Smile Telecoms offers a real insurgent data challenge by delivering LTE – first in Tanzania and Uganda and then in Nigeria and DRC
Africa seems strangely unprepared for its next technology leapfrog, the implementation of LTE. But it’s happening already and it’s not just the small number of mobile operator LTE implementations (see MTN South Africa in telecoms news below). Formerly a WiMAX operator, Smile Communications has quietly launched in Tanzania and Uganda. Russell Southwood spoke to its Group CCO Thibaud Weick about how it’s been so far and roll-out plans for the DRC and Nigeria.
Smile Communications was founded by ex-MTN director Irene Charnley in 2007 as an insurgent challenger for data and bottom of the pyramid voice using WiMAX technology. The technology proved a dead-end as the user device ecology never emerged at the right price. Current shareholders are two Saudi investment groups – Al-Nahla and Atheeb – CapitalWorks and Verene (Pty) Ltd.
In 2011, it bought the right frequency (in the 800 band) in the four target countries and has a licence but no frequency yet in South Africa. According to Weick, the company decided it was “time to get real and hire the right people on the execution side.” Weick is one of those hiring having worked as Orascom’s CCO Africa and before that as CEO of Vodafone Cyprus.
Its business strategy is to provide broadband data access with a delivery speed, quality and reliability not seen before in Africa. Initially it will be aimed at the traditional home-ground of ISPs – corporates and high-end households – but will cascade downwards and outwards once LTE devices come down in price. It will use its own networks (the one in Tanzania is outsourced to Alcatel Lucent) to guarantee quality and reliability:”We don’t own the base stations. We work with the tower sharing companies but we will build towers if they’re needed. When it comes to rural coverage, LTE is much more effective than 3G as the frequency used means you need less sites.”
By contrast with the mobile operators, it offers tariff simplicity:”It is simple in terms of tariffs. There are very straightforward, simple bundles.” Current Tanzanian bundles go from TZS9,000 (US5.53) for 500 Mb to TZS100,000 (US$61) for 10 GB to TZS320,000 (US$203) for 50GB. These bundles last 30 days. The average current use by customers is 12 GB per month:”Customers have a wallet with a balance and they can load up with any amount they like”.
There are two devices that can deliver the service: a router that receives the LTE signal and distributes it as a Wi-Fi signal and LTE dongles. The first Wi-Fi routers cost US$250-300 seven months ago but have already come down to US$180-250. It does not want to go all-out with LTE dongles until there is contiguous coverage so it is selling fixed wireless for the office and home.
So what’s the difference in usage and content with LTE?:”They’ve discovered the Internet as they want it and they start enjoying it. They use more and spend more. One of the big things some of our customers told us was that Skype was very important for business conference calls and what they find is video calls work and it’s the same with high-end families. Also advertising agencies that need to transfer large graphic files between offices now find it is much easier to do so. They don’t need to stay late in the office to wait for it to go in the less busy out-of-hours time. It’s probably going to be the same with the film industry in Nigeria. It enhances the efficiency and productivity of businesses.”
”Some of our high-end customers will buy 4G/LTE smartphones in the Christmas sales in the USA and Europe but we’re not pushing this.” So what’s his estimate of when the LTE device ecology will be at an affordable price for a wider range of customers?:”Fourteen to eighteen months time. The transition (from the current target markets to a wider customer base) will be driven by handset prices. If it’s sooner, we’ll be ready.”
It currently has less than 10 base stations in both Dar es Salaam and Kampala in business and high-end residential areas but this is being expanded:We have an aggressive roll-out over the next six months which will see us cover the whole metropolitan area and then a programme over two years to cover other cities. In Tanzania that will include Dodoma, Arusha and the other main cities. In Uganda, it will be the same pattern but also include the oil drilling places”.
It’s currently delivering actual average speeds of 6 mbps:”It can be more but with that you can deliver HD video streaming without buffering. That’s the use case we’re putting to customers. Also the signal is very good and will go through almost any wall.”
Currently it has only hundreds of customers in Tanzania and Uganda but with its current business target markets it’s looking to get tens of thousands but with devices at the right price this will rise to millions:”When you have LTE smartphones below US$100, you will see millions of customers.”
It will start operations in Nigeria and DRC next year and already building its test network in the former. So how does he see the market for broadband in Nigeria?:”It’s completely underserved. There’s lots of wealth and businesses and the country’s not getting the broadband it deserves. The data networks here are overloaded.”
And he’s not frightened of competition from the mobile operators:”More competition will help develop the market and get device manufacturers to focus on Africa. We’ll compete on quality and reliability but not price. We won’t start a price war. We’ll offer voice as an add-on to data.”
“For existing operators with legacy networks, the business case for LTE is challenging. Your 3G investment hasn’t been ‘sweated’ yet. In the case of a greenfield operation, the business case is much better.
What about the issue of overloaded base stations as the customer base increases?:”We have a clear policy to limit the number of subscribers per base station. We will then invest in more base stations to meet the new demand. The market needs something that works. We’re offering reliability of the connection. We want to be different and keep it that way.”
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