Tanzania Telecommunications Company Interview

TanzaniaInvest interviewed Mr. Bill Beckman, Chief Executive Officer of Tanzania Telecommunications Company – TTCL, for an overall assessment of the Tanzania telecom sector and also to gain an understanding about the level of development that has been achieved.

TI: In 2005, Tanzania introduced a new licensing scheme, considered to be pioneer in Africa, based not on the technology used, but on the type of service provided. What does it mean for a company with a broad prospect like yours that provides voice, data, and other telecoms services?

Bill Beckman – Tanzanian Telecommunications Company Limited: The licensing framework means that it’s relatively easy for a company to get into the telecommunications business.

There are four different license types.

The first is the network facilities license, where a company gets a license to build a network.

The next is a network services license that allows a company to provide telecommunication services.

The third license allows a company to offer applications by combining network services plus some of the company’s value add and then sell the network services plus the value add as an application service provider.

The fourth license is for those who want to provide content.

From our perspective, as a telecommunication services provider, we have the network facilities license, which allows us to build and operate networks.

We have the telecommunication services and we have the application service licenses.

At some point, we might get into content creation and distribution and then we will get the fourth license.

As I said, what this means is that there’s relative ease of entry into the business for anybody who wants to enter the sector.

TI: Tanzanian Telecommunications Company Limited (TTCL) has traditionally been the market leader as the government owned company. Although it has been partially privatized, the Government of Tanzania still owns some shares. What is your current market positioning and development strategy for the future?

BB: Tanzanian Telecommunications Company Limited (TTCL) was the incumbent telecommunications operator.

It is historically based on a fixed line service.

Its advantage is the fact that it has the fixed line network serving most of the businesses in Tanzania.

Its disadvantage is that most of the growth is occurring in the mobile sector.{xtypo_quote_right}Most of the growth is occurring in the mobile sector.{/xtypo_quote_right}

Tanzanian Telecommunications Company Limited (TTCL) has entered into the mobile sector and views the sector as a growth area.

Tanzanian Telecommunications Company Limited (TTCL), plus the four other mobile service providers competing in Tanzania, still have plenty of opportunities for acquiring customers and growing this market.

TI: Which telecom services do you believe will generate the greatest profits for Tanzanian Telecommunications Company Limited (TTCL)?

BB: I think that there’s actually going to be two; the first is broadband services on fixed and mobile.

There’s huge demand for them and we’ll be counting on them to provide a lot of our growth.

And the second is mobile services – mobile cell phones.

There’s a lot of demand for mobile in this country.

There’s a demand within the customer base.

I’m not sure whether there’s a demand for five or six mobile providers, as is currently the case.

If you look at the trends in most countries, there aren’t as many mobile service providers in those countries as there are in Tanzania.

My expectation is that, at some point in time, some sort of consolidation will happen in this industry.{xtypo_quote}At some point in time, some sort of consolidation will happen in this industry{/xtypo_quote}

TI: Where do you think Tanzanian Telecommunications Company Limited (TTCL) will stand at the time of the consolidation?

BB: A buyer or a company to be bought; but we’re playing the game with this end in mind.

TI: Is having the Government of Tanzania among your shareholders a burden or a competitive advantage?

BB: We view it as much of help as it can be a hindrance.

But generally, our view is that it’s a help.

The Government of Tanzania has shareholder interests that have to be met just like every other shareholder’s interests, which is generally to create value.

The only difference is that they are interested in social as well as economic value.

So the idea is to work with them to build a business case where we can provide services where others might not be willing to do that.

It’s not a burden if recognized for what it is and we manage that, we actually have joint objectives.

Shareholder value is what it is all about but we also recognize that this particular type of shareholder has different value criteria.

TI: In consideration of the growth of fixed lines compared to mobile, which have been ever increasing in Tanzania, is it really necessary for a developing country like this to have a fixed line backbone?

BB: We are looking at two things here; one is the fixed line and the other is the backbone.{xtypo_quote_left}As the economy of a country like Tanzania develops, there is an increasing need for data communications through internet{/xtypo_quote_left}

A fixed line service allows a high speed, secure data service to be delivered.

And as the economy of a country like Tanzania develops, there is an increasing need for data communications through internet for public access, and data communication for transferring data back and forth at high speed between corporations and government branches in a secure manner.

Fixed line has an advantage there.

So the view is that as the economy develops there will be increasing need for fixed line services, not for fixed voice but for fixed line data services and secondarily for voice.

TI: Can it reliability be achieved through wireless services?

BB: It can but wireless service doesn’t have the same advantages as fixed line.

It doesn’t have the speed and the security.

When you’re dealing with small and medium enterprises, the wireless solution would probably be adequate.

But the corporate customers want high bandwidth and security.

TI: When do you think such cable backbone will cross the entire country?

BB: My expectation is that by 2009, at the beginning of the year, there should be a significant fixed backbone in this country.{xtypo_quote_right}My expectation is that the country will be able to build a fibre backbone within the next two to three years.{/xtypo_quote_right}

The country already has significant fibre assets.

The electrical utility has some, the railway utility has some, and the gas utility has got some fibre as well and it’s just a matter of getting the government and those who have an interest in those assets to work together.

So my expectation is that the country will be able to build a fibre backbone within the next two to three years.

TI: There’s been a lot of talk about the Eastern Africa Submarine Cable System – EASSy and how it could dramatically decrease the cost of reliable internet connection in this region of Africa. Do you think such an initiative will actually see the light?

BB: There’s such a demand for high speed connectivity and increased bandwidth from all the telephone operators in all of the country’s along the east coast of Africa that, at some point of time, something will happen if the politics of who’s going to take the lead and who’s going to take the most out of it is removed.

The market demand is here, the need for improved quality is here; all the customers want it, all the service providers want it and it will happen.

Whether it’ll be EASSy, whether Kenya or south Africa take the lead, or whether it will come through private investment, I don’t know, but there’s such a demand here that it will happen.

Everybody will be better off when submarine cable comes along and connects to the Eastern African countries.

TI: Compared with your previous experiences in other countries, how would you rate the telecommunications regulatory framework in Tanzania? What, if anything, do you believe should be addressed in order to improve it?

BB: I think there are opportunities for the improvement of the regulatory framework in its management of spectrum.

Spectrum is something used quite a lot by operators in Tanzania for their transmission networks as well as their mobile networks.

I think there are opportunities for improvement there.

And if you talk to any of the operators, they’ll say the same.

TI: What are your expectations for the economic and telecom growth of this country for the next five years?

BB: We actually see Tanzania as having very bright prospects.{xtypo_quote_left}We actually see Tanzania as having very bright prospects.{/xtypo_quote_left}

We’re counting on what’s been happening in the economy in the last two or three years, which is 6 and 7% growth, continuing and we’re counting on that to create more corporate demand.

This demand is going to come from small and medium enterprises plus the large international and corporate markets growing.

That’s one of the market segments we’re looking at.

And this growth will lead to an increase in the size of the middle class consumer market that will have need for broadband services and who will want a converged solution as well.

We can provide these markets with broadband plus mobile services.

So we’re counting on this growth to actually create the opportunities that we want to pursue.

TI: If you have to talk about Tanzania to somebody who has never been here, how would you describe this country in terms of business?

BB: Tanzania is a country that is in transition.

If you look outside of the window in my office, you will see brand new buildings under construction, fully modern design, fully modern services for businesses that are going to be operating in the 21st century.

You will also see buildings that were built around the turn of the century, in colonial times, side-by-side.

As the old is being replaced by the new, the services that the old required are being replaced by the services of the new.

The country’s economy is in a stage of transition; one just needs to look outside to see it.