Essar bets on cross-border calls to boost revenueTuesday June 09 2009
India’s Telecom giant Essar Group is spreading out across the region to cash in on the lucrative African mobile phone market and offer subscribers a seamless interconnection.
The firm was last week granted a mobile telephony licence to open shop in Uganda and is eyeing fresh licences or buyout opportunities in Tanzania, the Great Lakes and Zambia in an effort to have a single regional network.
Besides boosting its footprint, the shops would allow the firm to enjoy seamless connection in the region, following in the footsteps of its rivals Zain and Safaricom whose subscribers can now make or receive calls in neighbouring countries using their number and home tariffs.
The firm started operations in Kenya last November and has been unable to tap into the growing number of subscribers, especially businessmen and executives whose dealings cover the East Africa region.
“Seamless network will not help our subscribers call across the region but also cut costs,” said Mr Srinivasa Iyengar, Essar East Africa managing director, adding that the firm was looking for roaming deals to allow their subscribers receive their calls outside the country.
Roaming is the ability of mobile phone subscribers to use their mobile phones when they are travelling outside their geographical boundaries of their home network by using a visited network resulting from the agreements between the mobile service providers.
Unlike roaming services, a seamless regional connection does not attract additional charge for either receiving or calling in another country.
And with pricing emerging as a weapon for growing subscribers and profitability and average revenue per user, the local Essar outfit lacks the competitive edge in a head to head battle with rivals Safaricom and Zain.
The need for the regional connectivity is expected to rump up with efforts to ease trade and movement of people in Eastern, Southern and Central Africa.
The East African Community (EAC) is moving towards creating a common market that will allow the free movement of people and capital in the five East Africa countries while Comesa created a custom union on Monday.
This is set to increase the movement of persons across the region and local mobile telephony firms are increasingly looking at making it easier for the subscribers to communicate across the region at no additional costs.
Zain was the first to jump at this opportunity in 2006, helped by its regional operation that spans 12 African countries and five countries in the Middle East.
Safaricom was to follow suit, but because it did not have the benefit of regional subsidiaries , its signed interconnection agreements with Zain rivals in Uganda, Rwanda and Tanzania.
In Uganda, it hooked up with MTN and Uganda Telecommunication Limited UTL and singed up with Vodacom and MTN in Tanzania and Rwanda respectively.
France Telecom, which entered the mobile telephony market last year following its purchase of a 51 per cent stake of Telkom Kenya, is also planning a similar interconnection after it bought a majority stake in Hits, a mobile telephony firm in Uganda.
The Indian telecommunications company will become the sixth Mobile telephone operator, joining Zain, MTN, UTL, Warid, and Orange telecom.
According to Mr Iyengar, Kanya has been granted a licence to build a 200 million-dollar cellular phone network in Uganda. Essar Teleholdings, a member of the Essar Group, obtained a similar licence in Kenya last year and operates under the Yu network.
According to the Managing Director of Essar Telecom Kenya, Srinivasa Iyengar, three million dollars has been paid for frequency charges to Uganda Communications Commission.
He said the service in Uganda will be launched in September, 2009.Essar Teleholdings, which will own 90 per cent of the stake in the Uganda venture.
At the same time, the company is also bidding for licences in Tanzania, Congo and Cameroon.
In Zambia it will bid and participate in the privatisation of Zambia Telecommunications Co. Ltd (Zamtel), a state-owned cellular phone company.
Last year, Econet Wireless International sold a 49 per cent stake in the company to India’s Essar Communications Holdings, paving its entry into the lucrative Kenyan market where Econet had been granted a license but was unable to rollout.
The operator introduced some of the lowest calls rates and introduced free SMSs in the Kenyan market it is planning to replicate its least cost pricing model on its regional operations, setting the stage for a pricing war for the regional market.
Mr Iyengar says the seamless networks will be strategic for their subscribers by reducing the call charges across the borders.
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