Boston, MA -- (SBWIRE) -- 02/26/2013 -- BMI View: Tanzania's mobile penetration rate fell sharply in Q212 after market leader Vodacom adopted a 90-day activation policy in place of the 215-day policy. This development supports our view that the mobile sector has strong growth potential for basic voice and SMS services, as well as advanced value-added services, which are taking off rapidly in the country. Meanwhile, the outlook for data services continues to improve, with significant terrestrial fibre-optic cable network investment by the incumbent and the launch of the country's first commercial LTE network, albeit it with limited coverage.

Key Data:

- The mobile sector contracted by 12.3% quarter-on-quarter (q-o-q) in Q212, according to BMI estimates, following the discounting of used SIMs within a 90-day period by Vodacom.
- Mobile ARPU rose by 10.6% q-o-q in Q212, mainly due to the disconnection of inactive lines.
- M-commerce users have continued expand, with M-PESA users reaching 3.6mn in Q212.

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Risk/Reward Ratings

Tanzania dropped nine places on BMI telecoms Risk/Reward Ratings table for Sub-Saharan Africa, mainly due to a change in our ratings methodology, which included new factors such as subscriber mix and operators' EBITDA in our industry rewards category. Although Tanzania has similar characteristics to other countries in the region in these metrics, its new rating was considerably less than in our previous methodology, which attributed a higher score for the number of operators in the market.

Key Trends And Developments

Tanzania's mobile market is gearing up for more competition with the expected arrival of a fast-growing international telecoms operator. According to local media reports in Vietnam, Viettel acquired a 65% stake in mobile licensee Epocha and Golden Ocean Tanzanie Ltd (Egotel) for US$18mn in Q312 and intends to invest up to US$337.7mn in the operator. BMI notes that Egotel is one of up to 12 other firms with licences to provide mobile services in Tanzania, seven of which are active with varying levels of performances. While we expect Viettel to make an immediate impact given its experience and resources, we retain the view that the Tanzanian market will be unable to support that many active operators over the long term.

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