19th annual research workshop mobile phones and micro and small enterprises (mse) performance and transformation in dodoma, tanzania by Dr. V. Venkatakrishnan

Voice minutes and SMS per user

The numbers of voice minutes and short-messages (SMS) per user have been showing a mixed trend from April 2010 to April 2012. However, since July-Sep 2012, it has been noticed that there is an increasing trend in these indicators per user. These increases could be among the reasons for the increasing Average Revenue Per User (ARPU) during this period. Will it display an upward trend if the tariff for both on-net and off-net is reduced by the service providers?

Figure 5: Number of voice minutes and SMS per user in Tanzania: April 2010 to Dec 2013 Source: Data obtained from Tanzania Communications Regulatory Authority

Unstable tariff for on-net mobile calls in Tanzania

The data available for different quarters from April-June 2010 to Oct-Dec 2013 show that Vodacom’s tariff for on-net mobile calls (i.e. Vodacom to Vodacom) remained higher than other mobile service providers. It was comparatively very high at 240 Tshs during April-Sep 2010. Though it touched the rock bottom of 60 Tshs during Oct 2010-Sep 2011, it has been increasing steadily since Oct-Dec 2011 and climbed back to Tshs 225 in July-Sep 2013, just below its highest of Tshs 240 during the period from April 2010 to Dec 2013. Even the other two leading mobile service providers such as Airtel and Tigo which were pegging their tariff for on-net calls much lower than Vodacom for a long period aligned with it since Jan-March 2013 and the tariff difference between these three leading operators has remained very marginal till today.

Figure 6: Weighted and average tariff for on-net calls for major telecom operators in Tanzania: April 2010 to Dec 2013

Source: Data obtained from Tanzania Communications Regulatory Authority

The next major mobile service provider, Zantel is maintaining a much wider gap with the tariff of these three leading providers. The public sector’s TTCL has been maintaining a lower tariff for on-net calls and it has been declining as well.

Stable and low charges for SMS and high charges for off-net calls

The usage of SMS among the younger age customers seems to be very high. The analysis of data related to the tariff for the SMS, on-net and off-net calls indicated that the SMS tariff remained almost constant. It was also comparatively lower than both on-net and off-net calls since the beginning. As mentioned earlier, Vodacom’s tariff remained higher for a considerable amount of time than other service providers though the other two major providers such as Airtel and Tigo have narrowed the gap in the recent past. The lower average tariff by these providers as shown in the Figure 7 is due to the fact that they had much lower tariff for quite some time compared to Vodacom. During the quarter Oct-Dec 2013, nothing much separates this three leading service providers in terms of their tariff for the on-net calls as shown in Figure

Figure 7: Average tariffs for major telecom operators in Tanzania: April-2010 to Dec 2013 Source: Data obtained from Tanzania Communications Regulatory Authority

High off-net calls tariff – challenge for further growth in the telecom sector

The tariff for off-net calls in case of almost all the service providers seems to be much higher than the on-net calls. The tariff barriers for calls originating from one service provider to another service provider are likely to prevent the subscribers from contacting the subscribers of the other service provider. That means that most of the operators are operating like silos with very limited interconnectivity. Probably, this is among the most important barriers as the national traffic between different service providers seems to be very low. The leading mobile operator, Vodacom has brought down the difference between the tariffs of on-net and off-net calls much lower in the quarter Oct-Dec 2013. Contrarily, the second important mobile service provider has increased the difference in the same quarter. The other major mobile service provider, Tigo has also increased both the tariffs for on-net and off-net calls for the same quarter and effectively it means that the gap between the off-net and on-net calls in terms of their tariffs will continue to be a barrier for inter-connectivity between the customers belonging to different mobile service operators. The next significant growth in the mobile telephony in Tanzania could be achieved by bringing down the gap between the off-net and on-net calls with regard to their tariffs. An indication to that effect is seen since the quarter April-June 2013 as there seems to be a spurt in the off-net call traffic in Tanzania.

Figure 8: On-net and off-net voice call tariffs for major telecom operators in Tanzania: April-2010 to Dec 2013

Source: Data obtained from Tanzania Communications Regulatory Authority

The Average Revenue Per User (ARPU)

The Average Revenue Per User (ARPU) is an indicator of revenue generated by the mobile phone / telecom service providers per customer. This is defined as the total revenue divided by the number of customers. With regard to the mobile telephony, it is not only the revenue billed to a customer by the mobile companies but also the pre-paid charges paid by the customer and also the revenue generated by the incoming calls from other service providers determined within the regulatory interconnection regime. In case of Tanzania, the Figure 3 shows that the period April-Sep 2010 observed a high ARPU which declined during the period Oct 2010-Sep 2011. Again it kept on increasing from Oct 2011 and reached a very high of about Tshs 34,000/- in Oct-Dec 2013 except the period April-June 2012 during which there was minor decline. This very high ARPU could be explained as the result of increased usage of minutes per user and growth in the short messages (SMS) and also the resurgent high on-net and off-net call charges by the major telecom operators since Jan 2013. The Figure 4 shows the growth of ARPU since April-June 2010 to Oct-Dec 2013.

Figure 9: Average Revenue Per User per month for Tanzania voice and SMS services: April-2010 to Dec 2013

Source: Data obtained from Tanzania Communications Regulatory Authority