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There are two mobile operators – Mascom and Orange – who represent 50-60% of the market by value. Ovum’s prediction is that the market will grow to 850,000. Orange’s CEO Yannick Bourdeu reckoned that mobile penetration would be 50-55% by 2010. Orange took over Vista Cellular and currently covers all the main areas of the country like its rival Mascom. (see interview with its CEO, Jose Ferreiro below.) Both operators rely on BTC’s national network and are currently not allowed to build their own.

According to Mascom’s Ferreiro, between 2001-2004 mobile prices have fallen by 11%. Mascom also claims to have the lowest pre-paid prices across neighbouring SADC countries. Interestingly it has recently announced a partnership with Visa International to implement m-commerce in Botswana.

Both operators want to run own international gateways but are much less keen to self-provision their own infrastructure. Whatever their service complaints about the current operator, they are sitting in a “comfort zone” in the present circumstances. There is no price competition except through marketing offers and promotions and neither can claim a coverage advantage as each relies on the same national network.

In the interview that follows Jose Ferreiro, CEO, Mascom talks about the success of SMS in Botswana, the prospects for 2.5 and 3G and the impact of the liberalisation proposals on its business.

What’s the current shareholding position?

The current situation is that 80% of our shares are in the hands of the Batswana people through pension funds and individuals. Econet owns the remaining 20%. The Portugal Telecom shareholding has been sold.

What’s the size of the market?

There are 600,000 subscribers and Mascom has 70% of the market and Orange has a 30% share.

Why has Orange got such a relatively small share of the market?

Let me answer the question from our point of view. Our leadership comes from our market position in relation to the customer. We’ve always brought new services into the market, things the market needs.

How much of the population is covered by your service?

80-85%. For the final 15% we are dependent on the expansion of BTC’s network and the viability of those markets. We need to install our network in places that are mainly profitable.

What are your market projections for the final size of the market?

800-900,000 is feasible in 5-7 years time. We are now reaching the fringes of the market. We now have good offers on pre-paid and cellphones. Almost every single household has one cellphone. In this way, we have reached our objectives.

What price differentiation is there between the two networks?

There is no or little difference on the published tariffs. The difference is the bonuses, the discounts and promotions. We have a more pro-active stance in this respect than our competitor. If a customer recharges with 20 pulas worth of air time, he or she will get a 10% discount. We’ve also been doing free Mascom to Mascom calls for the last three weeks.

What’s your ARPU?

I can’t give you an exact figure but it’s about average for the region.

What level of SMS traffic do you have?

Our prices are much lower than elsewhere in the region. It’s only 15-17 tebis Mascom to Mascom. This means that the revenue from SMS and other value-added services is 8%, which is of course mainly SMS. In December 2004, 16 million SMS messages were sent.

What about content services?

We have a huge portfolio of SMS content and work with local partners. Content includes: horoscopes, currency rates, jokes, news (in partnership with the BBC), ring-tones and logos.

Are you looking at GPRS or 3G?

The latter will be part of a new licence to be offered so we don’t know. Of course, we are trying to offer new technologies and services. We have to make sure that investment in a one technology is not a burden on another new technology that comes along. There needs to be time enough to amortise the investment. For example, in Portugal the 3rd mobile operator did 3G and struggled to make it work financially. However we will be one of the bidders for any new 3G licence.

What would a GPRS implementation cost in this market?

Probably somewhere around 150 million pulas.

What’s your attitude to a third operator coming into the market?

If a country like South Africa has 3 operators with a population of 40 million, does it make sense to have three in a country with 1.7 million? The situation in Botswana is not a developing one. Where will the profits come from for a third operator? More customers? That’s not very likely. We are not a duopoly. We are competing hard with new services. The man on the street won’t benefit from a third operator and the value for shareholders of existing operators (80% of whom are Batswana) will be lower.

The recommendations from Ovum on liberalisation suggest you should be allowed to self-provision your own infrastructure, compete on fixed lines and open your own international gateway. First, what about fixed lines?

We will consider that. But I would like us to be good and have an excellent quality of service in our core business. If with the deregulation I can bundle mobile and fixed I’ll do it.

What about your own international gateway?

We are talking about creating a better offer to our customers. There are two big issues: pricing and quality of service. I want better quality of service and rates. BTC’s profit from international is very high and the quality is not always good. So with our own gateway we could improve both price and quality.

For a call from Gaberone to New York we charge 5 pulas a minute, the same rates as BTC. Pre-paid customers pay at a higher rate. Typically BTC gets between 1-3 pulas from that 5 pula minute and that’s a significant margin. The consultants Ovum point this out in their report. So we would get involved in setting up an international gateway if we were given the opportunity.

Finally, what about setting up your own infrastructure?

It’s an extra cost for an operator like Mascom. But it happens differently in other markets in Africa. Our main interest is in not having infrastructure