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After markets such as Uganda, South Africa and Kenya seek to introduce competition in the fixed segment, it is now Senegal’s turn to take the tricky liberalization route. The Senegalese government announced its plan to liberalize Senegal’s telecoms market by issuing a unified license for fixed, mobile and Internet services to a second national operator (SNO) in 2005. This announcement comes months after the formal end of the monopoly of the incumbent, France Telecom’s Sonatel in July 2004. Despite the attractiveness of the license, the SNO faces many challenges.
The licensing of a second fixed line carrier is consistent with Senegal’s desire to spur further growth in its telecoms market and increase access to basic telephony services in the country. Despite a GDP per capita close to $700 and a population of about 10.5m at year-end 2004, we believe there is still room for growth for a new operator in the market. France Telecom’s Sonatel has been the sole provider of fixed line access facilities since 1996 in Senegal.
Current fixed penetration is at around 2.3% with about 245,000 main lines in Senegal at YE04. An SNO has much to gain in the market as the demand for Internet services and broadband solutions remains high, particularly in the corporate segment. Despite evident fixed to mobile substitution, fixed revenues have grown at a CAGR of around 13% (32% for mobile revenues) between 2001 and 2004. And with the entry of a second fixed line carrier, fixed telephony services are likely to become a more competitive alternative to mobile given the expected decline in tariffs for local, national as well as international calls. As a result, we forecast fixed telecoms revenues to grow at a CAGR of about 2.5% between 2005 and 2009.
Exhibit 1: Senegal Total Telecoms Revenues (US$m)
Liberalization of the mobile market began in 1998, Millicom’s Sentel was issued a license to compete with Sonatel’s mobile arm, Alize. Sentel is part of the Millicom International Cellular SA Group (Nasdaq: MICC), a global player with operations in Asia, Latin America and Africa and a sister company of Tele 2. Mobile revenues have grown at a CAGR of around 32% between 2001 and 2004. Sonatel’s Alize and Millicom’s Sentel boast roughly 1.12m subscribers at YE04 which represents a 10.7% mobile penetration. With the entry of a third operator in that segment, Pyramid Research expects total mobile revenues to reach $400m in 2009.
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