Tanzania mobile users up 20pc in 2010, investment seen falling

DAR ES SALAAM: Tanzania's mobile phone subscribers rose 20 percent to 21 million last year, but low tariffs due to a vicious price war are expected to diminish the appetite for investment in the telecoms sector, industry officials said.

East Africa's second biggest economy's communications sector has grown at an average annual rate of nearly 70 percent over the past ten years in a sector where seven players have been fighting for market share, forcing tariffs lower.

Mobile phone companies invested more than 2 trillion shillings ($1.23 billion) in cellular networks and other fixed assets between 2004 and 2009 in the fastest-growing sector in Tanzania, accounting for 20 percent of gross domestic product.

However, this investment declined to 511 billion shillings in 2009 from 682 billion shillings a year earlier, statistics by the telecoms regulator show.

"Tanzania rates are now among the lowest in the region and continent. Although low tariffs are supposed to be good for consumers, high levels of network congestion leads to a decline in quality of service," Norman Moyo, the chief commercial officer at Zantel, a unit of United Arab Emirates' telecoms operator Etisalat, said late on Saturday.

"Investment in the industry has also declined due to the crush in tariffs below cost... Investment in telecoms will continue to be depressed as long as tariffs are below cost of providing the service."

The telecoms regulator said the average revenue per user (ARPU) fell to 4,801 shillings in Q1 2011 from 5,849 shillings during the fourth quarter of last year.

Mobile phone penetration in Tanzania stood at 47 percent last year, the regulator said.

The telecoms regulator sees the next frontier for investment as fourth-generation (4G) technologies and number portability.

Vodacom Tanzania, part of South Africa's Vodacom , is the market leader with a 43 percent market share followed by Bharti Airtel (28 percent), Millicom's subsidiary Tigo Tanzania (22 percent) and Zantel (6 percent).

Other smaller players are state-run telecoms firm TTCL, Sasatel and Benson, which have tiny market share.

Copyright Reuters, 2011