Orange, MTN, Moov: 5 things about Côte d’Ivoire’s telecoms crisis

April was marked by what the Ivorian telecoms sector is calling the “data crisis”. From one day to the next, Orange, MTN, and Moov were the targets of a media frenzy after the national regulator decided to increase mobile internet tariffs to guarantee better revenues for the beleaguered sector.

This crisis, which ended with a return to prior prices, showed how the cost of mobile data amid high inflation poses a sensitive issue, both to consumers and operators.

Nevertheless, the event was a reminder to the authorities of the urgent need to redefine a profitable business model for a sector that contributes around 11% of the gross domestic product (GDP).

1. Why is the Ivorian market stagnating?

In West Africa, Côte d’Ivoire is home to the only telecoms sector that is stagnating or even declining.

With a mobile phone penetration rate (number of SIM cards in circulation in the country) of over 165%, the country has, for some years, been considered a mature market by the telecom industry.

Unlike other large neighbouring markets such as Senegal, Côte d’Ivoire has three relatively powerful operators, none of which capture more than 50% of the market.

Against this backdrop, customer bases are changing little and competition appears limited. The only option for the three players is to offer ever-lower prices so that more subscribers switch from their competitors.

The problem is that while package prices are falling, operators’ production costs are rising steadily, especially since the Covid pandemic and the Russia-Ukraine conflict.

At the same time, Wave’s arrival has halted the growth of mobile money revenues, the sector’s main growth driver. At present, it is no longer able to compensate for the fall in revenues from traditional communication (voice and SMS). Applications such as WhatsApp or Telegram do not contribute to the financing of communication networks.

2. What costs do operators incur?

To enable users to use applications and surf the internet, operators need to find capacity abroad and develop or modernise their own networks by investing heavily (between 15% and 20% of their annual turnover) in undersea cables and terrestrial networks (fibre optics and antennas).

At the same time, running these networks consumes energy – electricity and fuel for the generators – while equipment transportation costs skyrocket. Labour costs are also rising as employees facing a rising cost of living are calling for higher wages.

“We pay our suppliers in foreign currency, for which the transfer costs have reached levels I’ve never seen before,” a telecoms manager said.

The Côte d’Ivoire telecoms sector is the most heavily taxed in the country. According to one of its players, the direct and indirect tax burden on companies in the sector is 30%, compared with 25% for other industries.

Between investment injunctions, soaring fixed costs, falling revenue and heavy taxation, the margins generated by Orange, MTN, and Moov are no longer sufficient to absorb the capital invested in the networks.

3. What financial results are operators posting?

According to one industry player, the decline in Ivorian telecoms market revenues began in 2021. In the first quarter of 2023, the sector’s overall revenue nevertheless reached almost €380m ($425m), up 2.2% from the same period last year. The industry as a whole agrees that April’s data crisis will continue to have an impact on their results in the long term.

On a case-by-case basis, Orange Côte d’Ivoire recorded zero growth in turnover in 2022, to CFAF965bn (around €1.65bn), with net profit down 1.51% to CFAF153bn ($26m). At the same time, capital expenditure by the French giant’s subsidiary rose by 2.9% to CFAF158.5bn, or 16.4% of turnover.

MTN’s sales also showed zero growth, at R8.9bn (nearly €440m), while net profit fell by 4.7% to R2.9bn. As for Moov, it is not disclosing its results for Côte d’Ivoire. The subscriber base fell by 5% in 2022, which is not necessarily due to the difficulties described in this article.

4. What risk does the sector and its users face?

According to the operators, if nothing is done quickly, the sector risks not being able to finance its modernisation. A major switchover of customers from 2G to 3G and 3G to 4G is already underway across the country, not to mention the public authorities’ desire to launch the costly 5G technology quickly, without any real profitable model having yet been found.

Ultimately, a decline in the sector’s dynamism could have an impact on the state budget – to which it is the main contributor – and degrade the quality of networks and therefore the internet, at a time when digital technology is central to the economic growth of governments.

5. What do the main stakeholders think?

While they are delighted at Côte d’Ivoire’s digitalisation made possible by their low-price policies, the operators are deeply concerned about the medium-term impact of the current situation in a country whose GDP is growing at around 7% a year.

“If we don’t achieve 10% growth this year, we won’t be able to make up for the losses caused by this crisis,” said an operations source. “I’m playing the resilience and cost control card,” said another source who is convinced that the government, seeing its revenues fall, will eventually react.

“We need to educate the public and the authorities to justify the prices charged because many people still believe data costs nothing because it is not backed up by any infrastructure,” the same source added.

As for the solutions envisaged to break the deadlock, the ideas differ from one player to another.

Some are calling for new floor prices to guarantee a certain amount of revenue. In contrast, others are calling for an honest discussion with platforms such as Meta or Google to encourage more network investment.

This is Orange’s ambition, in particular, seeking to push the issue in the various markets where it is present in Africa. In any case, all the operators seem to be unanimous about the amount of fiscal pressure that the state is putting on their shoulders.