Status of the Communications Market – March 10

Jan – Mar 10 2

The Telecommunications Sector at a Glance

Mar - 09 June - 09

Sept - 09

Dec – 09

Mar - 10

PIP 22 23 25 25 26

PSP Voice and Data 32 31 32 36 37

PSP Capacity Resale 5 3 7 8 9

Fixed Lines 210,655 213,820 213,600 233,533 244,455

Mobile Subscriptions 9,801,173 9,464,979 9,529,293 9,383,734 9,992,705

Tele-density 32.61 31.57 31.78 31.37 32.21

Number of Payphones 65,669 71,673 79,896 94,896 96,890

The Macro Performance

Consumer Price Index Annual inflation dropped to 7.5%

from 11% in the previous quarter. The drop in overall inflation was

primarily the result of price drops in food and clothing following the Christmas peak during the preceding quarter.

In the transport and communication sector, CPI dropped to 9.3% from 12 % in the previous quarter . The increase in competition in the sector has had a downward push on telecommunications prices in the country.

Jan – Mar 10 3

Mar-09 Jun-09 Sep-09 Dec-09 Mar-10

14.1

12.3

14.6

11

7.5

10.3 10.5

13.7

12

9.3

Annual CPI Change (March '10)

Annual CPI % change Transport & Communication

Macro Performance Conti.

Tax Contribution Shs 55 billion was realised in

the tax revenue during the period Jan – Mar 2010 compared to Shs 39 billion collected during the same period 2009.

The tax comprised of;

- Shs 23.8 billion in Excise

- Shs 25.7 billion in VAT

- Shs 5.7 billion in PAYE

Jan - Mar 104

1Q09

2Q09

3Q09

4Q09

1Q10

39,151,908,882

42,585,579,094

47,942,938,939

53,524,871,835

55,148,974,620

Telecom Tax Revenue

A reduction in underlying prices for telecommunication services has resulted into more usage and revenues for government, underlying the positive correlation between price and uptake of service. A reduction in the usage tax(currently at 30% )should generate more volumes of usage and consequently yield higher revenues for Government.

Macro Performance Conti.

Total turnover from the sector (Post and communications) increased by 14% to 1.2 trillion shillings during the year 2009.

This is a slow down compared to 2008 when turnover rose by 24%.

Operators are driven to lower their prices as the market gets more competitive. This is consequently having a squeeze on their margins and therefore the ability to grow their revenues.

Jan - Mar 10 5

2005 2006 2007 2008 2009

538,840,114

621,656,625

839,205,933

1,045,355,815

1,194,728,119

Telecom Revenues, UGX 000

Revenue Contributions per Service

Mobile voice services (Prepaid and post paid) dominated gross earnings accounting for more than 50% of turn over.

There was jump in revenues from data and internet services, accounted for an estimated 15% of gross earnings.

The commendable growth in the growth of data services is the result of increased mobile data penetration enhanced by the introduction of 3G data services by the all the telcos.

International access via the high capacity fibre link networks at the East Africa coast is facilitating growth of data market in Uganda

Jan – Mar 106

Communications Infrastructure

Private Sector Initiatives

Consistent with the previous two quarters, there has been a contraction/ slowdown in the roll out of BTS as infrastructure sharing takes root.

Sharing is however still primarily limited to passive network elements with no known sharing of active elements to date.

By March 2010, only 10 BTS were added making it a total of 2890 BTS country wide.

We predict that future additions in BTS shall be in the form of in house coverage boosters as opposed to the traditional mast mounted antennae

Jan - Mar 10 7

Fixed Telephony Market

Fixed Subscriptions

There has been a resurgence in the fixed line market over the past two quarters of December and March 2010.

A total of 30,555 new fixed line connections were registered during the two quarters.

This growth has resulted into a national fixed line penetration of 0.77 lines per 100 persons.

Jan – March 10 8

Mar-09 Jun-09 Sep-09 Dec-09 Mar-10

210,655 213,820 213,600

233,533

244,455

Year on year Fixed Telephony Subscriptions

Fixed Line Distribution

Jan – Mar 10 9

Like in the preceding quarter, new growth in the fixed line market is predominantly in the form of fixed GSM and Wimax Terminals

By the end of March, Fixed cellular terminals accounted for 39% of total fixed lines compared to 36% market share at the end of 2009

CDMA and Copper wire line share of the fixed line market is at 37% and 27% respectively.

FCT (GSM & Wimax)

39%

WLL0%

Fibre3%

CDMA37%

Copper21%

Fixed Line Distribution, Mar -10

Mobile Subscriptions

608,971 new mobile subscriptions were realised in the first quarter of the 2010.

This translated into a quarter to quarter growth of 6.5% compared to the sub zero growth of -1.3% realised in the preceding quarter.

The increase in number of subscribers translates into a cellular network penetration of 31.4% lines per 100 persons.

Jan - Mar 10 10

1Q09 2Q09 3Q09 4Q09 1Q10

9,865,446

8,876,702

9,529,293

9,383,734

9,992,705

Mobile Subscriptions, March 2010

Mobile Subscriptions Vs Penetration

Jan - Mar 10 11

Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 8,400,000

8,600,000

8,800,000

9,000,000

9,200,000

9,400,000

9,600,000

9,800,000

10,000,000

10,200,000

10,400,000

28.00

29.00

30.00

31.00

32.00

33.00

34.00

10,076,101

9,090,522

9,742,893 9,617,267

10,238,000

32.86

29.65

31.78 31.37

32.21

Subscriptions Teledensity

It is worth noting that mobile penetration has fluctuated at 30% over the past year with no significant changes as witnessed in the previous years. This may be a sign of market saturation in mobile market or may necessitate for a trigger to revamp the market.

Subscription Growth and Penetration rates

1Q09 2Q09 3Q09 4Q09 1Q10

15.3

-9.8

7.2

-1.3

6.5

32.6

31.631.8

31.432.7

Subscriber Growth Rates and Penetration, March 2010

Growth Rate Penetration

Jan - Mar 10 12

Traffic Trends

The industry realised a 29% increase in domestic and outgoing international traffic combined for fixed and mobile voice services.

This is Commensurate with the increase in mobile and fixed subscriptions as well as a reduction of prices for these services.

On net traffic still accounts for the lion share of domestic traffic at 88%, a reflection of the current pricing structure where calling on net is considerably cheaper than calling off the network.

Jan – Mar 10 13

3Q09 4Q09 1Q10

1,380,431,465 1,290,255,788

1,740,656,751

218,586,509 201,387,161 202,434,090

25,642,001 23,406,188 25,225,869

Telephone Traffic, 3Q09 - 1Q10

On net Off net Intnl Out

Traffic Distribution

Jan – Mar 10 14

On net88%

Off net10%

Intnl Out1%

Traffic Distribution, 1Q10

On net85%

Off net13%

Intnl Out2%

Quarterly Traffic Distribution, 4Q09

SMS Traffic

There was a growth in SMS traffic of 28% in the first quarter of 2010. This was largely due to the increased SMS usage campaigns by cellular operators. Growth in the previous quarter had been only 4%

On net SMs again dominated the SMS market accounting for 81% of all SMSs sent .

Off net SMS accounting for 16% of SMSs.

Jan – Mar 10 15

3Q09 4Q09 1Q10

97,632,941 103,296,812

142,029,761

27,023,680 25,404,601 28,291,548

8,275,486.00 9,406,964.00 5,887,623.00

SMS Traffic

Onnet Offnet Intnl

SMS Distribution

Jan – Mar 10 16

Onnet 75%

Offnet 18%

Intnl7%

SMS Distribution, 4Q09

Onnet 81%

Offnet 16%

Intnl3%

SMS Distribution, 1Q10

Tariffs

Tariff related highlights during the quarter included;

Orange’s Gyekiri becoming a permanent offering,

The review of Orange’s international roaming rates (24th Feb 2010)

The review of Orange’s domestic and international rates (1st March 2010)

The launch of Warid’s Pepeya promotion

The revision of Pakalast Daily rental from 1000/- to 1500 and the 2 hour usage fee of 500/-

UTL on net bonus promotion MTN’s revised Voice SMS

promotion (Feb 2010) Conclusion of MTN’s goal of

Goals promotions

Jan – Mar 1017

UTL - Xtra MTN - Pay Go Std

Warid - Per Min

Orange - Per Min

Zain - Per Min

310

340329

290

400

290 285275

300

On net Standard Profile Tariff Compar-ison, July 2010

Peak (8 am - 8pm) Off Peak (8pm - 12 am)

Per Second Profile Comparisons

Jan - Mar 10 18

UTL Vibe MTN - Per Sec

Warid - Per Sec

Orange - Per Sec

Zain - Chacha

9

8 8

7

8

6

8 8

7

8

Onnet Per Second Tariff Rate Comparison, July 2010

Peak Off Peak

UTL Vibe MTN - Per Sec

Warid - Per Sec

Orange - Per Sec

Zain - Chacha

12

11

10

9

11

12

11

10

9

11

Off net Per Second Rate Compar-ison, July 2010

Peak Off Peak

Payphones

By the end of March, there were 96,980 payphones countrywide. These were in the form of both vendor operated as well as card/coin operated phones.

This translates into a payphone access of at least a payphone for every 100 inhabitants

The drop in rate of growth may be indicative of the fact that the industry is slowly realising universal payphone access.

Jan – Mar 10 19

Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 -

20,000

40,000

60,000

80,000

100,000

120,000

-

1.00

2.00

3.00

4.00

5.00

6.00

7.00

Payphone Growth & Penetration, 1Q09 - 1Q10

Payphones Payphone per 500

International Bandwidth

The period 1Q10 has seen an actual realisation of the undersea cable systems at the East African coast.

By the end of March 2010, total international bandwidth had risen to 3,640.94 mbps from 2,020 mbps at the end of Dec 2010 of which; 1,650 mbps is uplink and 1,990 mbps was downlink

bandwidth 80% of the available bandwidth is

provided by the two cable systems (TEAMS and Seacom).

Jan – Mar 10 20

Dec-09 Mar-10

850.00

1,650.27

1,200.00

1,990.66

International Bandwidth, Mar 10

Uplink (mbps) Downlink (mbps)

Mobile Internet Access

Subsequent to new growth in international bandwidth has been a jump in overall internet connectivity.

The mobile broadband segment has again continued with its impressive growth posting 460,000 active accounts at the end of March.

Mobile connectivity has become the dominant internet/ data solution in Uganda, just as it was in the voice market.

Jan – Mar 10 21

Jun-09 Sep-09 Mar-10

310,056

358,228

468,608

Mobile Wireless Internet Subscrip-tions, Mar 10

Mobile Internet Access

The growth in mobile broadband access and usage is the result of;

- Increasing 3G coverage

- Dropping bandwidth prices

- Dropping handset and modem prices.

By the end of March, the average mobile access price per kb was 1.8/= (the chart on the RHS shows comparative rate comparison of bandwidth pricing)

Jan – Mar 10 22

UTL Warid Zain MTN Orange

2 2.048

1.3

2.5

0.9

Comparative GPRS/WAP Web Browsing Rates, Mar 2010 (UGX)

Price per kb Uploaded or downloaded

Jan – Mar 10 23

POST AND COURIER SERVICES

Post and Courier Licensees

The following companies were issued domestic courier licenses;

United Local Courier M & A Express Ltd

No new Regional or international Courier licenses were issued.

The table on RHS shows the total number of licensed service providers per license category

June 09

Sept 09

Dec 09

Mar 10

Major Postal Operator

1 1 1 1

International Courier

6 6 7 7

Regional Courier

8 8 8 8

Domestic Courier

8 10 13 15

Jan – Mar 10 24

Post and Courier Access Courier Access

Unlike in the preceding quarter, there has been no infrastructure additions in the postal segment.

However there has been an estimated 20 new courier access/ drop points resulting from entry of new providers and expansion of some domestic incumbent providers.

Postal Access

Indicator Sept 09 Dec 09 Mar 10

Number of Permanent Post offices

331 334 334

Number of post offices with money order services

103 103 103

Post offices offering public internet services

1 21 21

Private letter boxes

78,457 79,417 79,417

Courier Access Points (Est)

280 300 320

Jan – Mar 10 25

Domestic Postal Traffic Trends

Following the postal season peak of Nov – Dec, there was a 71% drop in domestic letter post during the 1st quarter of 2010.

On the other hand, 30,605 domestic items were handled during the same period translating into a 6% quarter to quarter growth.

Jan – Mar 10 26

3Q09 4Q09 1Q10

621,051

762,255

213,689

22,040 28,920 30,605

Domestic EMS and Letter Post Vols, 1Q10

Domestic letter post Domestic EMS

Domestic EMS &Letter post Volumes Select Foreign Letter Post Volumes

Jan – Mar 10 27

Monthly Postal Traffic, 1Q10

Jan-10 Feb-10 Mar-10

91,857

22,045

99,787

12,020 9,680 8,905

Monthly Domestic Postal Traffic, 1Q10

Domestic letter post Domestic EMS

Jan-10 Feb-10 Mar-10

4,280 2,557

568 407 424 436

68,668

18,161

37,849

8,626 8,534 10,253

Select International Postal Traffic, 1Q10

East African Letter post Incoming East African Letter post Outgoing

European Letter post Incoming European Letter post Outgoing

Jan - Mar 10 28

Broadcasting

  Status Mar 09 June 09

Sept 09 Dec 09 Mar 10

Radio On 192 192 192 195 196

Off 30 30 32 33 34

Total 222 222 224 228 230

TV On 35 35 40 40 40

Off 15 15 15 15 16

Total 50 50 55 55 56