Share Square: Mozambique

Mozambique has the fifth largest population of the East African countries, but ranks only tenth highest in mobile penetration. The entrance of Movitel in 2012 caused a dramatic shakeup in the market, with the MNO rolling out significant infrastructure and become the number one operator (ahead of mCel and Vodacom) within just a few years. Unlike several other East African countries, 4G rollout is yet to commence, although the ongoing extensive rollout of fibre is readying the market for such a move. With new legislation mandating infrastructure sharing being proposed, the Mozambican tower industry may be set to change shape; Mott MacDonald take a deeper look at the country in their latest Share Square.

Mozambique had an estimated population of 28.4mn people and 18.3mn mobile subscriptions at the end of 2015¹, giving a mobile penetration of 65% - the tenth highest level of penetration of the twenty countries comprising Eastern Africa. Around 97% of subscribers have a pre-paid account, which ranks fifth lowest amongst the Eastern African countries. Burundi ranks the highest with 99.9% pre-paid subscribers. There are three Mobile Network Operators (MNOs) serving the Mozambican market (See figure 1), each with a relatively similar market share, ranging from Vodacom (29%) to the current market leader Movitel (36%). Movitel entered the Mozambican market in 2012, causing a significant disturbance through its aggressive expansion strategy. Within two years, Movitel surpassed the existing market leader and incumbent operator mCel to achieve a dominant market share. mCel, which was recapitalised by the government in 2015 due to long standing financial difficulties, currently services 6.4mn (35%) subscribers with Vodacom in third place serving 5.2mn subscribers, 29% of the market.

Mozambique has an average mobile penetration for the Eastern African region (65%), with the Seychelles exhibiting the highest level of penetration (135%), followed by Mauritius (131%) and La Réunion (110%). When considering countries with a population of 10mn or higher in the Eastern African region, Zimbabwe had the highest penetration rate by a significant margin , recording 96.9% penetration in Q4 2015, Mozambique ranked 6th out of 13. Mozambique’s national subscriber base has grown rapidly in recent years, more than doubling since 2011 to reach a record high of 18.9mn in Q3 2015, before declining slightly. The fall in subscribers was felt relatively evenly across the three operators and is thought to be due to the SIM card registration exercise that was enforced by the government in November 2015. According to GSMA, subscriber figures are expected to continue falling marginally before rallying in 2017 to reach a record high of 19.6mn by the end of that year.

mCel was first to market with 3G services in 2008, enjoying no competition until Vodacom and Movitel entered the 3G market in 2010 and 2012 respectively. mCel, Vodacom and Movitel were all successful in acquiring fifteen-year 3G licences in 2011 in the 1900MHz and 2100MHz spectrum bands. Stipulations of the licences included expanding their 3G networks to all districts of the country by the end of 2015 and significant infrastructure rollout activity has been seen by Vodacom and Movitel in recent years, however mCel has been comparably quiet in this area.

The breakdown of the 3G market follows a similar trend to the overall industry, with Movitel servicing the lion’s share of subscribers. The gap between Movitel and Vodacom is in fact larger in the 3G market, with Vodacom servicing 1.2mn (21%) of the market, mCel accounting for 2.1mn (35%) subscribers and Movitel servicing 2.6mn (44%) subscribers.

None of the three operators currently offer 4G services in Mozambique, which is a surprise when considering the operations of neighbouring Eastern African countries. In the last few years, Kenya, Rwanda and Tanzania have launched 4G operations; however they each boast a higher penetration rate than Mozambique.

Significant activity has been witnessed in the fibre rollout market, with each of the three operators now using fibre optic backhaul solutions. This development of fibre capability is expected to be a significant step towards developing a network capable of providing 4G services. Since its launch, Movitel has deployed 25,000km of fibre, reporting to have fibre connections at the majority of its sites. Vodacom is thought to be rolling out 1,000km a year and mCel, which has its own existing network, also has the ability to use state-backed, fixed line provider TDM’s fibre network.

Movitel (Viettel) is Mozambique’s largest operator by market share, despite the short length of time that it has been active in the market (~4 years). Movitel is a partnership between the Mozambican holding company SPI and the Vietnamese military backed Viettel, which caused a significant stir in the Mozambican telecoms market when it launched in 2012, providing a serious challenge to the two existing operators. Movitel rolled-out a network that provided a high quality service in a short period of time, largely utilising guyed masts to achieve the network rollout.

mCel (Mozambique Cellular) was the first mobile operator in Mozambique, launching its services in 1997 as a joint venture between TDM and Detecon. Enjoying monopoly status in the mobile telecoms market from 1997-2003, mCel serviced the total subscriber base of 413,000 in 2003, however it failed to retain its dominant status following the entrance of Vodacom in 2003 and Movitel in 2012. mCel is currently in the process of being merged with state-backed, fixed line provider TDM in an attempt to achieve greater business efficiencies as one organisation.

Vodacom Mozambique is the smallest operator in Mozambique by market share. The operator is majority owned (85%) by Vodacom International Limited, a Vodafone company, with the remaining 15% spread amongst local Mozambican holding companies and investors. Unlike mCel, Vodacom has been noticeably proactive when addressing the threat posed by Movitel, rolling out ~800 sites across Mozambique in a two year period.

In 1996 the Instituto Nacional de Comunicacoes de Mocambique (INCM) was established to regulate the Postal and Telecommunications industries. The role of the INCM within the telecoms industry is to draft legislation, regulate services (fixed and mobile), allocate spectrum licences, monitor tariffs, control quality and mediate between the operators.

Until November 2015, the telecommunications legislation being used in Mozambique dated back to 2004. In late 2015, the first reading of a new bill to amend telecoms legislation to force operators to share infrastructure was passed by the government of Mozambique.  It is thought that the change in legislation will support the government in achieving their aims of improved coverage in rural areas and improved average mobile internet speeds for subscribers.

In August 2015, the government issued a judgement to the MNOs to carry out a SIM card registration exercise of their subscribers with a 90 day deadline. The decision stems from a similar exercise in 2010 in response to riots in Maputo which were reportedly coordinated by mobile phone. Fines of up to MZN 6 million (USD 115,000) were tabled for the operators if they failed to respond to the 2015 registration. The operators reportedly obliged, however in September 2016 the INCM claimed that there are still up to three million unregistered SIM cards being used in the country, despite the registration exercise.

No towercos currently operate within Mozambique, although in 2013/14 a company called Towerco Mozambique tried to establish a shared site model. It identified 50 potential sites but couldn’t facilitate an agreement between mCel and Vodacom and pulled out.

It is reported that there are currently ~3,000 angular towers in Mozambique, with an additional ~1,500 guyed masts. The Movitel tower portfolio which totals 1,900 is thought to largely comprise guyed towers, Vodacom manages 1,400 towers with the remaining 1,200 towers attributable to mCel.

Having acquired the fiercely contested third mobile phone licence in 2010 and launched its services 2 years later, Movitel has pursued an individual strategy, investing in infrastructure rather than infrastructure sharing in order to develop a footprint across Mozambique. mCel initially sought an agreement to share its existing cell towers with Movitel, however this agreement was not progressed and no infrastructure sharing is thought to have occurred between the two operators. In order to achieve its expansion strategy, Movitel deployed a high proportion of guyed towers. This has enabled the operator to achieve high coverage in a short space of time, however the guyed masts are less suitable for sharing.

In recent years, speculation has emerged about each of the three operators, claiming that they are each considering the sale of part or all of their tower portfolios. hilst mCel had appeared to be the most advanced in this area having appointed Barclays to oversee the sale of ~1,000 towers, news around any potential deal has gone quiet suggesting it may now be off.

In November 2015, new legislation was passed by the government of Mozambique to support the case for operators sharing infrastructure, including both towers and fibre. This is expected to accelerate the sharing of infrastructure in the market, potentially paving the way for the entrance of a towerco.

With the fifth largest population of the 20 countries in Eastern Africa (28.4mn people) and only the tenth highest mobile penetration (65%), there is considerable room for subscriber growth in the Mozambique mobile market. 4G services are yet to reach Mozambique, however the activity of surrounding, comparable countries in this area would suggest a launch in the not too distant future.

The entrance of Movitel into the market has encouraged competition and subsequently shaken up a previously sluggish market, in which the SIM penetration wavered at 30%. Recent regulatory interventions to oblige operators to share both fibre and tower infrastructure, as well as significant infrastructure development from the operators is likely to improve market conditions, including poor rural coverage and slow internet speeds.

A steadily increasing subscriber base which is expected to reach 23.7mn by the end of 2020, in combination with significant investment and development in mobile infrastructure by the operators suggests a positive outlook for the mobile industry in Mozambique. This suggests that opportunities for towercos may emerge in the next few years.

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1. GSMA