Zain yet to agree telco licence fee with South Sudan

Reuters , Tuesday 29 Nov 2011

Following the secession of South Sudan, telecommunications company Zain has yet to agree on a licence fee to operate in the country

Zain Sudan has spent $60 million splitting its operations in two following the succession of South Sudan, but has yet to agree a licence fee with the newly independent country, the telecoms operator's chief executive said on Tuesday.

South Sudan seceded from the north in July, the culmination of a 2005 peace deal that ended decades of civil war.

The fledgling country now has its own international dialling code, 211, which spurred Zain Sudan, a unit of Kuwait's Zain, to split its operations.

"Our network is completely separated and we are running both the old numbers and the new numbers so that we don't deprive our customers of being disconnected until they make a full switch," Elfatih Erwa, Zain Sudan chief executive, told Reuters.

"There were very big technical challenges."

Zain Sudan will spend $280 million improving its infrastructure in the north in 2012, while the operator's capital expenditure in the south is likely to be between $60 million and $80 million.

Zain Sudan has 12.7 million mobile subscribers, up from 10.7 million at the end of March.

The firm has continued operations in South Sudan despite no agreement over a licence fee.

"The government of South Sudan has not engaged on the licence fee yet," said Erwa. "The government said for us not to worry. They will start discussions once they set and enhance the laws and get more experience as a regulator."

Relations between the South and Arab north have soured, with Khartoum on Monday halting oil exports from the landlocked South until the two agree a transit fee.

Erwa said political tensions "are a risk for our operations only from the cost side -- our relationship with both governments is very clear."

"The only direct effect is on our logistics - any tension raises fuel prices and cost of goods in the south. It has an economic effect on both our operations," he said.

Zain's 590,000 mobile subscribers in South Sudan provide 5 per cent of the company's customers and 7 per cent of revenue, Erwa said, forecasting Zain's revenue in the South would increase by about 10 per cent in 2012, while its mobile subscriber base would grow by 20 per cent over the same period.

Zain has a 52 per cent market share in South Sudan, Erwa said, competing against Vivacell, MTN, Sudatel and Gemtel. Only about one in eight people in the country own a mobile phone, one of the lowest penetration rates in the world.

Erwa predicts this will reach about 28 per cent within the next two years, but the country's low economic growth and a lack of education is hindering mobile adoption.

"If I had to go and bid for a new licence in South Sudan as a new entrant I wouldn't - the main thing that lets me put heavy

investment in the South is because I was already there, I have the largest customer base and don't have to launch a start-up operation," said Erwa.   

The company offers 3G services in the three South Sudan cities of Juba, Wau and Malakal through microwave and satellite links.

"We were supposed to build our fibre network in the South, but the project has been delayed by the government due to the regulator not being ready and also some security issues in certain areas," said Erwa. "We have signed the contracts and were supposed to start work in July, but are still waiting."

In the north, Zain has a 58 per cent mobile market share and competes with Sudatel and South Africa's MTN.

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