Saturday, June 15, 2024

New ISP entrants hit on BTCL’s profit margins

Botswana Telecommunications Corporations Limited (BTCL) has suffered a blow in its revenue for the year ended March 31st 2018, at the backdrop of tough competition from the new entrants in the internet service provision.

The Botswana Stock Exchange listed whose stock has for the past months been on the recovery path, has cited in its financial results released this week that, competition in the telecommunications sector continued to intensify with the entry of new internet service providers leading to a downward pressure on prices.

Botswana’s telecommunications sector has grown phenomenally over the years and mobile penetration continues to hit record highs while internet usage also rises on competition in the market.

The three mobile companies namely Mascom, Orange and BTC slug it out for a share in the lucrative telecoms business, taking advantage of the country’s strong purchasing power. The number of internet users has risen strongly in recent years, largely as a result of lower prices following improvements in international connectivity.

According to Botswana Communications Regulatory Authority (BOCRA), as at March 2016, mobile phone access stood at 3.5 million subscribers, meaning that there were 3.5 million active mobile simcards in use in Botswana. There were also 1.4 Million mobile phone internet users in Botswana. These statistics places Botswana at position five in Sub Saharan Africa behind Mauritius, Seychelles, South Africa and Cape Verde. Globally Botswana ranks position 105 out of 176 countries in the world.

Mobile penetration has placed Botswana as one of the major users of mobile broadband internet as evidenced by the country raking among the highest in Africa in terms of usage of social media particularly Facebook.

Today, mobile phone companies are competing with a large number of ISPs, some of which have rolled out their own wireless access infrastructure, such as Nashua, CeneMedia amongst others. BTCL finds itself competing in the same space.

With the new entrants in the market of internet providers, “this had an impact on our performance for the year. The overall economic environment for the year was subdued, which led to the reduction in ICT spend from enterprises and government entities, with most entities negotiating for lower prices on new and existing services. The slowdown in spending also impacted the consumer segments as households were faced with prioritizing their income on basic necessities,” reads the financial statement by the Board chairman, Lorato Boakgomo-Ntakhwana.

The company recorded an 8 percent decrease in profit after tax to P217m from P237million in the previous reporting period on the back of a 3 percent decline in revenue to P1 567m from P1 615million in 2017. The company also realized a 9 percent increase in administrative expenses to P440m from P402million in the previous year and a P10m increase in the tax charge from prior year.

Gross profit, however, grew by 3 percent due to 11 percent reduction in cost of sales to P601m in comparison to P676m previously. The company made significant savings on transmission and bandwidth costs on negotiated and competitive price offerings from our suppliers.

According to the company executives, the revenue decline is mainly attributable to pressure on mobile revenue, other revenue lines remained relatively flat. “We however saw an increase in the uptake of data-centric products in line with market trends. The business during the year made P121m worth of investments in fixed broadband expansion and LTE/4G mobile broadband optimization to increase network coverage and enhance our value proposition,” cites the statement.

During the year, BTCL migrated customers to new technologies which are scalable and more efficient. The company therefore expect that efficiencies and usage will improve as it completes the migration phase and retire old technologies. An increased demand is anticipated in the long term as a result of improved network quality of service. The strategic focus remains that of growth and transformation, anchored by cultural, commercial and technology transformation.

One would gladly say, a new era of connectivity is on the horizon, as the telecommunications sector continues to be a critical force for growth, innovation, and disruption across multiple industries globally.

In his annual Delloite’s US Telecommunications Industry Outlook of 2018, Craig Wigginton, Global Telecommunications sector leader, shares that revenue yield on data services continues to decline as consumers use more and more data, with static or declining monthly bills. Hence it is critical to identify rapid investment opportunities across the telecom portfolioÔÇöincluding 5G, Internet of Things (IoT), and cross-industry partnerships (such as mHealth and mPayments), as well as a host of other growth opportunities.

Looking beyond IoT, many telecom carriers are looking to potentially enter the media space through M&A deals, partnerships, alliances, and the like. Mobile content and video are some of most significant consumer use cases for 5G, so expansion into the content arena is only natural for carriers seeking growth. “We expect this to continue in 2018 through ongoing M&A activity, as well as key partnerships and alliances. Telecommunications providers need to be aware of several important emerging developments,” he said.

The global commercial market is currently deploying the fifth generation (5G), whilst the Botswana market is still crawling between the 2G and 4G.


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