Orange In The Data Game: Better Late Than Never

BMI View: Mobile operator Orange's deal with the SCPT to gain access to international bandwidth should vastly improve its ability to compete in the DRC's crowded mobile market. Although Orange's nearly year-long wait for this agreement highlights the challenging business environment in the DRC, we remain bullish on the country's mobile market owing to its large population and low penetration rate.

Mobile operator Orange has signed a deal with telecoms regulator Société Congolaise des Postes et Télécommunications (SCPT) to gain access to the national fibre backbone and international bandwidth capacity through the WACS submarine cable landing station in Muanda. This came nearly a year after Vodacom's agreement with the SCPT in July 2013, followed by Airtel in August and Tigo in September 2013. The DRC's minister of communications confirmed that Orange was the last operator to gain access to the national fibre network, due to the government's unexplained decision to suspend all new contracts during late 2013 and early 2014.

Industry stakeholders in the DRC have previously questioned the SPCT's ability to manage the submarine landing station in Muanda and the national fibre backbone, in particular highlighting its limited technical expertise in the field and multiple delays in launching connectivity to WACS. The suspension of new wholesale capacity contracts therefore ignited speculation on whether the landing station was actually functional. The regulator has used the new agreement with Orange to dispel this rumour.

Orange Lags Behind
Mobile Subscriptions By Operator ('000), 2012-2014

BMI View: Mobile operator Orange's deal with the SCPT to gain access to international bandwidth should vastly improve its ability to compete in the DRC's crowded mobile market. Although Orange's nearly year-long wait for this agreement highlights the challenging business environment in the DRC, we remain bullish on the country's mobile market owing to its large population and low penetration rate.

Mobile operator Orange has signed a deal with telecoms regulator Société Congolaise des Postes et Télécommunications (SCPT) to gain access to the national fibre backbone and international bandwidth capacity through the WACS submarine cable landing station in Muanda. This came nearly a year after Vodacom's agreement with the SCPT in July 2013, followed by Airtel in August and Tigo in September 2013. The DRC's minister of communications confirmed that Orange was the last operator to gain access to the national fibre network, due to the government's unexplained decision to suspend all new contracts during late 2013 and early 2014.

Orange Lags Behind
Mobile Subscriptions By Operator ('000), 2012-2014

Industry stakeholders in the DRC have previously questioned the SPCT's ability to manage the submarine landing station in Muanda and the national fibre backbone, in particular highlighting its limited technical expertise in the field and multiple delays in launching connectivity to WACS. The suspension of new wholesale capacity contracts therefore ignited speculation on whether the landing station was actually functional. The regulator has used the new agreement with Orange to dispel this rumour.

The details of the agreement between the SCPT and Orange were not disclosed. However, when Airtel was negotiating its agreement in 2013, local media reported that the government's access fee was USD250,000 a month for 155MB of capacity, around ten times the cost of bandwidth in Tanzania and Zambia. The DRC's landing station at Muanda has a total capacity of 10Gbps. BMI expects the cost of bandwidth in the DRC is still high as the government is likely keen to collect its share of revenues from the fast-growing telecoms sector. Nevertheless, Orange's weak performance over the year to March 2014, with total net additions of just 148,000 compared to nearly 9mn across the whole market, highlights the importance of access to international bandwidth to remaining competitive in the market, even at a high cost.

Although Orange has fallen behind its rivals by a considerable margin, with its market share dropping from 9.6% to 6.7% in the two years to March 2014, according to BMI data, there remains considerable room for growth in the market as shown by Africell's impressive performance since launching in late 2012. Now that it has access to international bandwidth, Orange is well-placed to build market share with attractive value-added services, leveraging its extensive experience and portfolio of services across other French-speaking markets in West Africa. BMI forecasts mobile penetration to rise from 39.5% in 2013 to nearly 60% by 2018 and total subscriptions to rise from 26.7mn to 45.3mn over the same period.

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