Shilling Benefits Tanzania Telecom Companies

According to a recent Bloomberg Businessweek report, Tanzania telecommunications companies are currently working with the government in order to begin paying fees in shillings, which, according to Vodacom Group Ltd., will offset the currency volatility and ensure investment.

In an interview with Businessweek, Rene Meza, the managing director of Vodacom Tanzania, explained that East Africa’s largest mobile phone company currently pays its license fees in dollars, but operates in shillings.

“The shilling has been very volatile against the dollar,” he said, “and this could mean we have to cut back on investment to pay regulatory fees.”

According to the Tanzania Communications Regulatory Authority (TCRA), Tanzania telecommunications companies pay annual fees for earth satellite stations, switching centers and networks at a rate of 0.8 percent of turnover in dollars.

In an effort to expand and improve its network coverage, Vodacom Tanzania is currently planning to invest approximately USD 62 million over the next 12 to 18 months.

The exact figures are still being worked out according to Ms. Meza who indicated that Vodacom is currently in the process of finalizing their budget.

In addition to their expansion and improvement project, Vodacom is also currently working on developing software that will allow for cross-border money transfers with Safaricom Ltd. of Kenya, which is 40 percent owned by Vodafone Group Plc, who also owns 65 percent of Vodacom.

“We will leverage on the numbers of our sister-company in Kenya to grow our M-Pesa money-transfer service,” said Meza.

Vodacom Tanzania is currently expecting to have 11 million subscribers this month alone, 3 million of which the company has said now have active money-transfer accounts.

According to managing director of Vodacom Tanzania, the company is considering the possibility of outsourcing its tower infrastructure to Nokia Siemens, as they did similarly with their network management.

“We are discussing internally whether to outsource our towers segment, because it is not our core business,” Meza said, “Telecoms companies are essentially marketing and sales units now.”

In addition to their communications with the government of Tanzania regarding the use of the shilling for fee payments, companies are also working with the Tanzanian government regarding the introduction of number portability.

According to Mr. Meza, the service was a failure in neighboring Kenya, where he served as the managing director of Airtel Networks Kenya Ltd., a unit of Bharti Airtel, but Vodacom is working with the government on value vs. cost.

“It is not about moving a number to another operator, but what value that will add,” said Meza, “We are in high-level talks with government and are waiting for guidelines on issues like who will meet the investment cost.”