Madagascar: Despite political uncertainty, two new international cables offer market growth and new BPO opportunities

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Despite the continuing political crisis in Madagascar, the worst of its impact seems to be over and the major players are looking forward to further expansion in the market. The arrival of the EASSy and LION international fibre cables will provide a much-needed boost to growth. Balancing Act’s Sylvain Beletre spoke to two of the key players - Telma and Orange - about their views on the development of the market.

Last year was a terrible one for Malagasy incumbent Telma. At the height of the political crisis over the Presidency, it lost a full month’s revenue because its main impact has been on local revenues. This loss of revenue has had a knock-on effect and new investment has been delayed as a result. Nevertheless Telma has fought back with an aggressive marketing campaign that has seen it gain new corporate and residential customers.

Since its launch in December 2006, Telma’s mobile operation has gone from nothing to over a million users, giving it a market share of over 20%, in a market of 4.5 million users. It projects that there will eventually be 7 million mobile users, giving the country a 33% penetration rate. 20,000 of these subscribers are regular 3G users on its EDGE network. Orange is the biggest player in the market with a 60% share of all subscribers with the remainder going to Zain. Orange also offers 3G data services.

Telma’s CEO Patrick Pisal Hamida says that the company will introduce innovations like mobile TV and Triple Play in the mid-term but no immediate service changes are planned. The company has 170,000 fixed line subscribers and it offers ADSL services and sees these as complementary to its 3G offering.

The company’s 300 kilometre fibre network covers 85% of the population and where it does not reach, it uses WiMAX which Hamida describes as “the ideal solution for those outside of cities and remote locations for corporate customers.”

The Orange initiated LION cable started operations in November last year in order to relieve the lack of available capacity on the SAT3/SAFE cable to Mauritius. The cable landing station is at Tamatave in the Toamasina region and it goes on to link Reunion and Mauritius. It will eventually have a 1.3 Tbps capacity but currently only 10 Gbps is available. Orange’s list price is US$1,570 for the minimum STM1 order, a price that seems somewhat on the high side compared to east coast fibre prices from Seacom and TEAMS.

EASSy is expected to land in Madagascar shortly and it is promising to be ready for commercial service in June this year. It will offer 1.4 Tbps and Telma is saying that it will be halve the prices offered on the LION cable, which will no doubt also lower its prices.

Nevertheless, Hamida believes that infrastructure sharing is a sensible route with the national fibre backbone, particularly as operators contemplate costly upgrades to things like LTE.

Orange Madagascar’s CFO Louis Celier believes that the new fibre connections will give the island a tremendous opportunity to boost its productivity and in so doing attract BPO work. "This is an extraordinary opportunity to develop and strengthen links between Madagascar, its businesses and personal ties. The first benefit is for inhabitants to improve communication abroad, get inexpensive high-speed Internet and VoIP calls and to democratize digital tools." explains Celier.

He believes that as in other parts of the world, Internet access is a key factor for the socio-economic development of Madagascar, for which the challenge is twofold:

Firstly, for the general public through the introduction of broadband Internet, a whole world of applications and services will become accessible to all; secondly, for companies, for whom this new connectivity will increase their competitiveness, benefiting from media and trade."

Orange believes that Madagascar can become a French-speaking BPO destination. "If we can develop call centers between local private companies and entities abroad, Madagascar can soon become another Business Process Outsourcing center. The average monthly income is 27 Euros/month compared to much higher figures in other African countries like Morocco, Tunisia or Mauritius. Creating Call Centers is the obvious option. This is a great opportunity for investors" concludes Celier.

However, despite the completion of the LION development, Orange has complained that the Malagasy government has still not completed the necessary legal framework to allow the ‘full exploitation of the cable’. It has called on the state to regulate so that it can begin to offer commercial services. Nevertheless, despite the uncertainty, Celier says, "Orange now provides access to competing ISPs and service providers in the country on a wholesale basis using the LION cable."

Telma’s monopoly on the fixed line sector was due to end on 30 June 2008, but regulator OMERT has yet to legislate to officially open the market. The regulator itself was supposed to have been replaced by a new body but this move has been on hold for over two years. The current political uncertainty adds to the difficulties of getting the matter resolved.

According to official figures from the Malagasy Ministry of Telecommunications, the number of Internet subscribers is 36,000, representing a penetration rate of only 2.1%.

"Concretely, the cable will provide an unprecedented upheaval: the possibility of a true broadband access as the existing satellites were insufficient and too expensive..

There is potential for large growth, as soon as the government secures the investment of private companies," adds Celier.

Telemedicine is the most spectacular example of what the very broadband can bring Madagascar. Key benefits include providing the complex care offered by ICT, avoiding, whenever possible, patient transfers (opinion, expertise, hospital and home), and obtaining all medical information including digital imaging about a patient through a fast access.