New Market Study Published: Tanzania Telecommunications Report Q1 2014

Growth in Tanzania's mobile market remains slow for a country with a penetration rate of less than 60%. BMI attributes this to limited network coverage in remote and underserved areas, where the majority of the population live. Although some operators have begun to ramp up investment in expanding their networks to rural areas during H213,, the government's decision to increase taxation of the telecoms sector is a major disincentive to network expansion, as it is likely to diminish demand for mobile services in low income areas. Therefore, in the short term we believe operators are more likely to pursue revenue growth through the promotion of advanced data services in urban areas, which will offset the impact of declining revenues from traditional voice services and decelerating subscriber growth. However, as the data market in urban areas becomes more saturated and incomes throughout the country rise, over the longer term we expect operators to accelerate rural network roll-outs in pursuit of new subscribers.

Full Report Details at
- http://www.fastmr.com/prod/754682_tanzania_telecommunications_report_q1_2014.aspx?afid=303

Key Data

* The mobile sector grew by 7.1% in the year ending in June 2013, compared to 9.5% the year before, as the disconnection of inactive SIMs in Q213 was offset by strong subscriptions growth in Q412.
* Mobile ARPU appreciated for seven out of the last eight quarters, with q-o-q growth of 11.6% and y-o-y growth of 17% in Q313.
* M-commerce users have continued to expand, Vodacom reporting approximately 5.5mn M-PESA users on its network, almost half of its total subscriber base.
* Growth in the fixed-line sector remains volatile, with a decline of 3.7% in Q113, followed by only marginal decline of 0.4% in Q213.

Risk/Reward Rating

Tanzania's score remained unchanged at 39.4 this quarter, and it remained in 16th position on the BMI telecoms Risk/Reward Ratings (RRR) table for Sub-Saharan Africa. Tanzania's rating is boosted by its comparatively high Industry Risks score, although this could be negatively affected in the government succeeds in reclaiming full ownership of incumbent telecoms operator Tanzania Telecommunications Company Limited (TTCL). Tanzania's weakest rating is in the industry rewards category, reflecting a sharp slowdown in mobile subscriptions growth and the downgrade to our five-year forecast.

Key Trends And Developments

According to a statement to shareholders on November 26 2013, Vodacom Group signed an agreement to acquire an additional 17.2% interest in Vodacom Tanzania in a deal worth ZAR2.5bn (US$247mn).

Vodacom will subscribe for new shares in private investment firm Calvary, an indirect shareholder of Vodacom Tanzania. The transaction will increase Vodacom's stake in its local subsidiary from 65% to 82.2%, an indication of the company's positive outlook for the Tanzanian telecoms market.

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