Vodacom eyes deeper rural expansion

Mr RENE MEZAMr RENE MEZA
LESS than a year since he took to the position at the helm of Tanzania's leading mobile phone services provider, VODACOM, Mr RENE MEZA, has changed the way the firm operates.For instance, the level of women in senior positions has gone to over 39 per cent of the 485 strong staff force. The Business Standard ABDUEL ELINAZA interviewed the Managing Director on other issues that impact on the company and the telecoms industry since he took over the office last September.

QUESTION: How do you perceive the mobile phone business market since you were appointed as the Vodacom Tanzania Chief Executive Officer (CEO)?


A: The business has been good with a lot of opportunities for growth.At the moment we are talking of a penetration of about 40 per cent, individuals' usage. The industry is growing with huge potential of expansion in the rural areas than in urban centres.

 While the mobile penetration in urban areas is over 80 per cent, the mobile penetration in rural areas is estimated to be only 25 per cent. This means the future growth of the industry will eventually come from the rural areas. Therefore, mobile operators who have the required infrastructure in rural areas will leverage on such opportunities for growth.

I believe the regulator (TCRA) has played a key role in creating a level playing field for all operators for them to invest and expand the industry.

It has been so far a great journey for us at Vodacom and we are still committed to continue investing and expanding our services and footprint across the country - driving M-Pesa, driving internet, and still making the basic services - voice and sms available and affordable to all Tanzanians.

Q: Some industry analysts believe that currently data business is paying more than voice in this country, do you agree with them?

A: If I have to look at what we see, I will have to disagree with them. We still see good business coming from voice. The voice business in the country today contributes over 80 per cent of the total industry revenue of 1.7tr/- a year.

In more mature markets like in American or European, yes, but in emerging markets like Tanzania, voice has opportunity to grow.  And if one goes back to mobile penetration in the rural areas at no more than 25 per cent, clearly the growth will start with voice and text messages before the rural area become matured enough to migrate to the internet and high speed broadband banner. We don't see voice being dead.

Q: What is in the drawing board for Vodacom Tanzania to maintain its number one position in the next six months to one year considering that being number one is one thing but maintaining it is another thing all together?

A: Correct, you are right. We have few strategic areas to focus. One of them is clearly the area of investment where we have a very aggressive expansion plan.

This year, over 120bn/- will be committed to further expand our coverage and increase capacity to provide better services to our consumers.

On the Corporate Social Responsibility (CSR), through Vodacom Foundation, we will continue to play a key and active role engaging with the community to address social and welfare needs in the area of education and health to continue position ourselves as a brand that engages with the community.

On M-Pesa, we will continue to expand our footprint and visibility and the idea is to double the number of agents across the country in the next six months especially in the rural areas. At the moment we have 25,000 active agents countrywide.

On the internet, we will continue to expand our coverage to increase capacity, in areas where we already cover with 3G, the idea is to further increase capacity to carry more traffic and more internet users. We plan to continue strengthening our leadership on the internet arena of about 50 per cent of the total market share.  So these are the main strategic focus areas which will allow us to continue leading the market.

Q: Vodacom is perceived as the most expensive mobile phone service provider in terms of tariffs. Is that true?

A: If I look at all operators and regionally focusing on the EAC (East African Community) and West, North Africa zones, Tanzania has the lowest data and voice tariffs in Africa. So, yes, prices are competitive. Yes, I have to recognize the fact that we are perceived to be more expensive than other players, but that is not probably the reality today. 

Probably it took us sometime to decide to reverse our tariffs which gave us the reputation of being a premium brand or brand for only financially healthy people. That has changed in reality; today we have tariff schemes which are almost the same with other operators.

We have embarked on educating consumers on tariffs. You must have heard about 'Wajanja' campaign, focusing on free airtime when you send money on M-pesa, focusing 25/- for SMS and so forth. We are trying to move away from that perception that we are more expensive than the others, because we are not. But this is something that will probably take time to rebuild because it took us a very long period of time to decide to join the industry in lowering the rates.

Q: Did the global financial crisis affect Vodacom's business in Tanzania in one way or another?

A: It does not probably have a direct impact on what is happening in Europe to developing markets. But it does have indirect impact. The fact that we are part of the Vodacom and Vodafone Group of companies, which operate heavily in Europe, where a big portion of revenue comes from, obviously we suffer indirectly because at the end of the day we rely on our shareholders for funding investments.

The indirect impact is on the inflation side. Food prices have gone up over the last one year, putting pressure on the cost of running our business.

Depreciation of the shilling has also affected our business as well. This is because 99 per cent of our investments are done in hard currency US dollar and Euro, due to the fact that we bring technology from Europe and have to pay suppliers overseas, while we are charging our customers in Tanzania shillings. So when the shilling depreciates, it puts pressure on our business. Otherwise the global financial crisis has no direct impact on the industry.

Q: Vodacom Tanzania boasts as the market leader in the country. Unfortunately, the firm appears nowhere in the country's major tax payers ranking. What a puzzle?

A: That is my favourable topic. What is important and good is to put things in a wider context. And the government has to have a wider view when it comes to taxation.

When you look at corporate tax as one line item in your income statement that is probably a very narrow view because you're not looking at everything else that are affecting corporate tax and one of them being investments in this country.

I can assure you there are not many companies that have invested over one trillion shillings in the last 10 years in infrastructure. We have built 1,300 towers across the country. Not many operators have built the transmission network that we have built over the years.

Not many operators have  covered the footprint than we have done across the country. So when you look at the broader picture, related to the corporate tax, which hasn't been our key contributions in the market; in terms of VAT, excise duty we generated via offering these services to customers and the 5bn/- in CSR to support the community, that is other aspect we have to look at. And if compared to our level of investment in CSR to all the companies you obviously cannot compare the contribution.

When you have such heavy level of investment - of more than one trillion shilling in our case - the effect is that you pay a lot of money in VAT, excise duty and to Local Government Authorities to provide the services.We could reduce the money channeled towards investments and pay more in corporate tax but I don't think that's the right approach and therefore it is important to look at taxation in a broader way.

We are a reputable company listed in London and Johannesburg and cannot play with books on taxation.

Q: What was your pre-tax profit in the last year?

A: We are private and not a listed [public] company in Tanzania, therefore I cannot disclose nor talk about our profitability.

Q: Any plan to list or cross-list in Tanzania in the near future  there is a law coming on that aspect?

A: I don't think there is the need of listing at Dar es Salaam. We are listed in Johannesburg and London stock exchanges by our parent companies.

As it is, 35 per cent of Vodacom Tanzania is in local hands and we employ over 460 employees directly. However, if the law compelling us comes we will comply but strategically we don't see the need for listing at the moment.
Source: The Daily News, www.dailynews.co.tz
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