SIM registration in Africa: Subscribers number down but what about revenue and ARPU?

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Following the SIM cards registration process, the number of mobile subscribers in Zimbabwe went down by nearly 2.4 million (see full story in the telecoms section). In Ghana, Nigeria and Côte d’Ivoire, SIM card registration is ongoing while the Liberian regulator will soon be launching the same process. All SIM cards registrations exercises in African countries have translated into a temporary decrease in the number of mobile subscribers but how did it affect operators’ revenue? Isabelle Gross looks at the outcomes of SIM registration process in South Africa for some clues.

No African mobile operator has really contested the legal justifications that support SIM cards registration, however most of them have complained or expressed reservations on how the process will be implemented, what identification documents will be required from the subscribers and how well subscribers data will be protected. The first reason for their reluctance is that they bear the cost of the registration process which is very labour intensive and implies a lot of paperwork that needs to be sorted between the subscriber and the operator (just think for one second of how easy it is to get a working local phone number as soon as you are out of the airport). The second reason is that they are aware that as a result of the SIM registration process they will loose subscribers and potentially revenue.

As of July 1st 2009, the registration of mobile customers became compulsory in South Africa following the introduction of the Regulation of Interception of Communications and Provision of Communication also commonly referred to as “RICA”. So, how did RICA affect Vodacom and MTN, the two largest mobile operators in South Africa (their combined subscriber bases represent a market share of over 80%)? According to Vodacom’s quarterly and interim results reports, the total number of mobile subscribers during the 2009 year evolved as follows: at the end of Q1-2009, Vodacom reported 27.7 million mobile subscribers. Three months later at the end of Q2-2009, Vodacom had 28.7 million mobile subscribers.

At the end of Q3-2009, the number of mobile subscribers dropped to 28.2 million and at the end of 2009 (Q4-2009) Vodacom reported a total mobile subscriber base of 27.1 million. Six months after the introduction of RICA, Vodacom lost about 1.6 million subscribers which translated in a decrease of 5.57% of its subscriber base. For 2010, Vodacom reported the following subscriber numbers: 26.3 million at the end of Q1-2010; 25.3 million at the end of Q2-2010 (this figure does not include the 3.3 million call-forward SIM cards disconnections following a change in disconnection policy of 13 months to seven months). Twelve months after the introduction of RICA, Vodacom’s prepaid subscribers base was down by 11.9%.

How did MTN, Vodacom’s main competitor in South Africa, perform during the same period? At the end of June 2009, MTN reported 17.2 million subscribers. Three months later (Q3-2009), the mobile operator’s subscriber base was down to 16.4 million and by the end of 2009, its subscriber base stood at 16 million. However by March 2010, MTN’s subscriber base was again up to 16.4 million and in June 2010 the mobile operator reported 17.1 million mobile subscribers. Twelve months after the introduction of RICA, MTN’s subscribers base was down by less than 1%. This suggests that SIM registration in South Africa affected mobile operators in different proportions – the market leader suffering more from it than the contenders.

However, “one size doesn’t fit all”.  In Zimbabwe for example, market leader, Econet registered a loss of 1.4 million subscribers from a total subscriber base of 4.1 million while Telecel, the second operator by market share recorded a loss of 692,000 from a total subscriber base of 1.3 million subscribers. In this case the market leader held on better than the contenders. So then, does it not all come down to the clean up of an inflated subscriber bases in the first place? In Gabon, mobile operator Libertis controlled by Morocco’s Maroc Telecom, has reported a quarter-on-quarter reduction in its mobile subscriber base from 699,000 to 398,000 in the three months ended 31 March 2011. Artel, the Gabonese regulator launched the SIM registration process back in the middle of 2010 with final disconnections scheduled for the beginning of 2011.

Since South African mobile operators state total revenue figures which will include other revenues like data revenue for example (and South Africa has witnessed a big uptake in data services over this period which consequently has pushed up overall revenue), a comparison between subscriber numbers and revenue would be biased. Therefore it was more relevant to look at the voice traffic recorded over this period to see the impact of the decrease in subscribers.

Unfortunately, only Vodacom releases such data. At the end of June 2009, Vodacom reported 6.8 billion minutes traffic for the quarter on its network with 4.9 billion minutes outgoing traffic and 1.9 billion minutes incoming traffic. A year later as of June 2010, Vodacom reported 6.3 billion minutes traffic for the quarter (including the loss of minutes resulting from the 3.3 million call-forward SIM cards disconnections).

When comparing Q2-2009 to Q2-2010 results, this translates into a decrease of total voice traffic of 7.6%. This suggests that the reduction in subscribers had a negative effect on voice traffic and consequently on revenue. However, the level of revenue loss is likely to have been much lower than the loss of subscribers because among the lost subscribers there were a large number of “zero” ARPU subscribers. Another indicator hinting at this conclusion is the ARPU level recorded over this period among prepaid subscribers. In June 2009, Vodacom reported a prepaid ARPU of R64. One year later, the prepaid ARPU was up to R79. For MTN, the prepaid ARPU was R92 in June 2009 and R109 in June 2010. On a year on year comparison, the prepaid ARPU increased by 23% for Vodacom and 18% for MTN.

In all African countries that rolled out SIM card registration, the number of subscribers went down but there is less evidence available that suggest that the impact on mobile operators’ revenue was of the same magnitude then on subscribers numbers. Further this downward trend is not long lasting. In its interim results report for the end of June 2010, MTN stated that “the negative impact of RICA on the prepaid subscriber base has now stabilised, with gross additions increasing by 19.7% compared to the second six month period of 2009”.

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