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Last Updated: Sunday, 6 March, 2005, 17:43 GMT
Africa counts cost of making a call
By Jon Cronin
BBC News business reporter, in Tanzania

Tanzanian woman using a mobile phone
Mobiles are popular in Africa - but expensive for many people to use

Making a phone call in Tanzania used to be a tricky business.

Getting hold of a fixed-line telephone could take some time, and even if you did there was no guarantee the old state-run company could connect you.

That all changed with the introduction of mobile phones. Now visitors are as likely to see someone using a mobile phone in Dar es Salaam as anywhere else in the world.

The industry has been developing rapidly in East Africa, with competition growing in countries such as Tanzania and Kenya.

Presented with the choice, customers have deserted unreliable fixed-line companies in favour of the new mobile services.

Call costs

But while the future is looking bright for mobile operators, the cost of using a mobile phone remains beyond the means of a majority of East Africans, many of whom live on less than $1 a day.

Despite the fact of having a great deal of competition, we don't actually have the extent of pricing reductions that one would expect
Simbo Ntiro, telecoms analyst

Calls typically cost around 30 US cents a minute, while the price of new mobile handset can start at around $50.

Tanzania's government last week announced that Zantel, a Zanzibar-based telecoms monopoly, had been awarded a licence to begin nationwide mobile services, making it the country's fourth operator.

Given this level of competition - critics question whether companies are doing enough to bring down their prices.

Two of the region's biggest operators are Vodacom and Celtel.

Customer demand

South African-based Vodacom is Tanzania's leading mobile phone company, and has been operating in the country for almost five years.

Dar es Salaam
Dar es Salaam's skyline includes telecom masts and transmitters

Jose Dos Santos, Vodacom's chief executive in Tanzania, says competition over the past 12 months has been fierce.

"Although we are in a developing country, the challenges are similar to any other country I've been in," he says.

Mr Dos Santos believes prices will fall "based on customer demand", adding: "I do foresee that, over the course of time, prices will come down."

The number of people using mobile phones in East Africa's leading economies remains low in international terms - around 5% of the population in Tanzania and 10% in Kenya - but operators still see plenty of scope for expansion.

John Nkoma, director general of the Tanzanian Communication Regulatory Authority, is keen to see mobile use increase in his country.

"Right now, we have only 2.1 million subscribers (for mobile and fixed-line) out of a population of 35 million, which is very low," he says.

'Very expensive'

Simbo Ntiro, a telecoms analyst based in Tanzania, believes the way the industry has been allowed to develop is hindering the likelihood of price cuts.

A shop in Kigoma
Mobile companies use painted shop fronts to advertise their brands

"Despite the fact of having a great deal of competition, we don't actually have the extent of pricing reductions that one would expect," Mr Ntiro says.

"There are lots of built in costs which are entirely unnecessary. For example, there is no sharing of infrastructure or sharing of support services at cell sites."

Jesca Lucas, a mobile user who lives in Tanzania's remote Kigoma region, echoes the views of Mr Ntiro.

"My phone is very useful, but it's very expensive to use. It can cost you a lot of money. I mostly use it for text messaging," she says.

Hidden charges

However, mobile operator Celtel, which is the number two service provider in Kenya and Tanzania, says governments must share some of the responsibly for the level at which call charges are set.

The Netherlands-based company points to recently imposed surcharges, which, it says, artificially increase the cost of phone bills.

"The governments are taking quite a share of the revenue. A lot of the bill is going to them," says Terry Rhodes, Celtel's chief strategy officer.

He cites the example of Celtel's operations in Kenya - East Africa's biggest mobile market - where the company pays a 10% revenue surcharge on top of VAT at 16%.

This is the information age and if we could get it right we would go a long way
Trevor Simumba, Sierra Leone

"A quarter of the bill is going to the government before we even get started. This is simply being passed on to the customer," he says.

While Celtel is making money in many of the 13 African countries where it operates, the company has yet to see a return on its investment in Kenya, Tanzania and Uganda.

"As a whole Celtel is profitable, bottom line, but not yet in East Africa," says Mr Rhodes. "These are very competitive markets. You need deep pockets and a big commitment to these countries."

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