communications wants to create a more transparent and simple way of charging its customers:”We will be offering a very simplified tariff plan.

Most new entrants take a pop at the incumbent and the mobile competitors by offering much cheaper international voice calling. Access Communications again is playing it cautiously:”At the moment, we will not rock the boat too much. We’re trying to establish two international links. We will have one on VSAT and we have entered into an MOU with TDM who we will have to build a physical link to”.

“It wants a minimum of an STM1 so we’re co-operating with a local mobile operator and they’ll take half that capacity and we’ll take the other half. We’ll also be sharing tower sites and backhaul links with them. We’ll be lighting up two fibre optic cores between Lilongwe and Blantyre giving us 2.5 gbps over the link. This has been done in partnership with the Electricity Supply Corporation of Malawi (ESCOM).”

Okha says that growth will build slowly so that he will be happy with 20,000 subscribers in the first year while the company irons out any teething problems:”Quality of Service is a massive distinguishing factor so we have to move carefully in terms of customer numbers. We have not got the resources to take on the country’s major players so we’ll take it slowly, build up the customer base and build our reputation for quality.”

“The licence process was delayed by two years and in the meantime the incumbent has done a lot of work on its network and it’s been difficult to raise finance and funding in the current climate. But the business model will work on a relatively small number of subscribers and the high speed data will be a significant differentiator.”

The three investor groupings are all local with Okhai’s family company making an investment: the family company also owns Internet Malawi. The Chair of the company is Justice Richard Banda.

The CDMA 2000 challengers on the continent have tended to be incumbents because vendor Huawei’s selling strategy has been targeted at them. Therefore the product has competed with failing fixed lines and in many cases done very well. However, in Kenya where Popote and Flashcom both attacked in a very competitive market numbers have remained relatively small. Furthermore, their data download speeds have not always kept up in a fast developing market.

The big attraction is that with a low cost CPE and EVDO Rev A it will be able to offer potentially attractive data offers and it is very noticeable that wherever CDMA 2000 has been used, data revenues always exceed voice by some margin. This one may yet run and run…