SONATEL’S DOMINANCE A MIXED BLESSING FOR DEVELOPMENT OF SENEGALESE MARKET
Senegal has had privatisation without an accompanying dose of liberalisation. The privatised SONATEL dominates almost any telecoms or internet market worth anything in the country. Even with the end of its monopoly in 2004 no-one is holding their breath for any change: everyone in the ICT private sector wants it but does not really believe it will happen. SONATEL simply generates too much money for the Government, even with a minority shareholding. Russell Southwood looked at how the market is developing on a recent visit.
Senegal may only be a country of ten million people but it is one of the most significant mid-scale markets in Africa. Dakar is one of Africa’s leading cities (with 2 million inhabitants) and it has a cosmopolitan elite and substantial university institutions. It is already a genuine communications hub for a significant slice of West Africa and it also has the potential to build itself into a regional gateway for its neighboring countries. For all these advantages it has some of things that afflict large cities everywhere: impossible traffic jams; infrastructure that struggles to keep up with growth (particularly transport) and high rents and wages. As many will tell say, "you either love Dakar or hate it".
The main investor in its incumbent telco is France Telecom (42.333%) but the Government retains 27.67% of the shares. The remaining shares are split between external investors and the general public (20%) and staff (10%). Note that with only 43% owned by France Telecom, it remains a Senegalse company.
But like the Baobab tree, little grows in its shadow so its dominance is a mixed blessing. On the plus side, the company is very profitable and delivers regular dividends to its shareholders. Its senior management team is all home-grown, not a common thing when the words strategic investor are uttered.
In operational terms, it has adopted a progressive attitude to international pricing and wholesaling. It was amongst the first pioneers of VOIP and the first to reach agreements with the numerous grey market operators. Its competitive international pricing means that there is almost no "call-back" market. Its wholesaling of domestic minutes has led to a spreading of wealth through "telecabines" whose presence is palpable throughout Dakar. This use of wholesaling channels is a model of its kind and has guaranteed SONATEL much sympathetic coverage. In all these ways, it behaves for all the world like a competitive company would.
So if it quacks like a duck, why isn’t it a duck? Because on the negative side of the balance sheet it has created de facto monopolies in every major market. In the mobile market, it currently has 77% of total subscribers. It fought a long battle to avoid interconnection with its sole competitor Sentel. In the internet market, its subsidiary Sentoo has around 80% market share. In each case it has used its considerable financial and muscle to ensure that this was the case. It has direct access to international fibre through its share in SAT3 and thus controls the commanding heights in the market. It is also busily reinforcing this control by extending fibre to neighbouring countries (more of which later) that will both bring down international access costs for them but also give it a significant degree of control over international pricing in these countries.
The regulator, Agence de Regulation de Telecom (ART) is apparently talking about licensing a third operator but this likely to be another mobile operator. And the Government? Well, the Government is staying very quiet on these matters as well it might. It has nothing much to gain by having opinions at this moment. No-one is talking about allowing an aggressive operator &SHY; like say MTN or Vodacom - with deep financial pockets to take on SONATEL.
MOBILE STILL HAS LARGE POTENTIAL TO COME
Sonatel has 280,000 fixed lines and in most areas there is only a waiting time of days or weeks to get a new phone. But there is not really a residential market of the kind you might see in the developed world. Most people prefer mobile phones despite the cost premium because they value their portability. In simple terms, it’s almost generational. The head of the family might retain a fixed line but all his nearest and dearest have mobiles.
The result has been that Sonatel has captured half a million mobile subscribers and Sentel 150,000 subscribers. 80% or more of the market is pre-paid. Local estimates are that the total market is a million potential subscribers.
So why hasn’t Sentel made more of a dent in the incumbent? Informed observers believe that it has neither the management nor the marketing strategy to achieve a breakthrough. It simply seems to follow where SONATEL leads. To be fair, it has had its fair share of troubles.
A "misunderstanding" at its inception almost led to its licence nearly being revoked and SONATEL fought a fierce rearguard action to avoid giving it interconnection. This must surely count as almost a knock-out blow in a situation in which one in seven Senegalese has a SONATEL mobile (brand name Alize). Also, being first into the market by several years gives SONATEL enormous advantages in terms of coverage. Whilst 90% of the population is now covered, SONATEL is considered to both have better coverage (particularly in the northern Region Fleuve) and crucially, capacity.
SONATEL is developing an international gateway that will provide a fibre link to Gambia, Mauritania and Mali. The Mali section was laid along the power lines to the dam at Manantali and this connects to Dakar via the Region Fleuve. Traffic is expected to flow shortly once the rates have been agreed between SONATEL and the two Malian operators. There is also a connection to nearby Gambia.
INTERNET MARKET; THREE LOSSES AND REST SHADOW-BOXING
The number of ISPs has been reduced to 13. There have been three significant losses: WAIT ( not a great name in English), Michel Mavros’ Metissacana and the ISP operated by John Metzger. Most have neither the management, bandwidth or finance to compete with SONATEL.
As one informed local observer put it:"It’s no longer profitable for most ISPs with such a small share of the market open to them." Sentoo, Sonatel’s ISP has around 80% of the market and most other ISPs are now forced to occupy niche spaces. For example Arc (with perhaps 10% of the market) focuses on SMEs. The only other player of any scale is Avant in third place. The market is both saturated and stagnant. The widescale success of cyber-cafes (which are both easier and cheaper to use than a home connection) means that there is little incentive for a person to buy a dial-up subscription.
SONATEL is offering DSL lines but it is relatively expensive and limited to a handful of commercial districts in Dakar. The offer appears to be aimed mainly at smaller companies wanting more bandwidth without the skills and expertise needed to take on a leased line and a server.
Cyber-café access varies between CFA250F-CFA500F per hour: prices have come down a lot in the last year and several cafes are now using DSL connections. As ever the difference in price is accounted for by location, bandwidth capacity, comfort and number of machines. The best (provided by SONATEL brand, Telecom Plus) is every bit as good as anything found elsewhere. There are about 20 large scale cyber-cafes with more than 15 machines.
In 2001 there were 180 .sn sites and there around 250 today. There are in fact 962 registered sites but most of these are international companies simply buying all combinations of their name as a precaution against cyber-squatting. The .sn domain is run by the University.
There are almost no e-commerce sites despite a fairly well-developed finance sector. The only one seems to be Taf-Taf, a craft selling site which uses UPS for despatch and has payment certification in France. There is as yet no Senegalese way of arranging payment certification. However as tourism is one of the main strands of the economy, it is hardly surprising that a number of hotel sites offer online reservation.
Two banks &SHY; Banque Senegalo-Tunisienne and Societe Generale de Banque au Senegal have brought internet banking platforms developed by the French company Diagram Informatique for BNP. DGCNet (see below) did the localisation work.
SONATEL tried a WAP site with standard information services on cinema and money but closed it down due to lack of demand. This may say more about the usability of the WAP platform than about the scale of the market. SMS text messaging does not appear to be widely used and there are as yet no SMS-value added services.
There are a small number of web design and applications companies and the usual large number of freelance individuals with variable skills. The larger companies include: DGCNet.com, PeopleInput, iMedia and Iris Agency. As everywhere in Africa, ISPs tend to offer design as an add-on to help capture inexperienced customers. SONATEL is in the market with its SONATEL Multimedia subsidiary. Everyone says that they are tending to drive client ambitions because they have greater knowledge than their clients.
With 20 employees PeopleInput is probably one of the largest, describing itself as doing web integration, consultancy and training. It has an impressive list of clients that incluces: Elton Oil Company, Air Senegal International, Groupe CSE, Immobis, APDF, Les Pages Jaunes de Senegal,the regulator ART, Chocosen and Banque Senegalo-Tunissiene. Prices fall into three broad categories: a simple web site (FCFA 3-5 million); a transactional site (FCFA 8-15million) and web sites based on real-time information systems (priced according to client requirements). It believes that the biggest competitors in the market are the student freelances who offer to do sites for FCFA 200,000.
DGCNet offers web site design, CD-ROM development and communications support. Its clients have included banks, estate agents and projects from L’Agence Francophonie. It has also produced a CD-ROM for the Fondation Goree Institute which includes video footage. Price depends on the type of client: an estate agent might be charged FCFA 6-700,000. Prices are open to negotiation. How do they distinguish themselves from everyone else? According to Daouda Guindo on the basis of their design skills and their use of Flash.
Our thanks to Olivier Sagna of Osiris and his ever excellent web site: