23 August 2002

Top Story

Everyone calls Tanzania the "donor’s favourite". Its economy has shown steady growth as it has recovered from Nyrere’s experiment in African socialism. Most of this growth has focused on Dar es Salaam. Tourism was badly hit by the events of 9/11. It made an early start on deregulation and received structural funds to invest in its telecoms infrastructure. Its regulator has been in place longer than most and has initiated an effective regulatory regime for cellphones with more competition than most countries of its size. Its internet and data markets have shown continuous (if unspectacular) growth. The Government has removed import taxes on computers and appears committed to developing an ICT policy. You can almost hear the "but" coming in the next sentence....


But a dispute between incumbent telco TTCL and its strategic investor has recently gone to court and threatens to turn toxic. The issue has already become highly politicised with mud-slinging aplenty (see People). The cynics say that it’s all "politics" and that it will be resolved shortly. However the pessimists believe that unless it is successfully resolved it could sour all the favourable circumstances Tanzania was just beginning to enjoy in this sector. On a recent visit Russell Southwood tried to find out what was really happening in this key East African market.


International telco MSI agreed to become strategic investor in incumbent telco TTCL by purchasing a 35% share in the company. In exchange for the purchase of this stake, the Tanzanian government gave it overall control of the direction of the company. It agreed to pay for this stake in two tranches of US$60 million. The first has been paid but was returned to MSI to re-invest in the company.


MSI carried out due diligence on the company but agreed to make the two payments based upon the finalisation of the company’s accounts for the financial year 2000. MSI and the Government have not been able to agree these accounts and therefore are in effect still negotiating a final price. According to MSI, it discovered that "a very large proportion of the company’s recorded revenue in the year 2000 and before was never collected, and the age of much of the debt was such that it was never likely to be. The total uncollected debt due to non-Government sources amounted to 75 billion shillings at the end of 1999, rising to 115 billion shillings at the end of 2000". (Did it not know at least part of this when it carried its due diligence?) The Government and MSI have tried to resolve this and other issues through a joint MSI/Government task force but have failed to reach agreement. It was this lack of agreement that sparked the court case in London.


MSI has decided to seek an injunction in a London court to prevent the Tanzanian government from taking any further steps on the purchase agreement. MSI Marketing Director Tito Alai said:"We are not in court over the payment of the second tranche (which could be anything from zero to $60 million). We have placed an injunction to freeze the shareholding position until negotiations over the second tranche are completed." Potentially the company have been "put over a barrel". If they fail to pay the second tranche, the Government could claim the agreement had been broken and take back control of the company. The only chink of light is that the Government may (to avoid costly and damaging legal action) be prepared to revisit the agreement with the investor, particularly the size of the second tranche payment.



Growth in internet users has been hit hard by the doubling of TTCL’s rates to TS40 shillings a minute. Estimates of internet subscribers for Tanzania vary widely between 15-20,000. The main players (with subscriber estimates) are shown below. We provide these figures as "orders of magnitude" rather than as reliable statements of subscriber positions:

Telecoms isse 124 table

There are probably only around 1-2000 subscribers outside Dar es Salaam. Cyber Twiga was bought by Mobitel which has changed its name to Tele2 and Raha.com has sold a 50% share to one of Tanzania’s largest PC dealers, Computacentre. As Raha.com’s Hussein Dharsee tells it:"I’m a typical IT guy. Finance and admin? I’m very poor. We needed to bring in admin assistance as we’d grown to fast. We’ve now introduced s pre-paid system with a scratch card and nearly all our clients use it." He has consolidated his bandwidth suppliers down to one (NCS) and plans to go nationwide. It also has an ISP operation in Kenya.


Internet access rates vary between US$30-50 per month plus whatever phone access time you use. Internet Africa offers dial-up for $47.50 and wireless for $60. Local provider Acex offers a wireless-based service for US$50 a month (unlimited use) with an initial charge of US$200 for the necessary equipment: 64 kbps outgoing and 256 kbps incoming. Rates quoted do not include VAT at 20%. Africa Online claims that buying satellite access for the whole of Africa from a single supplier (Egyptian company GDBC) gives it a distinctive commercial advantage: it can deploy its bandwidth across the continent, taking advantage of the small time zone shifts on the continent.


Africa Online’s Acting General Manager, Kenyan Tony Theuri sees a mixed growth picture:"There are better rates of growth in other countries. But there are areas of growth like Mwanza with mining and tourism. Also we’ve got three ministries hooked up to the internet and Government could be the next area to provide a boost. The three biggest current markets are mining, banking and NGOs."


Local ISPs were lucky in spotting an opportunity to use wireless networks and the regulator did not intervene to stop them. As a result there are a number of ISPs offering wireless networks both inside and outside Dar.


The corporate market is estimated at 250 companies, many of whom have come into the country since it liberalised its economy. This is currently the area of greatest competition as a number of companies seek to attract this more lucrative business. Each of the suppliers we spoke to - Africa Online, Simbanet, Media Post, Acex - all claimed between 20-50 customers each. With the other suppliers in the market, this makes it a crowded place to be. Internet Africa’s Sharmila Bhatt says that it has installed 20 VSATs and has ambitions to push that figure up to 200 in the medium-term. Companies like Simbanet sell a basket of connectivity solutions including: high-speed data connectivity by wireless, leased lines or VSAT, VPNs and virtual ISP solutions. It is expanding with local partners in Nigeria, Uganda and Kenya: it is currently designing a new network for the Ministry of Finance in Uganda that it will operate for one year and then pass on to a local operator. It also currently trying to raise interest in e-Kiosk, a touch-screen facility for remote areas with information in local languages that would allow users to send voice-mail.


One operator that is stirring things up is TTCL’s bandwidth provider Simunet whose activities we will examine in greater detail in the next issue.



There are probably around 100 cyber-cafes in Dar and about 150 elsewhere. Many are run to give a job to family members and several of those we interviewed had cafes "on the side". WAN Communications has a prime location in the Steers Food Court on Akwezi Avenue. It operates 12 PCs and has three staff, alongside which it sells cellphones and accessories. A large proportion of users are non-Tanzanians. But of the Tanzanians themselves, most are aged between 14-22: most seem to use it for a little e-mail but largely for chat rooms, porn and music downloads. The majority are male. It’s open 18 hours a day and the busy times are 11.30-2pm and 4.30-8pm. Tanzanian use has been driven by e-mailing to students and relatives outside the country. Job adverts now sometimes feature an e-mail address as a way to send in a C/V.


Access costs between TS500-1000, with hotels charging TS3000 upwards. A 128K leased line from Simunet has recently been reduced from US$720 (inc VAT) a month to US$432 (inc VAT). Rent on a city centre premises may be as high as US$1000 per month.


VOIP has been banned by the regulator who followed the ban with a crackdown on operators. But the market for VOIP is in rude health although it appears mainly to be used by individuals. One of those we interviewed showed us with some pride a connection device for VOIP that he had just imported. As one local source told us:"They’re looking at ways of blocking it but it’s impossible to control."Unfortunately the position on VOIP is unlikely to change until the end of TTCL’s exclusivity in 2005.


The market for web design is just beginning to develop. Most ISPs offer web site design as an add-on service to customers as they are often unfamiliar with the process of commissioning this kind of work. There are only a small number of "serious" web design companies, perhaps 2-3. Metrocomia is currently doing the web site for the local subsidiary of Vodacom. Major sites of this kind may cost anything from $2000-30,000. As Michael Selch Jensen sees it:"We’ll never be the cheapest solution but we have good project management and documentation skills." There are large numbers of companies at the bottom end of the market where small companies are anxious to acquire a web-site for the first time. Acex offers 5 pages for $599 including domain registration and five e-mail addresses. Obviously bigger clients pay more. There are no e-commerce sites but according to Nisha Sanghiva:"E-commerce will come. It’s only a matter of time."


With five operators - Vodacom, Mobitel, Tritel, Caltel and Zantel - the mobile market (total: 300,000 vs lanlines: 160,000) has been very competitive. However most of the dynamic in the market has been provided by Vodacom whose user base of 180,000 far outstrips most of the other operators. From November 2000, it will offer road coverage on key routes: for example, Dar to Ngorogoro, Namanga and Rombo.


One of the biggest challenges for the regulator is what to do when TTCL’s exclusivity ends in 2005. No formal discussion has yet taken place but is due to start before the end of this year. The challenge for the regulator is how to open up competition in ways that will maximise investment and also bring down prices. It needs to find the landline equivalent of Vodacom: a dynamic operator who will seek to expand the market, rather than simply chip away at the incumbent. The difficulty is that there are few landline operators with that kind of attitude.


Coming in a future issue: An interview with Soft Tech’s Sharmila Bhatt.