Zambia ICT Sector Performance Review 2010 - Research ICT Africa

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Towards Evidence-based ICT Policy and Regulation Telecom, Internet and Broadcasting Market Analysis Fixed-line Network ZAMTEL, a 100% state-owned company, is the only provider licensed to operate a public switched telephone network (PSTN) in Zambia. Its range of services includes local, national, and international fixed telephone services where it enjoys monopoly privileges. In addition to its GSM network, under the CelZ brand name ZAMTEL is also in the process of installing fixed wireless infrastructure based on WIMAX technology to provide both wireless voice and data services. Table 6: Fixed-line Subscribers Year Number of Fixed Lines Per 100 Inhabitants Growth Rate (%) 2001 85,680 0.849 2.83 2002 87,674 0.842 2.33 2003 88,561 1 1.01 2004 90,663 0.818 2.37 2005 94,665 0.827 4.41 2006 93,427 0.807 -1.31 2007 91,789 0.784 -1.75 2008 90, 600 0.761 -1.29 2009 90,341 0.70 -0.28 Source: ZICTA Since 2006, the fixed line market has experienced a slow but gradual decline In 2009, Zamtel's fixed line network had an installed capacity of 162,000 fixed telephone lines out of which slightly above 90,000 lines were active. This translates to a capacity utilization of approximately 56% and fixed-line teledensity of 0.7 phones per 100 people across the country. From 1995-2005, the number of lines grew from 76,000 to 94,665, at an annual average growth rate of 2.4%. However, since 2006, the fixed-line market has experienced a slow but gradual decline, averaging 1% annually, to 90,341 lines in 2009. The decline is mainly due to lack of investment in network maintenance and expansion on the one hand and increased public access to mobile telephony on the other. 96,000 94,000 92,000 90,000 88,000 86,000 Fixed 84,000 82,000 80,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Figure 3: Fixed-Line Customer Trends The poor quality and lack of timely replacements or upgrades from analogue telephone exchanges to digital systems has contributed to the substitution of fixed-line telephony with mobile cellular communications, leading to the current trend of steady decline in the number of fixed lines available in both urban and rural areas of Zambia. 12
Zambia ICT Sector Performance Review 2009/2010 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 Mobile Fixed Internet 1,000,000 500,000 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 Figure 4: Mobile, Fixed and Internet Customer Growth Trends The fixed-line network is highly skewed towards urban areas, which account for close to 90% of the PSTN subscribers, but only 55% of the country's population. The network is concentrated in Lusaka and Copperbelt areas, which account for around 50% and 30% of fixed lines, respectively, but less than 38% of the national population. The rural areas, with more than 60% of the population enjoy less than 10% of the fixed lines available. At present, the active fixed lines in Zambia are evenly distributed between commercial and residential subscribers. More than 80% of ZAMTEL's transmission network is digital. A number of microwave trunk routes carry traffic to major provincial centers. A digital optic-fiber backbone linking Lusaka and Livingstone is being installed as part of ZAMTEL’s network upgrade. Traffic to medium-sized towns and rural areas is carried via microwave links that also provide interconnection with neighboring countries where applicable. Chinese equipment supplier Huawei has been building the company a fibre backbone, but it is far from complete. Financing constraints have delayed completion of the project considerably. In spite of its monopoly status, as at end of 2009 ZAMTEL had fewer than 100,000 fixed and fixedwireless subscribers over the last 40 years and, since 2006, it has lost over 10,000 subscribers. While the two major private operators, namely Zain and MTN, had over 3.5 mobile million subscribers between them, Zamtel has fewer than 200,000 mobile customers. In 2008, Zamtel registered a ratio of 110 subscribers per employee compared to 586 – the average subscriber base per employee for sub-Saharan African telecommunication operators. Zamtel’s bloated cost base, largely because of its large headcount, has led it to insolvency. In order to save the company from liquidation, the government opted to privatise Zamtel (see below). The fixed-line network is highly skewed towards urban areas, which account for close to 90% of the PSTN subscribers, but only 55% of the country's population. Zamtel’s bloated cost base, largely because of its large headcount, has led it to insolvency. Privatisation of Zamtel The Government has recognised that the ICT sector in Zambia has the potential to make significant contributions to economic growth. As a result, it has resolved to fully liberalise the telecommunications sector and is taking further steps to promote Zambia's international competitiveness by removing barriers to doing business as part of the private sector development reform programme. These actions include eliminating Zamtel’s monopoly on the PSTN and international gateway as well as reducing license fees to regional averages. In December 2008, the government announced its intention to partially privatise Zamtel through the sale of 51% to 75% shares in the company’s equity. The government intends to retain a minimum of 25% of Zamtel’s equity, and reserves the right to list some, or the entire stake on the Lusaka Stock Exchange. In a speech to Parliament in August 2009, the Minister of Communication and Transport revealed that Zamtel had an annual operational deficit of US$17 million, liabilities in excess of US$125 million In December 2008, the government announced its intention to partially privatise Zamtel through the sale of 51% to 75% shares in the company’s equity. 13
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