zain boss showers praise on tanzania

President Jakaya Kikwete (3rd left) taking down points as Zain Managing Director Khalid Muhtadi one of the four panelists who delivered a speech and asked the president questions at the first ever Business Roundtable with the government held at the Kilimanjaro Kempinski Hotel in Dar es Salaam yesterday. (Monday 6, 2008). Zain is among the sponsors of the two day meeting organized by the Economists Group to debate on the challenges and the best way to improve the countries investment environment. Following is the space delivered by Mr Muhtadi

Your Excellency,

Jakaya Mrisho Kikwete,

President of the United Republic of Tanzania,
Honorable Ministers,
Distinguished Guests,
Ladies and Gentlemen,

Your Excellency, allow me to congratulate you on Tanzania’s achievements under your leadership, namely:

Tanzania has made huge strides in the economic arena. Our average GDP growth rates during the past three years exceeded 7%.

We are the only country with a single digit inflation rate in East Africa.
And your efforts in Tanzania and in neighboring countries have continued to make Tanzania one of the most politically stable countries in Africa
Hongera sana.

As a result, major industries including telecommunications, banking, mining, and tourism realized healthy growth. The subject I will address today is focused on the importance of telecommunications as part of Tanzania’s economic infrastructure.

It is a well established fact that phenomenal growth of the telecom sector throughout Africa has had a major developmental impact on the continent’s economies. According to a study carried out by Leonard Waverman of the London Business School, a 10 percent increase in mobile penetration levels in developing nations results in1.2 percentage point increase in GDP growth rates.
Unlike saturated markets in Europe, Russia, and Australia, emerging markets in China, India, and Africa are at the early stages of development and will experience the fastest growth rates in the next few years.

The number of mobile customers in Africa has increased from 36 million in 2002 to 260 million today. In East Africa, the markets of Tanzania, Kenya, and Uganda are still below the average African penetration level of 27%.

Zain, a leading mobile telecoms player in Africa and the Middle East has been a major driver of this growth. Zain has invested more than 10 billion US dollars in Africa since 2005. We have over 50 million customers in 22 countries, 16 of which are in Africa. Our vision is to become one of the top 10 global telecom players by 2011 with over 150 million customers.

Zain Tanzania was the fifth entrant in the telecom market in 2001. We have steadily grown to become the number one network in Tanzania in coverage and in prepaid voucher sales. The growth of Zain has triggered matching growth in Tanzania’s private and public sectors.

Since 2005, Zain Tanzania has invested over $442 million US dollars in telecoms infrastructure.

Tanzania’s Private Sectors Income from Zain including distributors, resellers, telecom operators, and the media has increased from $44 million in 2005 to $114 million US dollars in 2008. Tanzania’s Government Income from Zain including VAT, Excise Duty, Corporate Taxes and regulatory fees has increased from $22.33 million in 2002 to $40.82 million in 2008.

The major challenges threatening profitable telecom sector growth today are:
Furture growth will be driven by lower income segments resulting in lower levels of use and a decrease in the average revenue per customer.

The increase in competition with new players will drive prices downward and will erode margins for telecom operators.

Levels of affordability in the developing world are lower than in other global markets which implies that African markets will experience saturation at lower levels of penetration than other markets.

Lack of fiber optic backbones and submarine cables connecting Africa’s urban centers to the rest of the world is forcing many operators to duplicate their investments in their own backbones.

Your Excellency, in today's world, mobile communications is a basic infrastructure and not a luxury, for communication has always been a major catalyst in the development of societies. We, in the telecomms sector, do indeed see ourselves as a partner with your government, as we all work towards creating a better world for all.

In closing, we feel that addressing the following points would bring further benefits to the telecom sector and to Tanzanian consumers:
One of the bottlenecks delaying our network expansion are delays in receiving and clearing our equipment and supplies from the ports. When should we expect the situation to improve?

Reducing the price of handsets removes a major entry barrier for mobile customers. Would the government consider waiving the value added tax on handsets with a view that increased VAT revenues from new customers would outweigh the VAT income from handset sales?

Finally, with the increase of competition in the telecom market, it becomes increasingly critical that a level playing field is applied on all telecom players. Is there an intent to harmonize tax treatment, namely VAT, between companies based in Zanzibar and the Mainland?
Asanteni sana.