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Morocco: New player in telecoms sector

In line with the trend elsewhere in Africa towards cross-border telecoms acquisitions, Morocco may potentially see a sizeable new entrant into its mobile sector, following confirmed reports that France Telecom is interesting in moving into the Maghreb country. The entry of the French giant could up competition in a market that is increasingly seen as a regional role model due to its sophistication and growth levels.

A spokesman for France Telecom, Tom Wright, told media in mid-August that the company "confirms its interest in the Moroccan telecom market". However, he declined to comment on a report in a Moroccan newspaper that France Telecom plans to buy a 40% stake in Méditel for some €650m.

France Telecom's eyeing of Morocco is part of a €9bn acquisition plan to build up its African operations as domestic growth slows. The company is considering four or five acquisitions in the region, Marc Rennard, the executive director for Africa, the Middle East and Asia, said in June, in addition to the presence it already holds in 14 countries across the continent through its Orange brand.

There is good reason for France Telecom to be interested in the Maghreb region, and in Morocco in particular. The country's advanced telecoms market provides a bellwether for the sector's development in the rest of Africa, and French rival Vivendi owns 53% of incumbent Maroc Telecom (MT).

MT currently holds about 64% of the mobile market, in competition with two mobile network operators.

Meditel entered the market in 2000 and holds a share of 34%, while Wana has garnered about 2% since it started operations in 2008.

The Middle East and North Africa region as a whole is seen as fertile territory for growth, and the next five years are expected to see increased competition in Morocco's fixed-line and mobile markets, according to a July report from US-based consulting firm Pyramid Research.

The report, entitled "Morocco: New Mobile Competitors Boost Market Share", estimates that Morocco's telecoms market will increase at a compound annual growth rate (CAGR) of 3.1% - from $4.9bn to $5.7bn - between 2010 and 2015. It also forecasts that mobile voice and data services will make up 69.5% of total revenue in 2015, up from 67.6% in 2009.

Fixed-line voice accounted for 26.8% of total revenue in 2009, but this is expected to decline to 21% by 2015 as mobile growth continues. Voice over internet protocol (VoIP) revenue is expected to see a CAGR of 39.4%, from $8m in 2010 to $41m, by 2015.

Market dynamics are shifting, particularly with the entry of Wana and its subsequent uptake of 1m customers during its first four months of operation, the report notes.

"The new environment is expected to significantly affect MT's share of revenue, which is expected to decrease by 13% over the next five years, reaching 59.6% by 2015," said Mehdi Ben Said, a senior analyst at Pyramid Research. "Also, new commercial initiatives and promotions introduced in early 2009 by Méditel are making a positive impact on the company's market share, leaving MT to bear the cost of declining overall growth."

Despite a projected fall in market share, MT still leads the sector. MT recently announced results for the first-half of 2010, with turnover rising 6% year-on-year to reach Dh15.5bn (€1.4bn). The chairman of the board of directors said the growth was a result of good performance in both the local market and among foreign affiliates.

The company boasted 23.6m customers as of June 30, an increase of 20% over 2009. Net profit, however, dropped 4.1% year-on-year to Dh4.45bn (€401m) as financial expenses increased due to investments and the purchase of Sotelma, a Malian telecoms firm.

Méditel's results in the first-half 2010 were also promising. It recorded earnings before interest, taxes, depreciation and amortisation of Dh1.01bn (€91m)- an increase of 7.3% over the same period last year - and Dh2.72bn (€245m) in profits, a rise of 12% over 2009. The company's customer base also grew by 15%.

The number-one growth area in the mobile phone market is undoubtedly 3G services. The broadband market had been dominated by MT's ADSL service, however, as of early 2010 some 60% of broadband consumers were using 3G mobile services. This growth is expected to continue, as the mobile penetration rate of 80% creates greater reach than the incumbent's fixed-line network.

Indeed, sales of 3G handsets are expected to account for 24.1% of the total handset market by year-end 2010, the Pyramid Research report notes. "Morocco's booming 3G market and improving purchasing power is a great opportunity," Mehdi said.

Indeed, with figures like these it seems likely that other operators will consider joining the fray. With further growth expected ahead and an increasing switch to 3G services, enabling operators to benefit from new revenue streams in areas such as value-added services and data, the sector looks like a solid bet going forward.

© Oxford Business Group 2010