2015 ANNUAL REPORT ICT SECTOR PERFORMANCE REVIEW FOR 2014

cranamibia

Marketing%20Report%202015

ICT Sector Performance Review for 2014

2015 ANNUAL REPORT

ICT SECTOR PERFORMANCE REVIEW FOR 2014

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ICT Sector Performance Review for 2014

September 2015


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ICT Sector Performance Review for 2014


CONTENTS

Introduction 1

Financial Performance of the Telecommunication Sector 1

Mobile Telecommunications Limited (MTC) 2

Telecom Namibia Limited (Company) 3

Conclusion 5

Mobile Telecommunication 6

MTC - KPIs 6

TN Mobile - KPIs 9

Mobile Traffic 11

Mobile network infrastructure 12

Mobile Broadband Quality of Service 12

Mobile Price Benchmarking 13

Mobile Prepaid Voice 13

Bundled Value Index 15

Postpaid Value Index 17

Mobile Broadband 20

Conclusion 21

Fixed line-Wired Services 22

Voice versus Data Revenues 22

ADSL and Leased-Line Revenues 23

Fixed Data Subscribers 24

Conclusion 24

Broadcasting 25

Radio

Television 27

Financial performance of the NBC 28

Conclusion 30

Conclusion 31

ICT Sector Performance Review for 2014

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INTRODUCTION

The ICT Sector Performance Review (TSPR) assesses developments in the

telecommunication sector for the year 2014. The review takes into account:

• The financial well-being and performance of Namibian operators and

broadcasters;

• Consumer price developments within the telecommunications sector;

• Changes in the competitive landscape; and

• General trends for the year under review.

Financial Performance of the Telecommunication Sector

The main event that shaped the competitive telecommunications landscape in

Namibia was the takeover of Leo by Telecom Namibia Limited (Telecom Namibia)

in 2013. Namibia is back in the pre-liberalisation era of 2005 with only two

telecommunications operators offering national mobile voice services, both of which

are majority or entirely owned by the government.

A major concern is thus whether the takeover has led to reduced competition and

higher consumer prices. While it may be too early to evaluate the impact of the

consumer price and quality of service on the sector, it is noticeable that Telecom

Namibia and Mobile Telecommunications Limited (MTC) do not act as though they

are owned by the same holding company; but seem to compete as independent

entities.

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Namibia’s telecommunications sector is highly concentrated with two operators

(Mobile Telecommunications Limited (MTC) and Telecom Namibia Limited) making

up more than 97.5% of the assets and 91.5% of revenues. In the category “Others”

in the figures below are Paratus Telecommunications (Pty) Ltd, Telepassport (Pty) Ltd,

Dimension Data (Pty) Ltd, MWireless (Pty) Ltd t/a AfricaOnline Namibia, SALT IT (Pty)

Ltd and Bidvest Namibia Information Technology (Pty) Ltd.

ICT Sector Performance Review for 2014


ICT Sector Performance Review for 2014

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The asset turnover for other licensees is even higher, which is not surprising since

they mostly resell services based on the assets of Telecom Namibia. Their asset base

is therefore smaller in comparison.

Figure 1: Assets and revenues in N$ million for financial year ending in 2013

and 2014 (company)

What is clear from these two indicators is that Telecom Namibia and MTC dominate

the industry. What is also clear is that MTC is more efficient since it generated N$ 729

million more in revenue with N$ 823 million less assets than Telecom Namibia. MTC

generates 55.5% of the sector revenues with 40% of the assets. 1

Figure 3: Asset turnover (revenues as share of assets) for financial year ending

in 2013 and 2014 (company)

The next section analyses the financial performance of the two largest

telecommunication companies that make up more than 90% of revenues and assets

in the sector, MTC and Telecom Namibia. Both publish their annual reports publicly.

Mobile Telecommunications Limited (MTC)

MTC’s revenues have increased consistently during the past ten years. The year 2010

illustrated the slowest revenue growth with only 1.2%, however, revenue growth

increased rapidly after 2010 and reached its highest growth of 13.7% in 2014. MTC

yielded a phenomenal EBITDA margin of around 55% 2 in the last three years and its

shareholders benefitted from a return on equity of N$ 0.42 per N$1 invested in 2014.

Figure 2: Assets and revenues as market shares for financial year ending in

2013 and 2014 (company)

The shareholder’s equity nearly doubled in the last ten years, with an increase

from N$ 646 million to N$ 1,212 billion. Dividends paid by MTC increased

from N$ 110 million to N$ 462 million during the past ten years, a four times

higher payout. Most of the after-tax profits were disbursed as dividends

over the past seven years, and exceeded company profits (even in 2011).

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1 MTC only provides mobile telecommunication services while Telecom Namibia provides also fixed-line and leased line services. The differences

in asset to revenue ratio can partly explained by differing infrastructure of the two companies.

2 The average EBITDA margin is 18.85% for wireless telecommunication operators in the USA (http://pages.stern.nyu.edu/~adamodar/New_

Home_Page/datafile/margin.html).

ICT Sector Performance Review for 2014


Table 1: MTC’s KPIs 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

N$ Million 769 937 1,113 1,232 1,390 1,407 1,453 1,617 1,832 2,082

Revenue YoY

growth

21.8% 18.8% 10.7% 12.8% 1.2% 3.3% 11.3% 13.3% 13.7%

Shareholders’ equity N$

Million

646 903 999 1,136 1,153 1,166 1,121 1132 1,173 1,212

Taxation N$ Million 147 171 177 181 199 187 160 167 248 241

Net profit after

tax

Capital

expenditure

N$

Million

YoY

growth

N$

Million

% of

revenues

% of

after tax

profit

% of

total

assets

293 337 340 358 388 397 319 353 425 505

15.0% 0.9% 5.3% 8.4% 2.3% -19.6% 10.7% 20.3% 18.9%

160 188 340 286 260 410 237 331 427 476.7

20.8% 20.1% 30.5% 23.2% 18.7% 29.1% 16.3% 20.5% 23.3% 22.9%

54.6% 55.8% 100.0% 79.9% 67.0% 103.3% 74.3% 93.8% 100.5% 94.4%

17.5% 16.1% 25.6% 17.8% 15.9% 22.9% 14.0% 19.3% 23.4% 24.8%

Depreciation (N$ Million) 58.4 68.3 73.4 108.8 149.2 154.8 174.9 207.7 205.5 231.4

Total assets (N$ Million) 915 1,169 1,329 1,608 1,632 1,791 1,696 1,711 1,822 1,920

Total liabilities (N$ Million) 269 266 330 472 479 625 575 579 649 708

Financial leverage 1.42 1.29 1.33 1.42 1.42 1.54 1.51 1.51 1.55 1.58

N$ Million 110 80 245 221 370 384 364 341 384 462

Dividends % of after

tax profit

37.5% 23.7% 72.1% 61.7% 95.4% 96.7% 114.1% 96.6% 90.4% 91.5%

Return on equity 45.4% 37.3% 34.0% 31.5% 33.7% 34.0% 28.5% 31.2% 36.2% 41.7%

Profit margin 38.1% 36.0% 30.5% 29.1% 27.9% 28.2% 22.0% 21.8% 23.2% 24.3%

EBITDA margin 61% 60.2% 52.2% 50.9% 53.8% 55.8% 53.2% 53.2% 55.0% 54.7%

Active SIM cards in 1000 403.7 555.5 743.5 1,008.7 1,283.5 1,535.0 1,854.7 2,042.6 2,380 2,574

Full-time staff 276 272 296 397 416 395 407 421 461 488

Monthly ARPU in N$

(calculated not reported)

159 141 125 102 90 76 65 66 64 67

Source: MTC annual reports, 2005-14

MTC continues to invest in telecommunications infrastructure. Their CAPEX was the

equivalent of 94.4% of its after tax profits, 22.9% of its revenues and 24.8% of its assets

for the financial year ending in 2014. This indicates that the financial performance is

of no regulatory concern.

ICT Sector Performance Review for 2014

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Telecom Namibia Limited (Company)

Revenues at company level all suggest that Telecom Namibia is struggling to grow.

Fixed Voice revenues are declining and mobile and data revenues have not increased

fast enough to make up for the loss in fixed line revenue. Telecom Namibia showed

marginal growth in revenues over the past eight years with noticeably higher increases

in 2009, 2012 and 2013. The 2012 and 2013 increases were due to increases in data

revenue of about 20% in both years with Data and IP service revenues only increasing

marginally in 2014. The companies’ shareholder’s equity increased at a rate of about

5% during the period 2007 to 2012. In 2013 it dropped by 7% and in 2014 by nearly

half, destroying N$ 557 million of shareholders value. The biggest contributor to this

loss is the revaluation of Telecom Namibia’s investment in Neotel, an impairment

of N$ 326.3 million. Losses in previous years were attributed to Telecom Namibia’s

investments in Angola totaling N$ 16.9 million.

Table 2: Telecom Namibia’s

annual report data

2006 2007 2008 2009 2010 2011 2012 2013 2014

N$ Million 1,058 1,061 1,081 1,130 1,134 1,143 1,223 1,310 1,353

Revenue

YoY

growth

0.3% 1.9% 4.5% 0.4% 0.8% 7.0% 7.1% 3.3%

Taxation N$ Million 61.8 27.9 33.1 9.2 18 40 27 -18 97

Net profit / loss after tax N$ Million 112.3 23.2 80.1 25.6 69.7 50.6 56.6 -87.5 -556.3

Capex (Group additions

to Plant and equipment)

N$ Million 170.0 346.1 245.9 245.9 160.9 173.2 235.1 445.4 332.4

N$ Million 1,781 2,040 2,231 2,325 2,534 2,566 2,629 2913 2743

Total assets

YoY

growth

14.5% 9.4% 4.2% 9.0% 1.3% 2.4% 10.8% -5.8%

N$ Million 801 1,025 1,168 1,237 1,393 1,374 1,376 1,746 2,133

Total liabilities

YoY

growth

28.0% 14.0% 5.9% 12.6% -1.4% 0.2% 26.9% 22.2%

Gearing 45.0% 50.2% 52.4% 53.2% 55.0% 53.5% 52.4% 59.9% 77.8%

N$ Million 980 1,015 1,063 1,088 1,141 1,192 1,252 1,167 610

Shareholders’ Equity YoY

growth

3.6% 4.7% 2.4% 4.9% 4.5% 5.1% -6.9% -47.7%

Dividend N$ Million 17 0 0 0 0 0 0 0 0

Return on Equity 11.5% 2.3% 7.5% 2.4% 6.1% 4.2% 4.5% -7.5% -91.2%

Financial Leverage 1.8 2.0 2.1 2.1 2.2 2.2 2.1 2.5 4.5

Profit Margin 10.6% 2.2% 7.4% 2.3% 6.1% 4.4% 4.6% -6.7% -41.1%

DELs in 1000 incl. public phones 136.2 138.2 145.4 148.7 157.1 159.1 168.5 180.1 190,6

No of Public Phones 6086 4,200 3,860 3,726 2,949 2,824 2,500 1000 0

Full-time Staff 1,306 1,069 1,025 1093 1073 1055 1076 1090 1,168

Mobile N$ Million 44.6 69.2 160.4

Fixed voice revenues incl.

interconnection revenues

N$ Million 765.2 639.4 536 516.4 437.1 418.5

YoY

growth

-16.4% -16.2% -3.7% -15.4% -4.3%

N$ Million 297 417 452 541.7 637.9 652.1

Data and IP services

revenues

YoY

40.4% 8.4% 19.8% 17.8% 2.2%

growth

Source: Annual reports, 2006-14

Telecom Namibia’s net loss for the financial year ending in 2014 totalled N$ 556.3

million. Its net operating loss was even higher with N$ 597 million. The biggest

operating expense is “administrative expenses” with N$ 850 million in 2014 compared

to MTC expenses of less than half at N$ 173 million.

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ICT Sector Performance Review for 2014


Figure 4: TN company and group operating profit/loss in N$ million (source: TN

annual reports, 2011-14)

A further concern is current liabilities have doubled while current assets only increased

marginally. Current liabilities are three times the value of current assets in 2014, which

raises immediate solvency concerns.

Figure 5: TN company and group profit/loss after taxation in N$ million (source:

annual reports)

Telecom Namibia’s poor performing foreign investments have been at the expense

of the domestic market. A strategy to grow the domestic market by offering better

services and lower prices would have positioned Telecom Namibia as a strong

competitor in Namibia instead of a potential bankruptcy risk. Telecom Namibia’s

foreign investment strategy has negatively affected shareholder value and thus state

assets. Its excessive administrative expenses are not proportional to its revenues base

and further losses can be expected for the next financial years.

Conclusion

Namibia’s telecommunication sector is dominated by MTC and Telecom Namibia. All

other licensees make less than 10% of turnover and mostly resell services of Telecom

Namibia and MTC. Telecom Namibia’s financial performance raises serious concerns

as its foreign failed investments have left its domestic operations vulnerable and limit

its capacity to invest and innovate. Telecom Namibia’s mobile operation also fails to

pose serious competition to MTC, capturing only 7% of mobile revenues (N$ 160

million of the N$ 2.2 billion).

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ICT Sector Performance Review for 2014


MOBILE TELECOMMUNICATION

This section analyses Key Performance Indicators (KPIs) for the two national mobile

operators, TN Mobile and MTC.

MTC - KPIs

Prices are top-level indicators that reflect the competitive environment most effectively.

They need to be interpreted in conjunction with others KPIs such as Average Revenue

Per User (ARPU), Minutes of Use (MOU) and subscriber numbers. Implied prices are

calculated by taking the monthly average revenue per user (ARPU) and dividing it

by the monthly average minutes of use per user (MOU). Analysing implied prices

provide a clearer understanding on price developments independent of advertised

prices and product choices of users. They are not actual prices per minute since Voice

ARPUs may include non-voice items such has handsets, termination rate revenues

and revenue for SMS. The trend is as important as the effective price value.

Figure 6: MTC’s implied prices (voice APRU divided by MOU)

ICT Sector Performance Review for 2014

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Prepaid minutes are costing on average N$ 0.20 per minute in the second quarter of

2015. MTC’s implied price for postpaid products are much higher with an average of

N$0.86 per minute in the second quarter of 2015. The reason for the high postpaid

effective price might be the inclusion of other costs such as handsets in the Voice ARPU

figures. They can either be directly or indirectly priced into the monthly subscription

amount. Prepaid ARPU’s are thus a better indicator of implied per minute prices.

Any operator wishing to compete with MTC in Namibia would need to build a business

model around an effective price of N$ 0.20 per minute to be able to compete on

price with MTC.

At present, there does not seem to be any competitive pressure that would require

MTC to cut its postpaid prices dramatically in order to align them with prepaid prices.

MTC is currently competing against itself: postpaid versus prepaid. With postpaid

customers typically being locked in for 24 months, one would expect a drop in

postpaid subscribers in 2015. This has not happened.

Table 3: MTC-s

prepaid and

postpaid

subscribers

Active SIM

cards

Prepaid Postpaid Total

YoY

Active SIM

cards

YoY

Active SIM

cards

Jul-Sept 2012 1,922,147 120,448 2,042,595

Oct-Dec 2012 2,024,498 5.3% 122,335 1.6% 2,146,833 5.1%

Jan-Mar 2013 2,065,259 2.0% 123,210 0.7% 2,188,469 1.9%

Apr-Jun 2013 2,074,708 0.5% 125,581 1.9% 2,200,289 0.5%

Jul-Sep 2013 2,141,481 3.2% 128,020 1.9% 2,269,501 3.1%

Oct-Dec 2013 2,248,022 5.0% 132,260 3.3% 2,380,282 4.9%

Jan-Mar 2014 2,273,881 1.2% 136,197 3.0% 2,410,078 1.3%

Apr-Jun 2014 2,275,159 0.1% 139,122 2.1% 2,414,281 0.2%

Jul-Sep 2014 2,328,969 2.4% 143,124 2.9% 2,472,093 2.4%

Oct-Dec 2014 2,427,042 4.2% 146,852 2.6% 2,573,894 4.1%

Jan - Mar 2015 2,457,172 1.2% 148,062 0.8% 2,605,234 1.2%

Apr - Jun 2015 2,423,471 -1.4% 149,860 1.2% 2,573,331 -1.2%

YoY

Figure 7: MTC Voice ARPU

Two trends may affect the postpaid ARPU in opposite ways. The replacement of

feature phones by smart phones leads to an increase in postpaid ARPUs, while the

declining smart phone prices lead to a decrease. Postpaid voice ARPU declined since

2012 until the first quarter of 2015, where it started to increase again.

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The only drop in active sim cards happened in the second quarter of 2015 for prepaid,

not postpaid. Reasons for a user keeping their postpaid number includes having the

handset financed and guarantee of not running out of airtime or having to recharge.

Companies also increasingly rely on mobile phones for in-house communication

instead of using a fixed-line PABX, creating a solid block of customers that would not

change to prepaid if they had the choice.

Figure 8: MTC MOU

ICT Sector Performance Review for 2014


Other trends that influence ARPUs and MOUs are a shift to Over The Top (OTT) 3

services, a postpaid/prepaid substitution and new postpaid product design.

• When new postpaid products offer more bundled minutes than before at the

same monthly subscription level, an expected reduction of out-of-bundle calling

will prevail.

• Most contract (postpaid) subscribers use smart phones and feature phones

that support OTT use such as WhatsApp, Facebook, Skype, etc. Out-of bundle

calling may be reduced and replaced by OTTs.

• Postpaid/prepaid substitution may not necessarily be a SIM card swap but a

usage substitution. A contract subscriber may use a prepaid sim card alongside

the contract for out-of-bundle use or cheap data connectivity. It may be a

combination of all three which explains these trends.

Mobile versus data revenues

Namibia sees spikes in the fourth quarter each year due to festive season

communication. The figures below compare quarters to eliminate seasonal spikes.

Figure 10: MTC Data vs voice revenues in N$ million for Q1s and Q2s

Subscribers

While active mobile broadband subscribers grew since 2012, the number of

subscribers using dedicated dongles dropped considerably in the first half of 2015.

This may be the result of dongle competition through Telecom Namibia or a shift in

access patterns away from computers and laptops and towards smart phones and

tablets.

Figure 9: MTC Data vs voice revenues in N$ million

The figures tabled below display the growing data revenues and declining voice

revenues for 2015.

3 Over-the-top services are provided by third parties and may include text messaging, voice calls and media

content. WhatsApp, Facebook, Skype, Viper, Talkray, FaceTime are examples for OTT services.

Table 4: MTC Data

Subscribers

Standard mobilebroadband

subscriptions

(on mobile phones)

Dedicated mobilebroadband

subscriptions (dongles)

All mobile-broadband

subscriptions

Jul -Dec

2012

Jan - Jun

2013

Jul -Dec

2013

Jan - Jun

2014

Jul -Dec

2014

Jan - Jun

2015

570,788 656,549 721,381 692,219 732,368 808,859

69,724 63,179 66,634 65,830 69,945 48,101

640,512 719,728 788,015 758,049 802,313 856,960

ICT Sector Performance Review for 2014

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TN MOBILE - KPIS

The most notable difference between the implied prices of TN Mobile and MTC is

that TN Mobile charges triple the prepaid price and less than half of the postpaid

price compared to MTC.

Figure 11: Prepaid implied prices (Voice APRU divided by MOU)

At first glance it may appear that Telecom Namibia is aiming for the postpaid market

and leaving the prepaid segment to MTC. The prepaid implied prices seems to be

high, given that a minute costs on average N$ 0.73 per minute in the second quarter

of 2015. Reasons for this could be inflated prepaid subscriber numbers provided to

CRAN by Telecom Namibia. With lower subscriber numbers MOU would be higher

and implied prices thus lower. Discussions with Telecom Namibia revealed that both

MOU and ARPU for post paid are not correct and can only be corrected for the next

Market Report.

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ICT Sector Performance Review for 2014


ICT Sector Performance Review for 2014

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Table 5: TN Mobile

KPI’s

Jan-

Mar

2013

Apr-Jun

2013

Jul-Sep

2013

Oct-

Dec

2013

Jan-Mar

2014

Apr-Jun

2014

Jul-Sep

2014

Oct-

Dec

2014

Jan-

Mar

2015

Apr-Jun

2015

Figure 12: Postpaid implied prices (Voice APRU divided by MOU)

TN Mobile regained 25,000 postpaid subscribers in 2015 and its prepaid subscribers

are just below 80,000. TN Mobile however lost 25% of its postpaid customers and

32.6% of its prepaid subscribers in the fourth quarter of 2013. The causes for the

subscriber losses seemed to have been addressed in the first quarter of 2014.

ARPU -

Monthly

MOU-

Monthly

Prepaid

Postpaid

Total

Prepaid

voice

14.39 13.73 14.32 18.22 9.98 10.50 14.13 12.54 10.88 8.50

Postpaid

voice

58.45 59.39 54.50 80.20 81.27 68.38 60.79 49.85 44.11 38.56

Prepaid 12 15 14 19 7 13 9 11 13 12

Postpaid 86 87 83 159 129 124 124 109 116 107

Subscribers

(active SIM 74,899 74,089 77,549 57,966 85,323 81,358 84,726 75,707 71,505 78,679

cards)

Change -1.1% 4.7% -25.3% 47.2% -4.6% 4.1% -10.6% -5.6% 10.0%

Subscribers

(active SIM 22,918 24,148 26,376 17,786 18,149 19,042 19,986 21,382 24,603 25,700

cards)

Change 5.4% 9.2% -32.6% 2.0% 4.9% 5.0% 7.0% 15.1% 4.5%

Subscribers

(active SIM 97,817 98,237 103,925 75,752 103,472 100,400 104,712 97,089 96,108 104,379

cards)

Change 0.4% 5.8% -27.1% 36.6% -3.0% 4.3% -7.3% -1.0% 8.6%

Prepaid ARPU and MOU are very low, while effective price (ARPU/MOU) is very high,

which supports a mainly postpaid focused strategy hypothesis.

Figure 13: Prepaid MOU compared

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ICT Sector Performance Review for 2014


Mobile Traffic

During the last three years TN Mobile had an on-net traffic share of 0.1%. Even for

total outgoing traffic, MTC’s market share was 99% in the first half of 2015 which

positions them as the default mobile monopoly.

Figure 14: MTC’s market share of total mobile traffic

MTC’s outgoing traffic is mostly on-net and only 0.2% of minutes dialled by their

customers were for TN Mobile subscribers in the first half of 2015. This is despite

off-net price caps, which safeguard that calls to other networks cost the same as calls

within the own network. The high market share of 99% of total mobile outgoing traffic

implies that Namibia currently only has one competitive mobile operator, and MTC

has a de facto monopoly. TN Mobile’s traffic is the inverse of that from MTC, mostly

off-net (75%), as one would expect for an operator with low subscriber numbers.

Table 6: Distribution of outgoing

traffic by operator

Jul - Dec

2012

Jan - Jun

2013

Jul - Dec

2013

Jan- Jun

2014

Jul - Dec

2014

Jan- Jun

2015

MTC

TN Mobile

On net 97.3% 97.3% 97.2% 96.8% 96.9% 97.8%

Off-net mobile 0.3% 0.3% 0.3% 0.3% 0.4% 0.2%

Off-net fixed-line 1.5% 1.5% 1.7% 1.9% 1.8% 1.3%

International 0.9% 0.9% 0.8% 0.9% 0.9% 0.6%

On net 5.9% 5.0% 5.1% 4.7% 5.2% 5.3%

Off-net mobile 84.0% 84.3% 81.5% 78.3% 76.8% 75.5%

Off-net fixed-line 4.1% 5.1% 6.3% 5.8% 9.0% 13.1%

International 6.0% 5.6% 7.1% 11.3% 9.0% 6.0%

ICT Sector Performance Review for 2014

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Mobile network infrastructure

Telecom Namibia only has a quarter of the base stations (BTS) that MTC has installed.

That poses a severe limitation for customer acquisition in the absence of a national

roaming agreement. In terms of data connectivity Telecom Namibia is at an advantage

due to its national fibre network and multiple international gateways.

Table 7: Mobile’s Infrastructure

Total international

uplink and down link

bandwidth in Gbit/s

Number of base

stations (Mobile )

End Dec

2012

End June

2013

End Dec

2013

End June

2014

End Dec

2014

End June

2015

MTC 0.9 0.9 1.9 2.8 2.8 3.8

Telecom

Namibia

4.1 4.7 10.3 12.3 8.2 11.9

MTC 1042 1073 1088 1092 1110 1113

Telecom

Namibia

266 269 278 230 258

Telecom Namibia and MTC’s average download and upload speeds in Mbps are

higher than those of the largest operators in neighbouring South Africa, with TN

Mobile achieving the best performance. This is likely due to the ratio of capacity to

the very low number of subscribers on TN Mobile’s network.

Quality of Service is becoming increasingly important and will be monitored very

closely in future by the Authority. Once more information is available on QoS this

data will be match to the type of investments that operators are making in the

industry. This will ensure that consumers continue to have access to high quality

telecommunications services.

Mobile Broadband Quality of Service

The Netindex collects download and upload speeds for ISPs around the world on a

daily basis and the data is publicly available until the end of 2014. 4

Figure 15: Average download and upload speed by city (in Mbps)

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4 For more detail, see the speed test at: www.speedtest.net/isp-performance

ICT Sector Performance Review for 2014


ICT Sector Performance Review for 2014

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MOBILE PRICE BENCHMARKING

This chapter compares prices for prepaid, postpaid mobile and mobile broadband

services of Namibian operators to prices from operators from other jurisdictions.

Mobile Prepaid Voice

In terms of cheapest product in a country, Namibia currently ranks 17 th among African

operators. Prices have not increased in Namibia but fallen quicker in other countries

with effective competition. Figure 16 below compares the cost in USD of the cheapest

prepaid mobile product available in Namibia, and in all of Africa, for the OECD 5 30

calls/100 SMSs basket between Q4 2010 and Q2 2015.

Namibia’s cheapest product rank improved from 19 th in Q4 2010 to 17 th in Q2 2015

While the ranking has not improved expressively, prices nevertheless have steadily

reduced in USD. The price benchmarking uses quarterly average exchange rates and

some fluctuation in end user cost which is caused not by price but by exchange rate

fluctuations.

All prepaid products and top-ups available in Namibia were costed for the OECD

basket. The graph above only displays the USD value for the cheapest one, MTC’s

Aweh O-Yeah. The detailed ranking for all countries for the second quarter for 2015

is displayed in Table 8 below.

Figure 16: Ranking and cost of cheapest prepaid mobile product available in

Namibia and Africa for OECD 30 calls/100 SMSs basket

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5 OECD (2010), Revision of the Methodology for Constructing Telecommunication Price Baskets, OECD Working Party on Communication

Infrastructures and Services Policy.

ICT Sector Performance Review for 2014


ICT Sector Performance Review for 2014

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Table 8: Cheapest product for OECD mobile baskets, 2010 definition - 30 calls and 100 SMS per

month

Country name

Dominant

operator

Cheapest in

country % cheaper than dominant

USD Rank USD Rank

Egypt 2.30 1 2.30 2 Dominant is the cheaper

Ghana 2.59 2 2.39 4 Dominant is the cheaper

Sudan 2.70 3 1.11 1 58.9%

Kenya 3.06 4 2.38 3 22.2%

Mauritius 3.15 5 3.15 7 Dominant is the cheaper

Madagascar 3.25 6 3.25 8 Dominant is the cheaper

Ethiopia 3.49 7 3.49 9 Dominant is the cheaper

Gambia 4.46 8 4.46 13 Dominant is the cheaper

Tunisia 4.92 9 3.00 6 39.0%

Tanzania 5.12 10 4.00 12 21.9%

Rwanda 5.14 11 5.14 15 Dominant is the cheaper

Nigeria 5.51 12 3.82 11 30.7%

Uganda 5.96 13 5.96 16 Dominant is the cheaper

Namibia 6.19 14 6.19 17 Dominant is the cheaper

Cameroon 6.37 15 2.96 5 53.5%

Libya 6.50 16 6.50 18 Dominant is the cheaper

Algeria 7.16 17 7.16 19 Dominant is the cheaper

South Africa 7.44 18 4.50 14 39.5%

Benin 7.98 19 7.98 21 Dominant is the cheaper

Botswana 8.26 20 7.55 20 8.6%

Mozambique 8.79 21 8.79 22 Dominant is the cheaper

Niger 8.93 22 8.93 23 Dominant is the cheaper

Burkina Faso 9.34 23 9.34 24 Dominant is the cheaper

Zambia 9.41 24 9.41 25 Dominant is the cheaper

Liberia 10.48 25 10.48 29 Dominant is the cheaper

Cote d’Ivoire 10.60 26 10.60 30 Dominant is the cheaper

Mali 10.74 27 10.74 33 Dominant is the cheaper

Central African Republic 11.30 28 11.30 34 Dominant is the cheaper

Congo Brazzaville 11.75 29 10.37 28 11.7%

Sao Tome and Principe 12.49 30 12.49 37 Dominant is the cheaper

Senegal 12.60 31 12.60 38 Dominant is the cheaper

Zimbabwe 12.80 32 12.80 39 Dominant is the cheaper

Chad 12.99 33 12.99 41 Dominant is the cheaper

Sierra Leone 13.15 34 10.67 31 18.9%

Malawi 13.24 35 12.20 36 7.9%

Togo 14.18 36 13.11 42 7.5%

Seychelles 14.32 37 14.32 43 Dominant is the cheaper

Mauritania 15.32 38 15.32 44 Dominant is the cheaper

24

ICT Sector Performance Review for 2014


Table 8: Cheapest product for OECD mobile baskets, 2010 definition - 30 calls and 100 SMS per

month

Swaziland 15.56 39 15.56 45 Dominant is the cheaper

Democratic Republic of Congo 17.12 40 10.11 26 40.9%

Angola 17.87 41 15.79 46 11.6%

Lesotho 18.53 42 11.55 35 37.7%

Gabon 19.39 43 10.68 32 44.9%

Cape Verde 20.13 44 20.13 47 Dominant is the cheaper

Morocco 31.79 45 10.32 27 67.5%

Guinea - 46 3.78 10

Guinea-Bissau - 47 12.87 40

Figure 17 compares the cost of the cheapest prepaid mobile products for each mobile

operator in Namibia according to the OECD 30 calls and 100 SMSs basket. MTC is

the cheapest operator since Q4 2011.

Figure 17: Cost of cheapest prepaid mobile product for OECD 30 calls and 100

SMSs basket by operators in N$

The basket methodology does not take into account the vast amounts of free minutes

and SMS that are bundled with some of prepaid top up products. It is based on

advertised prices for a fairly low use per month of 30 calls and 100 SMS. These

results need to be read together with the implied prices from earlier sections and the

bundled top up offerings in the next section.

Bundled Value Index

The Bundled Value Index (BVI) was devised to capture the value of combined data,

SMS and voice prepaid products that are offered as top up for regular prepaid

products. The BVI measures the value a customer receives for bundled minutes or

SMSs and data. OECD usage baskets are based on minute, SMS and data tariff

capturing the monthly basket cost. The BVI complements the OECD basket as it

calculates the value for the blended bundle, beyond just monthly basket cost (i.e. the

OECD basket).

The BVI adds the value of bundled minutes, SMSs, airtime value and data and divides

it by the price. The value of bundled minutes is derived by multiplying the number of

minutes with a fixed USD value inclusive of tax. One minute is valued at USD 0.10 ,1 SMS

at USD 0.01, and 1 MB data at USD 0.10. Data dedicated for social media only is valued

at USD 0.05 cents. An offering with 25 minutes, 50 SMSs and 100MB data bundled, with

a price of USD 10.00 will then have the following BVI:

BVI =(25*0.1+50*0.01+100*0.1)/10 =1.3

This means that the consumer gets 1.3 times the value of the bundle offering. The higher

the index scores the higher the value. We used the same USD values across all operators

and countries for comparative purposes. Unlimited calls, SMSs or data contracts were

made comparable to capped packages by applying the following rules:

• Unlimited minutes = 240 minutes per day or 7200 minutes per month.

• Uncapped SMS = 240 SMSs a day or 7200 SMSs per month.

• Uncapped data = the smaller value out of the fair terms of use policy limit and 30 GB

per month.

• Uncapped Social Media access = 2 GB per month or 500 MB per week

• Where unlimited minutes and SMS came with a set value from the operator, that value

was used.

Table 9 lists the top up products for MTC and Telecom Namibia and calculates the

BVI for each. It is clear from this table that MTC’s top up products provides a multiple

of TN Mobile’s bundled value. Aweh Gig offers 67.6 times the value of what it costs,

for example. The best value top up of TN Mobile is TN Mobile 20 which offers 2.7

times the value it costs.

MTC has a major advantage in offering top up bundles that Telecom Namibia cannot

match due to its dominance. Above 99% market share of outgoing calls means that

termination rate payments to Telecom Namibia are insignificant and MTC can thus

pursue a strategy of constant ARPUs. A sequence of four Aweh Gig or Aweh Prime

ICT Sector Performance Review for 2014

25


would give MTC N$ 120 revenue (excluding VAT). If used by all prepaid subscribers

of MTC it would yield N$ 3.5 billion a year for prepaid only. Its current total revenue

is N$ 2 billion in total.

Table 9: Bundled Value

Index

Cost

Validity

Free

Minutes

Free

SMS

FX USD Q2

Free MB Social Media MB

2015

MTC Aweh Super 50 7 Days 700 1500 350 710 12.1 46.1

Aweh Prime 30 7 Days 350 700 200 210 12.1 33.4

Aweh Gig 30 7 Days 100 700 1000 510 12.1 67.6

Aweh Go 12 7 Days 50 150 50 60 12.1 17.6

TN Mobile TN Mobile 20 19 7 Days 20 20 20 0 12.1 2.7

TN Mobile 50 49 30 Days 50 50 50 0 12.1 2.6

Business Lite 149 30 Days 150 150 150 0 12.1 2.6

While not all prepaid subscribers can afford to spend N$ 120 a month this strategy

also has the benefit of competing effectively with Over The Top (OTT) services such

as Facebook, WhatsApp, Skype, Viper, Talkray, FaceTime etc. The vast number of

BVI

26

ICT Sector Performance Review for 2014


undled SMS and minutes mean that using OTTs for domestic communication does

not bring any cost benefit to consumers. The top up strategy of MTC can be seen as

a transition to flat rate prices seen in Europe and the US for the postpaid market, but

in the case of Namibia for prepaid.

Figure 18 shows country ranking by highest scoring product on the BVI for Q2

2015. Kenya has the best BVI offering on the market from Orange, a late entrant

into a market in which Safaricom has significant market power. The comparison

figure indicates that other operators in Africa adopted a similar strategy, some even

offering a greater value than MTC.

Figure 18: Bundled Value for Money Index country ranking Q2 2015

Postpaid Value Index

The methodology to analyse prepaid top ups can also be applied to postpaid

products. The PVI measures the value a customer gets for the monthly subscription

price in terms of bundled minutes, SMSs and data. Table 10 lists the PVI by postpaid

products of MTC and TN Mobile.

The PVI measures the value a customer gets for the monthly subscription price in terms

of bundled minutes, SMSs, data and airtime value. It does not take into account out-ofbundle

rates. OECD usage baskets that CRAN uses for prepaid products are based on outof-bundle

rates. The PVI complements this by looking at postpaid PVI, together providing a

comprehensive view of the market.

The PVI adds the value of bundled minutes, SMSs, data and airtime value and divides it by

the monthly subscription, expressed in USD. The value of bundled minutes is derived by

multiplying the number of minutes with a fixed USD value. One minute is valued at USD

0.10, 1 SMS at USD 0.01, and 1 MB data at USD 0.10. Airtime value is converted to USD and

also added to the value along the bundled minutes, SMS and Data.

A contract with 25 minutes, 50 SMSs and 100MB data bundled, with a monthly subscription

of USD 10.00 will then have the following PVI:

PVI =(25*0.1+50*0.01+100*0.1)/10 =1.3

This means that the consumer gets 1.3 times the value of the monthly subscription. We used

the same USD values across all operators and countries. Using operator specific out-ofbundle

prices would make more expensive operators seem as if they are providing higher

value. Unlimited calls, SMSs or data contracts were made comparable to capped packages

by applying following rules:

• Unlimited minutes = 240 minutes per day or 7200 minutes per month

• Uncapped SMS = 240 SMSs a day or 7200 SMSs per month.

• Uncapped data = the smaller value out of the fair terms of use policy limit and 30 GB.

Generally we capture postpaid products without handsets. In cases where handsets are

attached to the contract the effect would be an underestimation of the actual value offering.

Bundled minutes and SMSs are not distinguished by destination (on-net or off-net) or time

period (peak or off-peak).

ICT Sector Performance Review for 2014

27


Table 10 calculates the PVI for all current postpaid products of MTC and Telecom

Namibia. The first thing that comes to mind is that the value received for the monthly

subscription is only a fraction of the value received for prepaid top up services from

MTC. This is mainly due to a large share of the monthly subscription being used for

the bundled handset, which is not covered by the PVI. Telecom Namibia’s postpaid

offerings are more competitive than its prepaid offerings.

Figure 16 places the PVI for all products sorted by monthly subscription value.

Table 10: Postpaid Value

Index

Monthly

Subscription

Free

Phone

Free

Minutes

Free

SMS

Free MB Airtime

value

FX USD

Q2 2015

MTC Select S 159 Yes 200 200 200 0 12.1 3.2

Select M 249 Yes 300 300 300 0 12.1 3.1

Select L 399 Yes 600 600 600 0 12.1 3.8

Select XL 749 Yes 900 900 2400 0 12.1 5.5

Duet M 599 Yes 600 600 600 12.1 2.5

Duet L 869 Yes 900 900 2400 0 12.1 4.7

Professional 95 No 0 0 0 0 12.1 0.0

Telemetry* 45 No 0 0 0 0 12.1 0.0

TN Mobile Chat 200 169 200 150 0 0 12.1 1.5

Chat 300 239 300 150 400 0 12.1 3.6

Chat 500 299 250 500 0 0 12.1 1.2

Control Chat 50 149 0 50 100 50 12.1 1.2

Control chat 150 249 0 150 300 150 12.1 2.1

Control chat 200 350 0 200 400 350 12.1 2.4

Smartphone Flex 399 0 150 600 400 12.1 2.9

Smartphone Plus 599 0 200 1000 500 12.1 2.9

Smartphone Elite 949 0 250 1800 900 12.1 3.3

PVI

Figure 19: PVI for Q2 2015 sorted by monthly subscription

While MTC provides a better PVI for most ranges the difference is not as stark as for

prepaid. The graph below displays the PVI for postpaid products for MTC and TN

Mobile along the monthly subscription levels. MTC’s Select XL has the highest PVI of

5.5 at N$ 749 per month. TN Mobile’s highest PVI is for the Chat 300 product with

3.6 for N$239 a month.

28

ICT Sector Performance Review for 2014


Mobile Broadband

Competition in mobile and fixed telecommunication is shifting from voice to data.

Data revenues continue to grow while voice revenues are in decline, as they are

around the world. Figure 20 displays the cost of the cheapest 1GB top up, valid for a

month for several African countries in USD.

Namibia is quite expensive in this comparison. However, this basket approach requires

the cost of 1 GB to be valid for one month, which costs N$ 139 excluding VAT at MTC

and at Telecom Namibia. For N$ 120 excluding VAT one may however get 4 GB of

data when buying Aweh Gig and get additional 400 minutes, 2,800 SMS and 2 GB

social media data. These extra benefits cannot be recognised in the basket approach.

Conclusion

MTC provides exceptional value to its prepaid customers through the Aweh bundles.

It resembles flat rate pricing for prepaid customers and gives even poorer segments

of the population affordable access to voice and data. MTC is likely to only feel

competition through OTT or its postpaid customers in terms of lower out of bundle

calling and international voice and SMS. Telecom Namibia’s prepaid and prepaid top

up products cannot compete in attractiveness with those of MTC. It is unlikely that

it would be able to design similar products unless termination rates are lowered or

zero rated due to its high share in off-net traffic. Given its low customer base and

low traffic, Telecom Namibia could adopt a premium mobile approach, providing

faster data and better voice quality at a higher price to elite customers. Such an

approach would also need to be accompanied by premium handsets. However this is

where MTC may have an advantage again due to higher volume purchases and more

coverage.

Figure 20: Q4 2014 USD Prices 1GB basket (Source: Research ICT Africa)

ICT Sector Performance Review for 2014

29


30

ICT Sector Performance Review for 2014


FIXED LINE-WIRED SERVICES

Telecom Namibia is Namibia’s only national fixed-line operator and owns the only

national fibre network for providing fixed services. 6 All other licensees rely on its fibre

network to varying extents and some resellers rely entirely on it.

Voice versus Data Revenues

Telecom Namibia faces declining voice revenues. While revenues from monthly rental

remained stable and international voice only declined slightly, the main drop in voice

revenues stems from declining domestic voice revenue. The reasons for declining

fixed voice revenues around the world are the wider use of mobile phones and the use

of VoIP applications such as Skype. Fixed-to mobile and voice to data substitutions

happen on the residential and business level. While fixed-lines are not necessarily cut

by businesses, business communication traffic has been shifted to mobile. This is an

international trend also reflected in Namibia.

Figure 21: Telecom Namibia’s fixed voice revenues in N$ million

ICT Sector Performance Review for 2014

6 MTC also maintains a fibre network but only for own use. It does not provide fixed-line or leased line services.

31


Data revenues are on the increase overall and exceed voice revenues since the

2012 financial year. For the financial year ending in September 2014 data revenues

exceeded voice revenues by more than 50% totalling N$ 652 million compared to

N$ 418.5 million.

Figure 22: Telecom Namibia voice vs data revenues in N$ million (source

annual reports)

ADSL and Leased-Line Revenues

Figure 23: Telecom Namibia’s ADSL and leased line revenues in N$ million

Telecom Namibia offers ADSL and leased lines as a retail service to end-users and as

a wholesale service to resellers such as Africa Online, MTN Business, SALT, Paratus

and Bidvest.

Revenue from ADSL subscriptions has doubled since 2012 and is more important

than leased line revenues for Telecom Namibia since the 4 th quarter of 2013. In the

second quarter of 2015 ADSL revenues were 30% higher than leased line revenues.

32

ICT Sector Performance Review for 2014


Table 8: Fixed data subscribers

End of

Dec 2012

End of

Jun 2013

End of

Dec 2013

End of

Jun 2014

End of

Dec 2014

End

of Jun

2015

Fixed broadband below 2 mbps 29,795 24,345 29,776 31,808 36,041 38,358

Fixed broadband 2 mbps to less

than 10 mbps

2,005 1,955 4,014 4,288 5,087 5,749

Fixed broadband 10 mbps and

above

56 38 57 65 84 135

Fixed broadband total 31,856 26,338 33,847 36,161 41,212 44,242

ISDN dial up 19,686 19,943 11,940 14,980 11,350 12,508

Satellite broadband subscriptions

VSAT

266 260 265 289 318 337

Broadband subscriptions (mobile) 19,789 18,395 16,673 13,067 22,508 23,873

Leased lines 9,606 9,259 10,001 10,376 10,690 8,607

Figure 24: Leased line revenues in N$ million

The leased line revenues of MTN Business and Paratus together were higher than

the leased line revenues of Telecom Namibia for the last three quarters. Effective

resellers provide more of an opportunity than they pose a threat to Telecom Namibia

given that it has the only national fibre network. A wholesale only strategy may prove

to be more profitable than competition in the retail market for leased lines as well.

Another option could be to separate the wholesale business entirely from the retail

business, as separate business units within the same group. Telkom South Africa has

just announced such a move recently.7 It reduces regulatory burden and promises

more efficiency for retail and wholesale operations.

Fixed Data Subscribers

In December 2012, Telecom Namibia only had 56 ADSL subscriptions of 10 mbps

or higher, which increased to 135 by June 2015. In total there were only 44,242

fixed-broadband end user subscribers in Namibia in June 2015 and the majority of

those at speeds are no longer considered broadband (below 2 mbps). MTC had

approximately the same number of dedicated data subscribers (48,000), and 856,960

active mobile broadband subscribers.

Conclusion

After the voice battle was lost in the last decade, faster data is becoming the new

competitive and marketing tool nationally and internationally. Therefore, to compete

with 4G (LTE) mobile packages and offer data at competitive prices, fixed line

operators will have to change their ADSL services to VDSL2 or massively reduce

prices for ADSL.

Another alternative could also be to replace all ADSL lines with 2Mbps leased line

services (which can be delivered over existing copper lines), at a flat access price.

FTTH could complement this service to new residential complexes and businesses.

It is of concern to the Authority that Telecom Namibia failed to gain a significant

mobile market share. Telecom Namibia’s voice revenues have been in continuous

decline since 2009 and during the same period its data revenues have continuously

increased. Telecom Namibia should focus their strengths i.e. on data and then

improve on issues such as speed, quality of service (QoS) and pricing to compete

with mobile services to stay competitive in future.

7 http://www.techcentral.co.za/telkom-spins-off-wholesale-as-openserve/60510/?utm_source=feedburner&utm_medium=email&utm_

campaign=Feed%3A+co%2FUqJF+%28TechCentral%29

ICT Sector Performance Review for 2014

33


BROADCASTING

This section evaluates the performance of the broadcasting sector for the year 2014.

The Namibian broadcasting industry can be divided into two sub sectors, TV and radio.

Radio again can be distinguished into commercial and community broadcasting.

Radio

Among commercial broadcasters Radio Wave is the largest in terms of revenues

followed by NBC and Radio Kosmos. Media for Christ, a community broadcaster is

the fourth largest radio station in terms of revenues.

Figure 26: Market share in terms of revenues in FY 2014 for commercial

broadcasters (NBC radio revenues only for FY2013)

From a regulatory perspective there is no need for a distinction between community

and commercial broadcasters since the same licence fee applies to both categories.

It raises the issues whether Namibia needs to distinguish between community and

commercial broadcasting. Both compete in the same advertising space. The tax

aspects of ‘for gain’ versus ‘not for profit’ is addressed by the option for a section 21

company.

Figure 25: Revenues in million N$ for the financial year ending in 2014 (NBC

radio revenues only for FY2013)

Among commercial broadcasters, Radio Wave, NBC and Kosmos account for 65%

market share. Among community broadcasters Media in Christ dominates with 71%

market share (based on revenues).

34

ICT Sector Performance Review for 2014


The market share outlook changes when considering listeners rather than revenues.

NBC accounted only for 24% of the revenues of commercial broadcasters but for 54%

of listeners. Sixty five percent (65%) of the listeners of the NBC Oshiwambo services

are from the LSM8 categories 1 to 4. In contrast, Radio Wave listeners are mostly from

LSM 9 and 10 (59%).9

Figure 28: Listenership by LSM categories (source: MediaMetrics 2015)

Figure 27: Market share in terms of revenues in FY 2014 for Community

broadcasters

Radio Wave generated 25% of the revenues of commercial broadcasters with less

than 2% of the listeners but the majority of their listeners are in the highest income

categories. Radio Wave is therefore able to charge more for advertising slots or simply

advertise more than others because of its wealthy listener base.

ICT Sector Performance Review for 2014

8 The SAARF LSM (Living Standards Measure) has become the most widely used marketing research tool in Southern Africa. It divides the

population into 10 LSM groups, 10 (highest) to 1 (lowest). See http://www.saarf.co.za/LSM/lsms.asp for more info.

9 MediaMetrics, 2015, pp. 95 & 103.

35


Table 9: Market share in terms of number of listeners for

2014 - listened to in the last 4 weeks (source: MediaMetrics,

2015)

NBC Oshiwambo 20.49%

NBC National Radio 11.56%

NBC Otjiherero 6.68%

NBC Nama Damara 5.55%

NBC Rukavango 4.60% 53.89%

NBC Afrikaans 2.28%

NBC Silozi 2.02%

NBC Setswana 0.51%

NBC German 0.20%

Omulunga 11.37%

Fresh FM 8.40%

Radio Energy 100 FM 7.02%

Radio 99 5.56%

Channel 7 / Kanaal 7 4.17%

KCR Base FM 2.09%

Radio Wave 1.83%

Kosmos 1.82%

UNAM 0.73%

Live FM Radio Live 0.68%

46.11%

Hit radio 0.56%

West Coast 0.44%

Karas Radio Station 0.42%

One FM 0.42%

Ohangwena Regional Council 0.25%

Ecclesia 91 3 FM 0.12%

Kairos Radio 0.05%

Oranjemund Community Radio 0.01%

Table 9 shows the

market share by

listeners for 2014.

NBC stations

make up 54% of

all listeners, while

other commercial

stations make up the

remaining 46%. The

listenership figures

show that NBC is

delivering on its

mandate to provide

all Namibians with

access to radio

regardless of their

location

It is important to note that it is not NBC’s role to be sustainable and fund its operations

from advertising revenues in contrast to commercial broadcasters such as Radio Wave

and Kosmos who do not receive subsidies from the state and have no public interest

mandate

36

ICT Sector Performance Review for 2014


ICT Sector Performance Review for 2014

37


Television

With a small population, Namibia’s TV industry is limited in local content production

and most content is imported. The result is that MultiChoice (DStv), as the main

importer of content has a revenue market share of 91% and is viewed by 31% of

Namibians that watch TV. NBC in contrast is being watched by 48% of TV viewers but

only has a revenue market share of 6%.

This data shows that the TV license-fee model that NBC uses to support its

programming is not working: Despite capturing 48% of all viewers and 14% of viewers

in LSM 9-10, NBC’s market share by revenue is only 6%.

Figure 29: Revenues in million N$ (NBC FY 2013, MultiChoice FY 2014/15,

OneAfrica calendar year 2014))

While not as pronounced as radio, commercial TV broadcasters capture significantly

higher percentages of viewers in the LSM 9 to 10 categories. 25% of DStv are in LSM

9-10 compared to NBC’s only 14%.

Figure 31: Market share in terms of viewers in 2014 (last 3 weeks - source

MediaMetrics)

Financial performance of the NBC

The NBC is continuously making losses despite state subsidies. The

losses are declining and were down to a N$ 43.2 million loss in 2013,

while state subsidies spiked at the same time to N$ 156 million.

Figure 30: Viewers per LSM category (MediaMetrics 2015)

38

Figure 32: NBC Net loss compared to state subsidy in N$ million

ICT Sector Performance Review for 2014


TV license fee income barely covered 6% of the operating expenses of the NBC. One

step could be to get rid off it altogether and make the NBC a fully state funded public

broadcaster.

Table 10: NBC KPIs 2007 2008 2009 2010 2011 2012 2013

Total revenues N$

Million

116.6 113.2 140.8 160.3 179.4 167.1 219.9

Net Profit / loss (after

tax) N$ Million)

-78.7 -38.0 -65.2 -124.0 -102.8 -61.9 -43.2

Operating Income N$

Million

54.1 50.6 52.7 52.5 57.3 62.3 63.9

State subsidy N$

Million)

62.5 62.6 88.1 106.1 122.0 104.8 156.0

Expenditure N$

Million)

138.4 145.2 201.5 278.9 277.2 206.4 229.0

State subsidy to

operating income 116% 124% 167% 202% 213% 168% 244%

ratio

TV licenses fee

revenue N$ Million

26.1 16.4 13.9 16.7 14.4 16.1 13.7

License fee revenue

as share of operating 48% 32% 26% 32% 25% 26% 21%

revenue

License fee

revenue as share of 19% 11% 7% 6% 5% 8% 6%

expenditure

Source: NBC audited financial statements

One may argue that N$ 16 million is better than nothing. However, it duplicates the

tax collecting mechanism which is fairer (tax rate progression based on income) and

more effective. The TV license fee is the same, independent of income, and thus

discriminates against the poor. An alternative approach needs to be investigated that

doesn’t discriminate against the poor and which offers a more sustainable income

stream for NBC. One approach that should be considered is splitting NBC into a

content company and a signal transmission company: The content company would

pay the signal distributor company for transmission and would make money through

state subsidies and advertising. This approach would also allow the content company

to segment viewers and allow more effective advertising.

Conclusion

Figure 33: NBC revenues in N$ million

Namibia’s broadcasting sector is dominated by the public broadcasters in terms of

viewers but by commercial radio and TV stations in terms of revenues. While this can

generally be expected for a public broadcaster the continuing losses and the gap

between NBC and commercial radio and TV raise the question on whether things

could not be done better when it comes to public broadcasting.

Once approach could be to split NBC into two companies, one responsible for

producing content and the other for signal distribution. Tax money spent on NBC

could then clearly be identified for producing local news and content. The signal

distribution, which is now digital, could be made available to any broadcaster. This

is a more efficient approach and is more likely to result in the transmission company

breaking even. The status quo ensures that NBC will continue to lose money, requiring

state subsidies for the foreseeable future.

ICT Sector Performance Review for 2014

39


40

ICT Sector Performance Review for 2014


CONCLUSION

The Namibian telecommunications sector declined from three national mobile

operators to just two. Only one of the two has significant revenues and traffic, leaving

Namibia with a quasi-mobile and an actual fixed-line monopoly, both majority stateowned.

The takeover of the only fully privately owned mobile operator, Leo, by a

100% state-owned Telecom Namibia crowded out private investment in favour of

public investment.

Due to the declining business model of Telecom Namibia and inadequate fixed

broadband offerings, Telecom Namibia is losing voice and data revenue to MTC and,

as a consequence, lacks the capital to build a mobile network that could compete

with MTC. Telecom Namibia further limited its capacity to invest domestically with

costly failed investments in South Africa and Angola.

Fixed broadband cannot currently compete in Namibia with mobile broadband

neither on speed, quality nor on price, and only has a slim niche of uncapped

Internet. This niche becomes increasingly smaller with MTC’s broadband partially

replicating (subject to fair use policy) Telecom Namibia’s uncapped products but at

much higher speeds. MTC’s 50GB classifies as uncapped use for a large number of

Internet subscribers in Namibia.

Telecom Namibia needs substantial funds to invest into mobile and fixed broadband

in order to compete in the short to medium term, its net cash flow alone is not enough

to make urgent needed investments.

It was competition from a privately owned operator (Leo) that brought 3G services to

Namibia in 2006 and subsequently lower voice and data prices. CRAN will monitor

developments in 2015 and look into pro-competitive regulatory strategies to ensure

the regulatory objectives of competition, affordability and universal access and usage,

innovation and quality of service.

In the broadcasting sector, NBC continues to fulfil its mandate to provide content

to all Namibians but at high cost. The state continues to subsidise NBC and this is

unlikely to change unless a better licensing model is implemented and specifically

one that doesn’t discriminate against the poor.

ICT Sector Performance Review for 2014

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ICT Sector Performance Review for 2014


ICT Sector Performance Review for 2014

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44

Communications House, No. 56 Robert Mugabe Avenue, Windhoek • Namibia Private Bag 13309, Windhoek, Namibia

• T+ 264 61 222 666 • F +264 61 222 790 • Fax2email 088 642 748 • Email cran@cran.na www.cran.na

ICT Sector Performance Review for 2014

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