Mozambique – Market struggles with massive financial scandal, moratorium on LNG investment and lack of open fibre markets

26 April 2018

Top Story

Mozambique is one of those African countries that seemed to be doing so well but it no longer fits the “happy-clappy Africa Rising” story. The Government is under a cloud because over US$500 million cannot be accounted for and until it is, a major LNG investment in the north of the country will not go ahead. Russell Southwood spoke to industry sources who told him people are having to choose between eating and airtime.

The financial backdrop for the telecoms and Internet sectors in Mozambique is absolutely terrible. According to a report in the Financial Times in June 2017, state companies at the heart of Mozambique’s debt scandal failed to account for at least a quarter of more than $2bn in contentious loans, according to an auditor’s report. Kroll, the New York-based investigator, found that the three companies — all owned by Mozambique’s intelligence agency — also paid $713m more for fishing boats, naval vessels, radar and other maritime security equipment than an expert evaluation said they were worth.

As a result, the IMF, the World Bank and other development partners have put their partnership with the country’s Government on hold until it is clear what happened with the lost funding over the last two years. It is almost one year after the Kroll audit and Government has yet to act on its findings.

The massive LNG plant plans for the north of the country are waiting for the green light from the IMF to go ahead. The company involved wants to invest US$15 billion. As one of my industry sources told me:“Until that happens, we are struggling.” Meanwhile the country’s currency has devalued by almost 100% from MT30 to the US dollar to MT62 to the dollar.

The market is relatively easy to describe in operator terms. There are three operators: mCel (state-owned); Movitel (owned by Vietnam’s Viettel) and Vodacom. At the end of 2017, there were 13,585,907 subcribers. mCel and Movitel have a 30% market share and Vodacom has 40%. The big loser has been mCel which has lost most subscribers in this three-way fight.

The market is very tight:”The mobile operators are struggling because people have to make a decision: do I buy a chicken or airtime? mCel is no longer the giant it was in the past. They are not making as much money as in the past. Almost everyone uses 2-3 SIMs. You work out which provider is giving you the better price for calls and use them. The same happens with data”. So some part of the much publicized 11% growth in 2017 is probably down to multiple SIM purchases.

Because of the market pressure on mCel, the Government is merging it with the state-owned fixed line provider TDM. A new, smaller Board has been bought in to run the merged company:”The merger will big and difficult. mCel was never a parastatal and worked as a full private entity. TDM was always run as a legacy state operator. Creating one company will be a big task.” The Chair of the new Board says that the merger will be completed by December 2018:”I don’t know if they will sell it off or not. At some point they will have to sell it or find a manager.”

In the lucrative corporate data market things are also tight:”We are simply shifting clients between us and fighting over the same clients. Shifts are often based on individuals moving company and changing provider at their new company to the person at the provider they were friendly with in their previous company.”

There are 24 licensed data operators but the main players are the three mobile operators, IS, Vodacom Business, Moztel (which offers services to small residential customers and SMEs) and triple-play operator TV Cabo (which is 50% owned by TDM). There is widespread industry talk of consolidation through acquisition.

In an effort to differentiate itself, one of the corporate data plkayers IS has signed an agreement with a Tier 4 data centre built by Vaninga & Investimentos Limitada three years ago. It was never launched and initially they wanted to sell it but a price could not be agreed so now IS is the sole entity introducing clients into the data centre. It also introduced cloud services last year that enable clients to avoid investing ahead of growth in physical servers.

Three operators - Vodacom, Movitel and TDM - have national fibre networks that connect at least 50% of the country’s districts but they are not interconnected. If you need a route, you buy from two different providers. Operators could offer deals where each operator provided back up when one link when down (back-to-back deals) but the market is not yet mature enough. The proposed new telecommunications Act also talks about shared infrastructure “but the market is also not yet mature enough for that.”

FTTH/X has been deployed in the capital Maputo and Beira but it is not as widespread as it should be. “All high rise buildings in Maputo are connected to fibre.”

Internet prices have come down a lot but they are much higher than in more competitive markets like South Africa and Kenya and prices are very much higher outside Maputo. Operators charge by distance and to get to say Pemba, it’s 3,000 kms. The slow uptake of internet in places like that is due in large part to the high prices being charged regionally. “Prices will have to come down over the next 2-3 years.”

There are two landing stations for international connectivity – EASSy and Seacom – but the landing party in each case is the state-owned operator TDM so there is not the kind of competition found elsewhere in Africa.

“Mozambique lacks an Open Access fibre provider. We don’t have a Dark Fibre Africa or Liquid Telecom. The operators have built fibre for themselves. They feel that if they can make some money on the side from it, all well and good but it’s not their core business”.

Wi-Fi hot-spots are much more widely available in places like cafes and restaurants but there is no Government or City-sponsored programme of Wi-Fi hot-spot roll-outs:”There’s nothing like in Cape Town where there’s free Wi-Fi.”

Despite all of this, social media has taken off as elsewhere in Sub-Saharan Africa.

Facebook (1.8 million users) and What’s App are very big in Mozambique:”People tend to turn off data on their phone until they find a free Wi-Fi hot-spot. It’s becoming a problem. People talk bad stuff about people on What’s App and that’s a big problem”.

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