With three telecom operators that each run fixed and mobile services, Morocco is more advanced than many of its regional peers.
And while the incumbent operator, Maroc Telecom and second player Meditel had until recently enjoyed a duopoly in the GSM market, this changed when the country’s third telco, fixed wireless operator Wana, was granted Morocco’s third mobile licence in February 2010.
The results of this move demonstrated the dramatic effect a third player can have on a market, and Morocco’s mobile subscriber base increased by 6.7 million in 2010, its fastest rate of increase to date, according to a report from Nomura Equity Research. Mobile penetration increased by 20% in 2010 to reach 99% by the end of the year, Nomura added.
Devoteam, a research and consulting firm based in Dubai, puts the mobile penetration even higher, estimating that it reached just over 100% penetration by the end of 2010. The rise of Wana, which operates under the brand name Inwi, has been largely at the expense of Maroc Telecom (MT), which has seen its share of the mobile market decline from about 60% in 2009 to 52.8% by the end of 2010, according to Nomura. Indeed, by the end of 2010, Wana had a 13.5% share of Morocco’s GSM market, while Meditel also experienced a decline in its market share.
Wana’s rise in the GSM market was aided partly by its “disruptive” offering which included per second billing, helping it to attract 5 million customers within a year, according to Ben Hayen, head of sub-region North West Africa at network vendor Nokia Siemens Networks.
However, while Morocco’s mobile market is now fully penetrated and offers little room for growth, huge potential remains in fixed-line telephony, and both fixed and mobile internet services.
Indeed, fixed telephony penetration was around 12% by the end of 2010, with Maroc Telecom holding the majority of the market share, according to Toufik Hartani, associate partner, Devoteam. Internet penetration per capita is also extremely low, at around 5.9% by the end of last year with a base of just 1.8 million internet users.
This is one of the main reasons behind the rapid growth of 3G services in Morocco, where each of the three main operators now holds a 3G licence. “There is huge growth in terms of 3G internet. At the end of 2010 there were more than 1.3 million subscribers, and the year before it was 700,000,” says Hartani.
“Uptake was aggressive in 2008 and 2009, and it almost doubled from 2009 to 2010.” Hayen is familiar with Morocco’s “craze” for 3G connections via both dongles and handsets and believes the rapid growth will continue unabated.
“In the next few years, Nokia Siemens Networks expects a much stronger demand for mobile broadband services, fueled by cheaper devices and smart phones, fierce competition and the government’s willingness to democratise broadband,” Hayen says.“Operators will need to support this growth. They will need to answer the demand for network bandwidth and would certainly need to move to new mobile broadband technologies such as LTE that offer higher speeds while lowering the cost.”
Indeed, Hayen sees “a significant and increasing trend” towards the use of data intensive services, particularly among younger people who favour services such as social media, and music and video downloads. “With each operator offering a portal to download music and videos, this trend is fuelling the demand for better bandwidth and mobile broadband,” he adds.
Nokia Siemens Networks expects to see “a specific growth sector” emerge from the transition to mobile broadband. “The user demand is driven by people’s need for mobility, internet and enterprise applications, availability and throughput of mobile broadband networks, and the development of more and more advanced devices – at affordable prices,” says Hayen.
However, outside of mobile broadband, internet access is less developed. Indeed, according to Nomura, the ADSL market in Morocco is under-penetrated compared to the rest of the Middle East, with a broadband penetration rate of just 12%.
Nomura also points to an ICT study from 2009 that indicated that about 69% of internet access happens out of the home, in places such as internet cafes. However, while fixed internet penetration might be low, Morocco’s ADSL speeds are above those of some of its regional peers. Indeed, 85% of ADSL connections in Morocco have speeds of 512Kbps or more, and 66% had speeds of more than 1Mbps by the end of 2010, according to Nomura.
While internet penetration remains relatively low, the many improvements made in Morocco’s telecom sector leads Hayen to describe the market as “one of the most developed markets in Africa”, and one which offers plenty of scope for growth.
“This is primarily due to the government’s general focus on making telecommunications and information technology a growth driver of the local economy,” he says.
He adds that several initiatives have been launched by the government, the latest being “Plan Maroc Numeric 2013”.
“The plan’s ambitions are to connect all Moroccan schools and a third of all households with the internet in five years time. The plan also aims at launching a strong e-Gov services program that will allow Morocco to improve its position in the UN e-Gov Index. These initiatives are expected to generate a further $3billion in GDP,” he says.
While competition has already helped lower the cost of services across the board, Morocco’s regulator is keen to do more and has set a plan to curb mobile termination rates (MTRs) over the course of the next two years, according to Nomura.
The termination rates are currently set higher for Meditel and Wana, giving them a chance to compete better with the incumbent. The termination rates for the three telcos will “likely converge” in 2013, according to Nomura. Hayan says the regulator’s aim is to “progressively cut-down” the inter-connection fees up to 70% by 2013.
“Those two factors will result in increased competition and erosion of price per minute. So as a conclusion, operators need to find new sources of revenues and mobile broadband is definitely one of them.”
However, Nomura’s research indicated a potential harmful side-effect of the regulator’s policy. “A more harmful impact would be if Wana and Meditel take advantage of lower MTRs to cut tariffs. A higher termination rate for both operators relative to MT would mean that both the operators will gain at the cost of MT if they are able to attract greater traffic to terminate on their own networks.
“Termination rate may yet to see further regulatory readjustment as the regulator would analyse the impact of MTR cuts on the market in the second half of 2011,” the research report from Nomura stated.
It is not just new services such as 3G that offer potential for Morocco’s telecom operators. The telcos also stand to gain from improving the quality of their existing services and by differentiating between different customer segments.
“To improve their revenues, operators will also need to customise their offerings to suit different customer segments and different usage trends,” Hayen says.
“To do this, they will need to deliver appropriate quality of service to improve the individual customer experience. Currently, subscribers are being charged a flat fee for mobile data services. This means that premium customers, who prefer better quality of service, are being unfavourably affected,” he adds.
Hartani agrees, and points to the dominance of pre-paid services as evidence of the potential for operators to tailor services for more specific customer needs. “Definitely the potential for operators lies in a better understanding of client requirements. Today you have a distribution on prepaid of around 96%. The potential is there for more postpaid, and for operators to leverage on specific segments.”