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Wednesday, August 30, 2006

We’re prepared for Nigerian market - Pieters


Interview:

Group chief executive, CelTel International of The Netherlands, Mr. Marten Pieters, spoke to selected Nigerian journalists in Kempenski, Tanzania, at the weekend. Senior Reporter, REMMY NWEKE, was there and reports.

Excerpts:

The company you have bought into used to be known as Econet Wireless and then as Vodacom and is now known as Vmobile and will be known as Celtel when you rebrand it. Four names in five years. How are you going to handle there-branding issue and what are the challenges?

Of course Vmobile has had a kind of troubled history. That is why I think it is so good that the company now has reached a safe harbour and is in good family. But of course now, entering into the family means that you have to adopt the family name. What we see in Nigeria so far is that Vmobile has done a very good job in promoting their brand-Vmobile. It is a strong brand. But there is also a lot of proof in the industry that if you have a strong brand, you can build on that brand equity and change it into another brand. Let me give you a few examples. Vodafone started out with only one licence and now it is all over the world. They started from the scratch with only a few licences. They bought quite a few licences and they re-branded them all. Orange did the same thing. Orange bought a lot to companies and re-branded them into Orange operations.

We have seen that it is very much possible if you do it in a professional way and you explain to the public that we are not throwing away Vmobile but it is just a next phase in the life of the company. It is a very good company. It has a very strong brand, the customers like the brand, the staff like the brand but it is now time to move on.

Again, becoming part of that family means that you have to adopt the family name. And that is what we have done in other countries. Let me just give you two examples from recent history. In Kenya , we bought a company called Kencell which was using a brand call Yell and we re-branded that two years ago to Celtel and if you go to Kenya now , you would see that it is very well accepted now. We bought a company in Madagascar last year and two months ago, we re-branded that into Celtel. If you do that carefully and you make sure that the communication is clear about it and again you make sure that you do not throw away the good things that you have but rather build on them, then it is absolutely possible and there is a lot of proof in the industry that you can do that successfully.

What is your capital profile that will enable you carry out your planned expansion of Vmobile?

I can tell you that we expect that in the next two years to invest another $700 million in the company. And then, of course, if all Nigerians want to be our customers, we might invest billions of dollars. It will depend on the customer growth.

Your coming into Tanzania market led to a reduction in tariff in the country. Do we look forward to a similar situation in Nigeria?

I think the situation here in Tanzania was a little bit different from Nigeria because in Nigeria every operator has its own international gateway. There is no monopoly of international gateways and that actually keeps the tariffs high. And that’s what was happening here. There was no competition in international traffic because it was monopolized into the fixed line operators. That has changed. The market has opened. And then you see that competition starts and then you are able to drop the tariffs because you don’t have to go through the monopoly that actually keep the tariff very high and then every mobile operator sitting behind him can do nothing else than also to keep the tariffs high. That is the situation here. But in Nigeria you already have a different situation because there is already competition on the international traffic.

What are your plans to improve the quality of the Vmobile network?

First of all, building a mobile network is an art though it is scientific and technology-driven thing. The reality is that it is very much dependent on the quality of the people that are working on it. So you see differences on the quality of the networks. The other issue is that if you purchase a piper aircraft, for instance, and it carries four passengers. Now what we do with the mobile networks is that before the flight we reconstruct that little aircraft into a Boeing 747 which is a big jumbo jet because we have to add passengers during the flight and we can’t go down and stop and put the plane in a hanger for three weeks and say we are going to add some extra chairs. But you can imagine if you reconstruct your piper in the air into Boeing 747. That is quite a difficult task and here and there something might go wrong.

And that is the issue. There are so many new customers on all the networks in Nigeria. And it is like if you have construction on the road, you will end up having traffic jam because you go from two lanes to one lane and the traffic has to stop. That is a bit of issue we have with the networks that we have in Nigeria . They are not stable networks. They are networks that are constantly under construction. And that means that things might go wrong. And I think it has shown by research that Vmobile is probably the best network in Nigeria. They have always served their customers very well because they have a very good network quality.

If I now tell you that Celtel was founded by the best GSM engineer in the world because the company was founded by Dr. Mo Ibrahim. He worked during his career in the GSM industry and founded a company called MSI which was a consultancy company as far back as in the 1980s. This grew to become the biggest GSM consultancy company in the world. They have thousands and thousands of engineers and some of them were passed on to the network when MSI was founded. That means that we are probably the company that knows the most about GSM networks. We are very confident that we can maintain the quality of the network and also bring new ideas into Nigeria.

Being a continental brand are you going to have local flavour?

We are not going to tell you about our internal relationship with our agency because that is confidential information. That is competitive, sensitive information. But of course if you build a global brand; although it is not meant to be globalised, now, is African, but in Africa, you can see it as a global brand, then, of course, that means that drives part of your brand positioning and that’s what you see.

But, still, we use more of the same philosophy in the advertising and the way we promote the brand. It has the same brand values and it has the same brand performance. It might be slightly different in the way we do our advertising in each country because people want to recognize what they see in the advertising and say, ‘yes, this is my environment.’

At the same time, I have experienced personally that people always have strong opinions about advertising but, it does not necessarily mean that all those feelings point in the same direction.

Take Coca-cola for instance, I have never seen a local advertisement for Coca-cola. It’s always an international advertisement for Coca-cola and that is the way we want to promote our brand also. It should be the same brand throughout the countries. But, of course, you will see more localized fliers, and if you talk to the salesman, you will probably see some posters that are more localized but the main positioning of the brand should be the same in all the countries. That is, how we try to do it.

Presently unified licensing is coming on stream. Would your company be interested in this?

Yes, of course, we’re interested in unified licence. In the end, everybody will have a unified licence. That is the whole philosophy about the unified licensing. It is a very good direction. What happened in the past was that governments and regulators would give licenses based on a certain technology, which in a way is a little bit funny because the technology is actually not interesting to the customer. The customer is interested in the service. Let us take our main product which is the voice call. I think you as a user of a mobile phone are not very interested if your voice call travels over a 900 frequency or 1800 frequency or something in between. I don’t think you are interested in that. So, it is a little bit funny if you as a government say that, ‘Okay, you can do voice service as a company but you can only do it on this technology.”

Governments are now moving away from that. So, what they would do would be to say okay, ‘you can do a service and you pick the best technology.’ And the best technology today, might be very different from the best technology five years from now. And we see that in the industry.

That is the good thing about unified licence. On the other hand, don’t expect too much from it. That is the down side. People get excited because it’s unified licensing, in the end, what limits the number of operators for example, that do mobile telephony, is not the number of licenses, the thing is the availability of frequencies and that is a very limited thing.

Unified licensing is good but, at the same time, you must not see it as a magic that will change the whole industry because that won’t happen. It’s a kind of natural evolution, a kind of natural growth path that we are going through.

Your operation in the countries where you are presently is not big. Now, you are entering the Nigerian market which is a huge one. How prepared are you to cope with the challenges?

Many members of our management team like me, have worked in much bigger companies before we joined Celtel. We are not a bit scared when we see a big number. Let me tell you that we are prepared for the Nigerian market. Nigeria is a beautiful country with a lot of potentials. But in the end it is just like another market. If you have two million or four million customers has no impact on your processes in the company. In the end it is more of the same thing. It is not something that we did not expect; we are very prepared.

I can tell you that the Vmobile staff are extremely competent. They brought this company to where it is today. The only thing that we shall do is that we shall be a god shareholder and bring some of the knowledge that we have. Having worked in 14 other African countries we have a lot of knowledge about what kind of things are working and those which are not working. We can bring that knowledge to Nigeria. So far, we have brought only five people into Vmobile which already has 2200 people. It is not that Celtel staff will start the company. It will still be the old staff. But as I said, it is now a part of a different family, so, it will have to adapt here and there to the family’s standards and rules. But for the rest we are confident that the staff will drive the company further as they had done in the past.

You are working on the “One East African Network”. What is it about?

It is a great opportunity for us to leverage on this unique opportunity that we have been present in Tanzania, Kenya and Uganda. What we see very clearly is that there is no border; no wall running across between these countries. As people trade across these borders, they just move from one town within a country to another in another country. They are not trading within a country, they are trading within East Africa. Today, they are heavily prohibited in their activities by the fact that they can’t use one telephone line in all these countries.

So, we are working on a project called “One Network” which is like taking down these borders and allow the customers of Celtel in Tanzania, Uganda and Kenya to move freely through these countries with a single number. If it is left to roaming, it will be expensive. We want to make the whole of East Africa just one market. We believe this will be powerful in contributing to the economic growth in these countries.

Will your taking over Vmobile lead to job loss?

We have told the staff of Vmobile that the brand name has nothing to do with their employment. The good news is that we are growing daily in Vmobile. In fact we hire people everyday. I said to the staff, “I am not in the business of firing people, I am in the business of hiring people.” I can tell you that it is difficult to find all the right people. So, people that can perform should not worry about their jobs.

Having operated in many other African countries, how do you see the regulatory environment in Nigeria?

Regulatory environment is more complicated in Nigeria than in any of the other countries we are working. This is because of the federal state of Nigeria. We have authorities on so many levels in Nigeria that complicates the whole regulatory issue.

We can learn more from Nigeria for our other markets than the other way round because Nigeria has been able to complicate the regulatory issue up to a level that we haven’t seen before. But we have a very competent regulatory department in Vmobile and they are handling a lot of issues. I guess some of these issues we have never seen before in our other markets. Let me give you an example. Very recently, fees were asked by the aviation authorities for masts that are erected even if they are 300 kilometers away from the nearest airport. This kind of thing we have never seen before. That is the difference.

Do you have any plan to bring your operations in Africa under one network?

Part of our strategy is to be a pan African operator. What we mean is that we want to have our footprints all over the continent. We also want to make it possible for our African customers to be able to talk to one another as if it was a borderless community.

You may know that we know traditionally, telephone traffic travels all over the world. If you make a telephone call from Nigeria to Gabon, for instance, that call quickly goes to London, from London to Paris and Paris to Gabon. It is not a very big issue technologically these days because if there is glass fibre, you actually won’t see any delay. It goes very quickly and it is just a matter of seconds. The reality is that there isn’t always glass fibre. It is like going on a bus trip, the longer it is, the higher the risk that somewhere down the road something goes wrong. So, you see that the quality of those calls is typically not very good. They are also expensive because they become international calls, all kinds of operators in between have to make some money on it. What we try to do is connect directly with each other. On top of that if we are able to implement this “One Network” concept, it will break down the tariff structure.

Let me tell you that that is a very complicated issue. It is not about us or the technology; it is all about governments. Each country has a different VAT (Value Added Tax) regime and all the countries want to make sure that they get their VAT on each call. Then you have different licence fees, you have different levies and specific taxes on telecoms income but they are different in every country. That makes the whole thing extremely complicated. From the technological point of view we can do it already today, it is really the regulatory side that holds us back because it is extremely complicated. But we are about to introduce it in East Africa. I think the moment that we introduce it and customers start to understand what this will bring to them, then there will be pressure from the consumer community to introduce this further. Then, it is easier once we have developed the concept to add more countries one by one. That is what we are trying to do in the next few years.

What is your reading of the Nigerian economy?

We are very positive about the future of Nigeria and that is for three main reasons. First of all, it is still the most vibrant population we have in Africa- very well educated, bright and also highly energetic people and that is what we see everywhere in Nigeria. So, if there is anybody that is going to make it in Africa, it is the Nigerian. That’s our opinion.

The second thing is that it is a country that has oil. And oil as we see today, is a huge influx of money. And then, the sheer size of the economy in itself is a great issue. The biggest in the continent. That in itself will drive the country to a level where Nigeria will be a very interesting economy.

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