Morocco’s telecommunications market is mature, with an estimated mobile penetration rate of 136.8% in the first quarter of 2022 and a subscriber base of nearly 51.68mn connections. Inactive and tourist SIMs are likely to contribute towards a notable proportion of the total figure, the latter only set to increase as holidaymakers begin returning to Morocco. Consequently, the market is subject to volatility and periodic culling both of which were evident over the course of the Covid-19 pandemic, though the overall trend is one of growth spurred largely by 4G cannabalisation as consumers increasingly adopt data services.
Despite reaching saturation, Fitch Solutions notes that the market still has room for value generation via adoption of more advanced connectivity technologies like 4G and 5G as well as uptake of value-added services (VAS) and migration to postpaid plans.
Mobile is still the main medium for accessing high-speed Internet services; the fixed broadband market in Morocco is restricted by the absence of local-loop unbundling and as such wide-scale availability of ADSL has always been limited, an issue that has proved contentious and not without legal intervention. Last-mile fibre (FTTx) connectivity is yet to become a commercially viable option, with operators preferring to invest in mobile infrastructure. Rising smartphone penetration is driving this trend as consumers increasingly use their mobile device as their primary form of data access.
Competitive Landscape
Morocco’s mobile market is home to three mobile network operators (MNO)s: Maroc Télécom, Orange and Inwi (Wana), each operating their own network infrastructure. Infrastructure sharing between operators is yet to occur, though we suspect that the inconsistent development of mobile service revenues and the introduction of 5G will add impetus to operator efforts to divide the capex burden either amongst themselves or by divesting their own infrastructure assets to independent tower companies (towercos). Regional giants IHS Towers and Helios Towers are likely to be at the forefront of any offers to buy Moroccan cell sites, the latter having already highlighted the country as a target.
Of the three MNOs, Maroc Télécom maintains its dominant position with approximately 38.4% market share (Q122) and also owns the country’s largest wireline voice and fixed broadband networks. In August 2021, the UAE’s incumbent operator E& Group (formerly Etisalat) increased its stake in Maroc Télécom from 48.4% to 53%, doubling down on its pan-African operation, of which the Moroccan market is the largest in terms of customers and revenues. Despite this association and the financial backing it bears, Maroc Télécom has steadily lost market share over the years, but this trend accelerated markedly in mid-2020 as Inwi began to rapidly gather market share. Inwi overtook Orange as the second-largest operator in Morocco for the first time in Q421, indicating that the operator is beginning to see rewards on the heavy investments it has made.
Inwi (the brand name of Wana Telecom) is 69% owned by the state holding company Societe Nationale d’Investissment (Al Mada). Kuwait-based Zain Group and the Kuwaiti Investment Authority’s Al Ajial own the remaining stake with 15.5% each. Wana Telecom does not release financial or operational data for analysis so Fitch Solutions’ estimates of its market share are undertaken using data from the regulator and the other operators.
Now on the back foot is Orange Maroc, majority-owned by a consortium of state-owned banks and financial institutions, though managerial control is held by Orange of France. Orange Maroc benefits from Orange’s extensive experience providing a wide-range of VAS products like e-wallet service Orange Money, though is up against burgeoning competition from Maroc Télécom and Inwi who also hold a presence in this space, Inwi becoming the first to do so in 2019.
Figure 1:Morocco - Mobile Market Shares, % (2019-2022)
Regulatory scrutiny has hindered Maroc Télécom’s ability to grow – or at least maintain – market share. In November 2020, the National Telecommunications Regulatory Authority (ANRT) reduced mobile termination rates from MAD0.03 to MAD0.01 per-SMS, a move that was primarily aimed at curbing the dominance of Maroc Télécom and subsequently restricting its ability to stretch revenues.
In June 2022, Orange signed an agreement with the Moroccan government that earmarks MAD5.69bn (USD575.6mn) in investment into enhancing internet infrastructures, including 4G and 5G cell sites and FTTx networks, displaying commitment to the country’s digital transformation. Fitch Solutions believes that Inwi’s rapidly advancing market share has added impetus to Orange’s efforts to carve out a greater presence in Morocco.
Competition between the three operators has also intensified in the broadband segment. As Maroc Télécom does not share its infrastructure, Orange and Inwi have been forced to make extensive capital commitments to rolling out their own FTTx networks and are now able to offer their services at more competitive prices. Data from Inwi are unavailable, but Orange notes that its fixed broadband subscriber base had increased 14.8% y-o-y in Q122 compared to a 1.5% decline for Maroc Télécom over the same period, providing early indications that Moroccan consumers are proving responsive to more affordable services from incumbent- alternative players.
Operators have indicated that they are ready to begin deploying 5G networks though are still awaiting licensing permission from the government, the latter taking a cautious stance and noting that it is awaiting further development and identification of use cases before doing so. Fitch Solutions’ forecasts currently anticipate the introduction of 5G in 2022, but the lack of progress on the matter could see this pushed this back. The eventual advent of 5G in the country is likely to see operators – even cash-rich incumbent Maroc Télécom – decide to share infrastructure deployments in order to reduce capex and potential for network duplication.
Market growth
Morocco’s high mobile penetration rate will see organic growth remain elusive over the long-term and the market will remain saturated with limited scope for the entrance of new players. As a result, MNOs are forced to engage in robust price competition in order to steal customers from each other amid the lack of new customer entering the market – even in rural areas.
The primary opportunities for value generation for the three MNOs will be in encouraging customer migration to 4G/5G and the introduction of new and improved advanced services. Sustained investment into widening the coverage of 4G (and later 5G) network infrastructure will be essential to the cannabalisation of more primitive technologies, particularly in rural areas which are responsible for a large portion of the current high levels of demand for 2G.
2G remains the dominant form of access technology in Morocco, accounting for around 45% of total mobile connections at the end of 2021, though advancing 4G uptake will see the latter become the principal technology by the end of 2022, a feature Fitch Solutions expects to remain until 2031 when there will be 38.24mn 4G connections.
5G is unlikely to become a mass market proposition by the end of the decade as its deployment will be limited to major metropolitan areas given the high cost nature of infrastructure for operators and of 5G-enabled devices for consumers. Currently, our expectations for 5G in Morocco are weighed down by a relative lack of progress – the ANRT has outlined 2023 as the year for the first 5G spectrum auction. Fitch Solutions expects nearly 30% of the mobile market, or 19.75mn connections, will be on 5G in 2031.
Morocco’s mobile market is heavily reliant on the low-value prepaid segment, which Fitch Solutions estimates made up more than 88% of the country’s mobile customer base in Q122. Therefore, additional value could be tapped by operator attempts to make their postpaid offerings more attractive though we note that low incomes and sluggish economic growth in the wake of inflationary pressures and weak harvests will weigh on this prospect somewhat.
Migrating customers to postpaid plans will support the elevation of Morocco’s average revenue per-user (ARPU), much-needed after their hastened decline over 2020 and 2021 shown by Maroc Télécom’s figures (neither Orange nor Inwi release ARPU data). Between March 2019 and March 2022, its ARPU has fallen from MAD56.8 to MAD44.9. Given Inwi’s rapid acquisition of market share - indicating it has undertaken tough competitive pricing - it is likely that both Inwi and Orange have also seen their ARPUs erode.
Outlook
In the short-term Morocco’s mobile market will continue to be subject to a degree of volatility given the high levels of saturation and removal of inactive SIMs from the market. MNOs will see this reflected in volatile customer bases exacerbated by a competitive pricing strategy largely led by Inwi. Of course, these trends will weigh on revenue growth and profitability, which operators will need to manage effectively if they are to tap into the 4G/5G opportunity and demand for data services presented by Morocco.
Looking to the long-term, Morocco’s rising incomes and young demographic add upside risk to the adoption of advanced technologies, as does the growing affordability of data and smartphones. Infrastructure sharing would vastly accelerate this trajectory, though the MNOs seem reluctant at present but this could change once roll out of 5G cell sites is permitted and operators become keen to realise faster returns on investment. The general softening of attitudes towards network infrastructure among the MNOs is likely to catalyse momentum in the local towers industry and we suspect Helios Towers and IHS Towers to emerge as key contenders there.
