Can new Zamtel threaten Zain, MTN?

imagesZamtel’s new owner could revitalise the company, gaining a 19% share of the mobile market by 2015, up from its current 4% share. According to Onda Analytics, the privatisation will lead to a major operator taking over Zamtel, providing a serious threat to existing Zambian mobile operators, Zain and MTN.

Interested parties, including MTNL, Telecel Globe (a subsidiary of Orascom), Telkom SA and Vimpelcom officially began due diligence this week.

According to report lead author, Daniel Jones (Partner), “The new investor will have to turn around an operator in crisis. A strategy along the lines of a new entrant will be needed, as Zamtel has fallen further and further behind in the mobile market. High mobile tariffs and low penetration in Zambia present an opportunity for the buyer. Aggressive price competition and going after subscribers new to the market will help Zamtel grow its market share and challenge its competitors”.

Onda Analytics’ new report considers the strategies that a new owner will need to adopt in order to turn the operator into a significant mobile player in Zambia. Under the right strategy, Onda Analytics forecasts Zamtel to grow its mobile market share from 4% in 2009 to 19% by 2015, increasing its subscriber base from 160 000 to 1.8 million. The report also analyses the strategic importance of Zamtel’s other assets, including its fixed line network and the WiMAX network currently in deployment.

On top of increasing revenues, Zamtel will need to keep a close check on costs. “Zamtel’s bloated cost base, as a result of its large headcount, has led it to insolvency and the current privatisation process” explains report co-author, Tom Harden, Partner at Onda Analytics. “Today, all the operator’s unionised staff have agreed voluntary redundancy. A massive staff reduction programme will be need to be carried out by whichever company takes over Zamtel. The union has recognised this, hoping to get the best redundancy packages for its members by negotiating the government now, rather than the new owner later” explains Harden.

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