Liberia: four mobile companies bring lowest prices in West Africa

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This week saw the first ICT conference in Liberia and the publication of the country’s draft ICT strategy. It was a five day event that included public and private sector slots and a day’s presentations from Cisco. It was one more sign that the country is coming back to life after a destructive civil war destroyed much of its infrastructure, including its electricity supply. Security is still being handled by the UN mission UNMIL but the newly elected Government has expressed a determination to improve things and diaspora Liberians are returning to help. Russell Southwood has just returned and reports on changes in the telecoms sector.

Like a lot of countries emerging from civil war, developments in the telecoms sector have not been entirely negative. Four competing mobile operators have produced some of the cheapest domestic and international calling rates in the region. They will achieve 80-90% coverage of the country’s population in the next two years despite formidable obstacles imposed by the lack of roads. Each mobile operator has its own network. All operators charge per second and by the end of 2007 will each have some form of Internet offering.

Although four operators is a lot for a small market, it does not seem to be too many and although prices are now largely settled at relatively low level, good levels of profit exist for three of the four operators. As one told us:”I’ve worked in the GSM sector for many years. I don’t believe there is a GSM company that isn’t making money. It only relates to how much money you put in.”

The incumbent LTC has largely disappeared but there are plans to revive it. Without a fixed line operator, it has passed to broadband wireless operations without having had dial-up. The regulator, the Liberian Telecommunications Authority will be put on a new basis when the Telecommunications Act 2006 is passed.

The four mobile operators are: Lonestar Cell (now owned by MTN), CellCom, Comium and Libercell. In terms of subscriber numbers, there is little agreement about subscriber levels as each gives numbers based on a slightly different basis. But any fair outside would probably say that Lonestar was the largest operator with CellCom chasing on its heels. Whilst everyone except Libercell itself agrees that it is the smallest operator in the market.

Market leader Lonestar says that it has 240,000 connected subscribers. It was originally owned by Lebanese-owned company Investcom until South Africa’s MTN bought the company. For the moment it will retain its Lonestar brand, having narrowly missed changing it to Areeba before the company was acquired.

It plans to have 100 base stations by the end of 2007 covering around 80% of the population. With further investment, this will rise to 90% of the population in 2009. Geographic coverage will then be somewhere between 40-50%. It has six sites in rural areas linked by VSAT.

It has just started content services and will invest $1.2 million in GPRS/EDGE, to be launched in mid 2007. No pricing structure has yet been agreed for the new service. This is part of a total investment of $10 million over the next two years to ensure that it retains its market position and increases its market share. Its rates to the USA are US40 cents a minute with bonuses that bring the rate down to US32 cents a minute. It believes that the market could grow to just over 600,000 by the end of 2008.

CellCom was the last operator but has rapidly caught up and looks set to be the main challenger to the market leader. It is a company set up by American and Israeli investors, operated by the Israeli LR Group. It has invested US$170 million since it set up in 2004.

Its latest market offer is a phone costing just $27 that is bundled with enough minutes to make it effectively free. It says this is the cheapest offer in the market. On the basis of subscribers using its network at least every month over two months, it claims 174,000 subscribers against 171,000 for Lonestar.

On network calls are only US9 cents but US19 cents to other operator’s networks. The operators pay each other US12 cents to interconnect. A call to the USA is US30 cents and US35 cents to Europe. An SMS on network is US5 cents and double that to other networks.

It offers Internet access using Wi-MAX over 2.4 or 3.5 ghz with a flat rate service with 128K per second costing US$120 a month. The data network will be completely in place by the end of June 2007 and it will set up a special NOC with a billing system so that it can charge by bandwidth consumption.

Lebanese-owned Comium claims 125,000 subscribers and says it is the same size as CellCom. 30% of its calls go to other operator’s networks. By the end of 2007 it claims that it will have covered 90% of the population. It offers a wireless broadband service through a separately owned ISP in the group and says it has 900 subscribers for this service. (Market sceptics believe that the overall size of the market is no more than 1-1500 subscribers).  It will soon be installing GPRS.

Its international calls cost between US40-50 cents depending on destination and offers a roaming rate of US27 cents between its network and its sister Comium network in neighbouring Sierra Leone.

It has an external value-added provider that offer data content services like horoscopes and ringtones. Currently there are about 3,000 users for these services and it only provides a very modest income stream. Not surprising considering that only 10-15% of the population are literate.

The smallest operator Libercell is owned privately by a Lebanese family. It offers Internet access over GPRS for $1 per meg and claims 5-6,000 subscribers, most of whom are business people. It covers 80-85% of the Counties (the name of the local administrative area) and says it will roll out to all larger settlements in the counties before rolling out along the roads to them. It believes the market could grow to between 1-1.5 million depending on the state of the economy.

It has yet to reach breakeven point but the company says it will go into profit before long and it sees itself as the technology leader with the introduction of GPRS/EDGE.  The danger it faces is that the new owners of Lonestar (MTN) has deeper pockets than a local family and it may find itself squeezed. On the other hand, it may simply become the acquisition target of another pan-African operator if the country stays stable.

The wild card is the planned revival of the currently inactive incumbent LTC. It has installed a CDMA switch sold to it by ZTE, although the line capacity is relatively modest. The question has to be: why revive an incumbent when you don’t have one? The World Bank and the regulator are both against the move. The company owed $15 million but the current management claims to have got rid of these liabilities.

It is investigating two options: firstly, it is looking to get in an external investor or if that is not possible, secondly bring in a short-term manager. One of the few carrots is that under the terms of its original licence it has a mobile licence. It will have responsibility for the national and international backbone. There was much talk of connecting to SAT3 which seems very unlikely. Sources say that it is currently talking to Etisalat-owned Atlantique Telecom with a view to the company becoming a strategic investor.

The only way value can be added to wrecked incumbents after a civil war is by reverting to a “special privileges” or monopoly regime. No-one will put money into a non-existent company in a high-risk country without some kind of monopoly guarantees. There is already some talk of re-instating the monopoly international gateway. But whilst there was much talk at the conference about leapfrogging forward using ICT, moves of this kind will take any idea of a competitive Liberia back 5-10 years. This would be disappointing as the kind of energy found in the local private sector needs encouragement rather than further barriers to be placed in its path.