Tigo blames telecoms price war in Ghana, Tanzania for low revenue in Africa
Millicom International Cellular (MIC) S.A., the operator of the Tigo network has blamed the relatively low final year revenue from its Africa operations in 2010 on the price war in Ghana and Tanzania.
The company also blamed its relatively low additional customers of 320,000 in the fourth quarter of 2010 on SIM card registration in these two countries.
This was contained in the company’s Final Year Report ending December 31, 2010.
Central America topped the revenue league at Tigo with $1.374 billion from 13.5 million subscribers; South America came second with $1.513 billion from 10.1 million subscribers, and Africa trailed with $905 million, even though it has almost 15 million customers, which is the highest in the group.
The report said “revenues in Africa were up (by only) five per cent year-on-year to $239 million following pricing pressure in Ghana and Tanzania.”
An official of Millicom told Adom News that the heavy tariff reductions by Vodafone, Airtel and MTN in Ghana compelled Tigo to also start the “three credits for the price of one” promotion in Ghana and a similar one in Tanzania, and that affected revenue.
“In Tanzania, Vodacom also reduced prices drastically in anticipation of Airtel’s going into that country, and that compelled Tigo to adopt strategies which affected revenue intake,” the official said.
The report said as a result of “lower market prices”, averaged revenue per user (ARPU) for the region was also down 11% year-on-year in local currency, falling from $6.6 per month in 2009 to $5.5 per month at the end of 2010.
Which means the revenue that Tigo made from every individual customer fell from $6.6 per month in 2009 to $5.5 per month by the close of 2010, and part of the reasons could have been the telecoms price war in Ghana.
The company’s President and Group CEO, Mikael Grahne was quoted as saying “we have seen increased pricing activity in Africa in recent months and in some markets we have adjusted our cross-net tariffs through headline price reductions or promotional activity in order to maintain affordability.”
He said “we will monitor closely whether elasticity will follow in the coming months.”
The report also stated that “customers in Africa increased by 23% year-on-year, bringing the total at the end of December 2010 to just below 15 million,” adding “the lower intake for the region is partly due to mandatory customer registration processes in Ghana and Tanzania which give rise to greater volatility.”
Millicom officials again explained to Adom News that people who use multiple SIM cards in Ghana tend to register the one they use most and that affected Tigo’s customer base as some of those people may have registered another SIM card instead of their Tigo SIM card.
Africa topped Tigo’s other regions with 527 additional customers in the third quarter of 2010, 1.274 million in the second quarter and 643,000 in the first quarters, but the 320,000 in the fourth quarter fell below the 461,000 from South America, and 365,000 in Central America.
In Ghana, Tigo maintained its position as the second biggest mobile network operator with 3,999,262 subscribers by year end December 31, 2010, which is an additional 578,908 subscribers on that of 2009, which stood at 3,420,354.
The Millicom Group also reported that it had limited capacity in Senegal due to investment in capital expenditure through the Senegalese operation’s own cash generation, and that also affected final year revenue.
But the company reported that it expects investment in capital expenditure in 2010 to yield results in 2011, adding that it would also invest in 3G in the coming months and that was also expected to impact positively on future revenues.
Tigo Ghana is, for instance, due to launch 3G next month.
The company said it would put $800 million into capital expenditure in 2011 to expand capacity and improve on network quality.
Meanwhile, group total revenue at the end of 2010 was $4.018 billion (including Honduras and revenue from Cable services), which was 13 per cent increase on that of 2009, which stood at $3.571 billion.
The rest of the revenue was from Honduras and from Tigo Cable services.
Group subscriber base grew from by 14 per cent and reached 38.6 million as at December 31, 2010.
Average revenue per user (ARPU) for the group also fell from $10.1 per month at the close of 2009 to 9.6 per month as at December 31, 2010.
By Samuel Dowuona