Africa seems strangely unprepared for its next technology leapfrog, the implementation of LTE. But it\u2019s happening already and it\u2019s not just the small number of mobile operator LTE implementations (see MTN South Africa in telecoms news below). Formerly a WiMAX operator, Smile Communications has quietly launched in Tanzania and Uganda. Russell Southwood spoke to its Group COO Thibaud Weick about how it\u2019s been so far and roll-out plans for the DRC and Nigeria.<\/p>\n
Smile Communications was founded by ex-MTN employee Irene Charnley in 2007 as an insurgent challenger for data and bottom of the pyramid voice using WiMAX technology. The technology proved a dead-end as the user device ecology never emerged at the right price. Current shareholders are two Saudi investment groups \u2013 Al-Nahla and Atheeb \u2013 CapitalWorks and Charnley herself.<\/p>\n
In 2011, it bought the right frequency (in the 800 band) in the four target countries and has a licence but no frequency yet in South Africa. According to Weick, the company decided it was \u201ctime to get real and hire the right people on the execution side.\u201d Weick is one of those hiring having worked as Orascom\u2019s CCO Africa and before that as CEO of Vodafone Cyprus.<\/p>\n
Its business strategy is to provide broadband data access with a delivery speed, quality and reliability not seen before in Africa. Initially it will be aimed at the traditional home-ground of ISPs \u2013 corporates and high-end households \u2013 but will cascade downwards and outwards once LTE devices come down in price. It will use its own networks (the one in Tanzania is outsourced to Alcatel Lucent) to guarantee quality and reliability:\u201dWe don\u2019t own the base stations. We work with the tower sharing companies but we will build towers if they\u2019re needed. When it comes to rural coverage, LTE is much more effective than 3G as the frequency used means you need less sites.\u201d<\/p>\n
By contrast with the mobile operators, it offers tariff simplicity:\u201dIt is simple in terms of tariffs. There are very straightforward, simple bundles.\u201d Current Tanzanian bundles go from TZS9,000 (US5.53) for 500 Mb to TZS100,000 (US$61) for 10 GB to TZS320,000 (US$97) for 50GB. These bundles last 30 days. The average current use by customers is 12 GB per month:\u201dCustomers have a wallet with a balance and they can load up with any amount they like\u201d.<\/p>\n
There are two devices that can deliver the service: a router that receives the LTE signal and distributes it as a Wi-Fi signal and LTE dongles. The first Wi-Fi routers cost US$250-300 seven months ago but have already come down to US$180-250. It does not want to go all-out with LTE dongles until there is contiguous coverage so it is selling fixed wireless for the office and home.<\/p>\n
So what\u2019s the difference in usage and content with LTE?:\u201dThey\u2019ve discovered the Internet as they want it and they start enjoying it. They use more and spend more. One of the big things some of our customers told us was that Skype was very important for business conference calls and what they find is video calls work and it\u2019s the same with high-end families. Also advertising agencies that need to transfer large graphic files between offices now find it is much easier to do so. They don\u2019t need to stay late in the office to wait for it to go in the less busy out-of-hours time. It\u2019s probably going to be the same with the film industry in Nigeria. It enhances the efficiency and productivity of businesses.\u201d<\/p>\n
\u201dSome of our high-end customers will buy 4G\/LTE smartphones in the Christmas sales in the USA and Europe but we\u2019re not pushing this.\u201d So what\u2019s his estimate of when the LTE device ecology will be at an affordable price for a wider range of customers?:\u201dFourteen to eighteen months time. The transition (from the current target markets to a wider customer base) will be driven by handset prices. If it\u2019s sooner, we\u2019ll be ready.\u201d<\/p>\n
It currently has less than 10 base stations in both Dar es Salaam and Kampala in business and high-end residential areas but this is being expanded:We have an aggressive roll-out over the next six months which will see us cover the whole metropolitan area and then a programme over two years to cover other cities. In Tanzania that will include Dodoma, Arusha and the other main cities. In Uganda, it will be the same pattern but also include the oil drilling places\u201d.<\/p>\n
It\u2019s currently delivering actual average speeds of 6 mbps:\u201dIt can be more but with that you can deliver HD video streaming without buffering. That\u2019s the use case we\u2019re putting to customers. Also the signal is very good and will go through almost any wall.\u201d<\/p>\n
Currently it has only hundreds of customers in Tanzania and Uganda but with its current business target markets it\u2019s looking to get tens of thousands but with devices at the right price this will rise to millions:\u201dWhen you have LTE smartphones below US$100, you will see millions of customers.\u201d<\/p>\n
It will start operations in Nigeria and DRC next year and already building its test network in the former. So how does he see the market for broadband in Nigeria?:\u201dIt\u2019s completely underserved. There\u2019s lots of wealth and businesses and the country\u2019s not getting the broadband it deserves. The data networks here are overloaded.\u201d<\/p>\n
And he\u2019s not frightened of competition from the mobile operators:\u201dMore competition will help develop the market and get device manufacturers to focus on Africa. We\u2019ll compete on quality and reliability but not price. We won\u2019t start a price war. We\u2019ll offer voice as an add-on to data.\u201d<\/p>\n
\u201cFor existing operators with legacy networks, the business case for LTE is challenging. Your 3G investment hasn\u2019t been \u2018sweated\u2019 yet. In the case of a greenfield operation, the business case is much better.<\/p>\n
What about the issue of overloaded base stations as the customer base increases?:\u201dWe have a clear policy to limit the number of subscribers per base station. We will then invest in more base stations to meet the new demand. The market needs something that works. We\u2019re offering reliability of the connection. We want to be different and keep it that way.\u201d<\/p>\n
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