Mauritania: arrival of third operator will shake up cosy duopoly

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Mauritania’s new third operator has already paid a staggering USD107 million for its unified licence. And all this money for a country that only has a population of around 2.75 million people. Currently there is a fairly cosy duopoly on mobile between the former incumbent Mauritel (now owned by Vivendi’s Maroc Telecom) and Mattel (owned by Tunisie Telecom. In other key areas like international bandwidth and the Internet Mauritel has a de-facto monopoly. The new operator Chinguitel has a unified licence and will start operations in December 2006.

The sum for the third bid has raised eyebrows both locally and elsewhere because the runner-up France Telecom (that owns Sonatel in neighbouring Senegal) only paid US$36 million. However Chinguitel looks set to invest a significant sum in making its operation work. And in doing so, it will force the other two operators in the market to raise their game. It has recently appointed a Mauritanian CEO currently working in a telecoms company in Saudi Arabia. Chinguitel is betting that the economy is set for some spectacular growth with the impact of oil (which has recently started pumping from offshore fields) and a newly opened copper mine.

The new entrant is a consortium of Sudatel (with money from the sale of the stake in its mobile operation) and Gulf state investors. It is rumoured to be planning to spend US$40 million on a network that will have 150 base stations from day one compared to the 160 it has taken Mauritel several years to build up. Mattel has only 80 base stations although it is also engaged in a rapd build out to get its coverage to match Mauritel's.. To meet the competition, Mauritel is also ramping up its network spending and modernising its network over the 2006/2007 period.

A key problem for all operators is access to international bandwidth. An international fibre connection is available through Sonatel but the Senegalese incumbent is charging a significant premium for the transit to the SAT3 landing station. Competition may force the solution of this problem. It would be easy for Mauritel to build a fibre link to Nouadhibou on the country’s northern border. It is then only a comparatively small distance between there and Laayoune, the western-most extension of Maroc Telecom’s fibre network. This would give it access to international bandwidth that was significantly cheaper.

In order to compete, Chinguitel would either have to get regulatory dispensation to share the resulting cheaper prices on Mauritel’s fibre link or build its own. It has two possible choices: go north to Morocco and build a submarine spur to the Canary Islands or build a link to Mali and off to a cheaper SAT3 destination overland. The latter is probably less feasible given the distances and the generally higher prices on SAT3 further along the pipe.

The incumbent’s mobile subsidiary Mobitel Mobile has 500,000 subscribers and its only competitor Mauritel has 400,000 subscribers. However, these figures are misleadingly optimistic as many Mauritanians have two phones because the interconnect rates between the two networks are very high. Industry insiders say there is a a mid-term potential of 1.2 million subscribers.

Currently mobile coverage is limited to coastal strip between Nouakchott and Nouadhibou and the “route de l’espoir” to Mali and along the Senegal River that makes up the frontier with southern neighbour Senegal.

Mattel will launch a GPRS service later this year (probably ahead of the Chinguitel launch) aimed at high-spend, post-paid customers. It will start the service in Nouakchott and roll-out the service once that has been established.

Mattel claims to be 30% cheaper than Mauritel Mobile but this is a relatively recent price differential. Both operators have paid fines for quality of service issues but as local industry sources point out, these fines are relatively modest alongside the sums of money each operator is making.

Mattel seems to have adopted a minimum investment, maximum return approach that has worked well with a duopoly where each player shadows the price and service behaviour of their competitor. However, Mattel chose not to bid for any of the recent round of licences and it looks like that it does not have the money to keep up with the spending race that will be initiated by Chinguitel’s entry into the market. As a result, it is probably the operator with the most to lose as competition hots up.

Internet access is only available in Nouakchott and Nouadhibou and that covers only about 40% of the population.

There used to be five ISPs but that number has gone down to two: Mauritel and Top Technology. The latter is having a hard time making any money. Mauritel has squeezed all Internet competition out of the market. Its charges meant that ISPs were left with a margin on the supply of basic bandwidth of only US$7 per subscriber. Since some had only 200 subscribers, the complete impossibility of creating a business model is apparent. Mauritel has also refused to supply DSL services to the one remaining independent ISP.

There are 3,000 Internet subscribers, of which around 1,000 are DSL subscribers. Many of these subscribers are using Skype to speak to friends and relatives abroad. DSL prices are very high: US$95.69 (without tax) for a 256K connection as the roll-out is essentially seen as targeted at the corporate market.

However the emergence of a third competitor may force Mauritel to adopt the strategy of its parent in Morocco. It has used the lowest DSL prices on the continent (US$22 compared to Mauritel’s $95.69) to get the highest number of DSL subscriptions on the continent (340,000). The tactic has been a “land-grab” to deny its competitor Meditel the opportunity to get established. However before low prices can really emerge both Mauritanian competitors will have to find lower international bandwidth prices.

All of this investment and competition can only be good news for Mauritian consumers until both Mauritel and Chinguitel have effectively forced Mattel off the road.