Although DR Congo was one of the first sub-Saharan countries to launch mobile services in the late 1980s, the development of the market has been hampered by a challenging business and political environment, writes Mervin Miemoukanda, ICT industry analyst at Frost & Sullivan, an international growth consulting and partnership company.
Basic infrastructure, such as roads and electricity supply, are completely run down and, in most parts of the country, non-existent. This, coupled with inadequate telecoms regulations, has hampered market growth.
Currently, there are five licensed mobile operators in DRC: Vodacom Congo, Airtel DRC, Tigo Congo, Congo Chine Telecom (CCT) and Supercell. Except for Supercell and CCT, mobile operators in the DRC are international players. CCT is jointly owned by Chinese Telecom vendor ZTE (51%) and the DRC government (49%).
Airtel DRC (previously Zain DRC) and Vodacom Congo are still dominating the market, with 38% and 34% market shares, respectively. Historically, Vodacom Congo was the market leader and lost market shares to Tigo Congo and Zain DRC following aggressive competition from the two mobile operators.
These mobile operators cater to approximately 10-million subscribers. With a population estimated to 66-million in 2010, this represents a mobile penetration of 15%.
This penetration rate is relatively low compared to the average of 50% in sub-Saharan Africa. Therefore, there are still considerable growth opportunities in the country. As a result, many international players have been eyeing countries like DRC to sustain their organic growth.
Due to operating problems, CCT has intended to exit the Congolese mobile market since 2009. Today, the company’s majority stakeholder ZTE is in negotiation with France Telecom. In fact, the Chairman of France Telecom, Lafarge, was amongst the businesspeople that travelled with French president Nicolas Sarkozy to DRC in 2009.
During this presidential visit, France Telecom indicated its desire to enter the Congolese mobile market through either an acquisition of existing player or bidding for a mobile license. This expansion plan has now come into being.
The question to pose is whether the entrance of France Telecom could have a detrimental effect on Vodacom Congo’s future growth?
It is tempting to say France Telecom, specifically its mobile arm Orange, may shake up the DRC market. What would the implications for Vodacom Congo be?
Although Orange is not likely to shake up the market in the short term, the company is expected to chip away its competitors’ subscribers in the medium to long term. As a result, Vodacom Congo and Airtel DRC are expected to lose their leading position. This will most likely put pressure on their profit margins if remedial strategies are not taken.
Orange has been successful in somewhat challenging Francophone countries with the same features as DRC: Mali and Guinea. For example, in Mali, Orange adopted a strategic deployment approach with focus on the rural market.
This strategy has proven to be successful and has been a key driver for the company’s exceptional growth. Frost & Sullivan expects Orange to replicate such deployment strategy in DRC, as CCT has limited network infrastructure in DRC.
Like Mali, DRC has a considerable diaspora in France and Francophone countries. Therefore, Orange will likely provide services which target Congolese in the diaspora.
That said, Orange has not been able to make in-roads into Kenya and Uganda. The failure of Orange in these countries can be attributed to cultural issues.
Uncertainty surrounds the future of Vodacom Congo in terms of Vodacom Group’s commitment to its subsidiary. This situation has had a detrimental effect on Vodacom Congo’s network expansion plans.
Vodacom Congo may be hard hit by the entrance of Orange if the conflict between the Vodacom Group and Congolese Wireless Network (CWN) is not resolved.
Will Vodacom Congo provide fixed lines or other services to survive in DRC?
Today, none of the major mobile operators have considered offering fixed line and data services, such as mobile money services and broadband services to the mass market.
Traditional fixed services are non-existent in DRC due to the collapse of the incumbent Office Congolais des Postes et Telecommunications (OCPT). Vodacom Congo could consider acquiring OCPT to complement its product portfolio and gain a competitive advantage over its rivals.
If not, Orange will most likely provide fixed line services in the long term in order to gain a competitive advantage over its rivals. Unlike its competitors, the company has solid experience in that market.
Moreover, Vodacom Congo should enhance its broadband and data services in DRC. The company could provide mobile money services and discounted international voice tariffs, given considerable Congolese Diaspora in South Africa.
Innovative services can include international airtime transfer, allowing Congolese residing in South Africa to send airtime to their relatives in DRC. The company can also replicate its rival Zain’s One Network in DRC for calls between DRC and South Africa.
Should Vodacom exit the DRC market?
Vodacom Congo should not exit the DRC market as most countries on the continent have stopped issuing new mobile licenses and have high mobile penetration rates. DRC, along with Ethiopia, remains one of the few countries in sub-Saharan Africa with massive growth opportunities in the long term. Therefore, exiting DRC could be a suicidal strategy for the company.
In conclusion, Vodacom Congo’s main competitive strength lies in the length of its presence in the Congolese mobile market, with many years of experience in a variety of challenging conditions. This means that the company is likely to pre-empt changing market conditions and respond accordingly.