Sudan, after years of civil war , was separated into two countries last year. The telecoms industry is gradually adapting to the split, and there are different operators that function in the region.
The oil-rich southern Sudan has been in the midst of a brutal civil war with the North for many years. The South had very basic telecommunication infrastructure, and heavily relied on high frequency radio and Thuraya satellite phones. According to independent telecom research company, BuddeComm, the high frequency radio communication costed $1 for five minutes and calls via the Thuraya satellite phones were charged $2 per minute.
In 2005, peace came, along with an autonomy agreement for the South. The agreement involved sharing of oil revenues and reconstruction to the tune of 600 million Euros. This brought about a strong need for network operators and equipment suppliers. The Sudan People’s Liberation Movemnt (SPLM) was to issue new telecommunication licences.
The three main players in North Sudan are Zain, MTN and Sudatel. According to Josep Que, partner, Delta Partners, Zain leads the market with close to 52% market share. He also mentioned that mobile penetration was quite high at nearly 70%. It was also above the regional average of 17% in Ethiopia, 36% in Chad and 6% in Eritrea. Que also warned that competition and price wars are impacting operator revenue in Sudan with the ARPU dropping from $10 in 2009 to $6 today.
In South Sudan, the picture is a little different. The new state has five mobile operators. These are Vivacell, Zain, MTN, Gemtel (Lap Green) and Sudatel, which is not currently in operation. In this market, Vivacell has a 38% market share, though mobile penetration is very low, at 19%. Que forecasts that the country will experience a strong mobile take-up in the coming years, to bring mobile penetration to 35% by 2015.
Jonas Zelba, research analyst, ICT practice, MENA, Frost and Sullivan says that he anticipates high growth in all telecom segments in Sudan. He said: “The number of mobile subscribers will double and reach 56.8 million by 2018. Competition between three major mobile operators namely Zain, Sudani and MTN has led to decreased tariffs.”
Moreover, cheaper handsets and SIM cards make mobile phones affordable and allow more people access to them.
Fixed line penetration however is very low, nearly 1%. Thabit and Canar Telecommunication are the only fixed service providers in Sudan. Zelba says: “According to Frost & Sullivan, while two fixed-line operators Thabit (Sudatel) and Canar (Etisalat) have shown small signs of growth in 2010 and 2011, the uptake of fixed-line services is not expected to increase noticeably.”
The Sudanese market however is experiencing a rapid increase in the number of internet users. According to Que from Delta Partners, Sudan has more than four million internet users, and 21 ISPs. The main providers in the region are Sudani, Canarel, MTN and Zain. There is quite a high internet penetration in the region of nearly 9%. This is in stark contrast to neighbouring countries that have a penetration of between 1% - 5%.
Que says: “This is mainly driven by mobile and dial-up connections with fixed broadband subscribers only reaching 74,000 in the entire country. The difficulty of rolling out fixed line infrastructure across Sudan’s diverse terrain has inhibited the development of the country’s broadband market.”
According to BuddeComm, Sudan is connected via a wide network of different submarine cable infrastructure. The SAS-1 submarine cable between Port Sudan and Jeddah in Saudi Arabia, a joint $20 million project between Sudatel and Saudi Telecom Company which was launched in 2003. It has four fibre pairs and a capacity of 1.28Gb/s. It is used for data and Internet traffic as well as cable TV.
Next is FlagTelecom’s FALCON submarine cable system that Canartel made a multi-million dollar investment in. This is a fibre link from Khartoum to the landing station in Port Sudan was launched in mid-2007. Flag brought terabit capacity to Sudan for the first time, connecting east and north Africa with India via multiple landing points in the Gulf region.
Lastly both Sudatel and Canartel are also members of the East African Submarine Cable System (EASSy) which runs from South Africa along the African east coast to Port Sudan, with onward connectivity to Europe. This cable went live in July 2010.
Trends in the region
Speaking about trends in the region, Que pointed out that a shortage of foreign currency, variation in exchange rates and an increase in taxes are having a negative impact on Sudan’s telecoms industry. He said: “In December 2011 the Sudanese government introduced a new tax on telecoms operators to make up for the loss of oil revenue from newly independent South Sudan. Sales and services taxes for telecoms firms were increased from 20% to 30%, while a tax on profits was hiked from 15% to 30%. These two elements are putting more pressure on mobile operators to keep investing and generating risk adjusted returns.”
Mobile internet and mobile broadband are gaining in popularity and Zain’s 3G network now covers 40% of the North Sudan population. This is up from 23% two years ago. As for South Sudan, Sudatel has announced that more than 75 of its customers are mobile broadband subscribers. The driver for increasing access to the internet is the growing popularity of social networks and mobile content.
Operators have begun to offer increasingly targeted services. They offer well-priced plans, plans for tablets, dongles and smartphone users. This will eventually increase adoption of smart devices in Sudan, and a growing number of smartphone and tablet users are forecasted for the future, according to Que.
Another opportunity according to Que is mobile banking. He says: “With only 7% of Sudani adults with a bank account (Worldbank 2012), mobile financial services clearly represent an interesting opportunity for players in the TMT sector. Although some operators in both North and South Sudan, namely Zain, are investigating this opportunity and discussing with potential partners, no mobile money service has yet been launched in Sudan. During the latest VAS Africa conference in South Africa, Zain Sudan mentioned that the mobile money volume in South Sudan is estimated to reach $1 billion by 2016.”
Challanges faced by operators
According to experts in the field, challenges faced by operators in Sudan stem from outside the telecom industry. According to executives who spoke with Reuters, Sudan’s foreign currency shortage and a huge variation in official and de facto exchange rates are delaying equipment purchases and payments by telecoms operators, hitting a key industry for the struggling economy. Inflation is said to now be above 20%, and expected to stay at these levels for the next two or three years.
Operators are trying to counter falling ARPUs by diversifying their offerings and increasing their rural presence. Zain Sudan CEO, Elfaith Erwa, told Reuters that the operator is looking to sign an additional one million subscribers in 2012, to reach a total of 14 million by the year-end. Erwa said that Zain will target growth outside the capital Khartoum.
When quizzed about the National Telecom Corporation’s (Sudanese telecom regulatory authority) stance, Que said : “The main regulatory issue currently is the strong uncertainty when it comes to the South Sudan market. A key unsolved question is whether operators already offering services in the country will have to acquire a new licence. The output of the licence discussion will lead to several completely different scenarios in the South Sudanese mobile market depending on whether there will be new licences or not, the potential high or low price of each licence, and the type of licence. This is mainly impacting Zain and MTN which had to split their nationwide Sudanese operations into two differentiated operations.”
He also said that there were currently no indicators that the governments were doing anything useful to boost the expansion and growth in the telco scene. On the contrary operators in the North of Sudan have increased taxation, whereas in the South, operators may have to face paying a higher fee for a licence to operate. He advised that the government needs to focus efforts to encourage investment and growth. “In our opinion, the government should focus on ensuring fair competition among all players, create a stable environment and when possible help operators to keep investing in infrastructure in the country as the benefits in the country’s economy of having a strong telecom sector are very clear and proven.”
As far as the future is concerned, one thing is certain, the Sudan telecom market is still tangled in a web of political and economical chaos. Que says: “Operators will need to be able to drive competition and penetration upwards but avoiding further reduction in prices as the key driver to achieve that. Further reduction in prices can put in real jeopardy the long term profitability of the company; especially taking into consideration that still the country requires significant investment to cover most of the country, for both voice and data, and still there is a possible scenario in which operators need to pay for the license.”
Despite the uncertainty operators are positive and are investing . By installing new generation infrastructure and focusing on the increasing use of mobile phones, and fixed and mobile broadband, operators have a chance to give a boost to the telecom sector in Sudan. It is clear that 2013 may be a promising year for the telecom sector in both North and South Sudan.