Vodacom Tanzania Says Fee Currency Switch Will Ensure Investment

Telecommunications companies in Tanzania are in talks with the government to pay fees in shillings, a move Vodacom Group Ltd. (VOD)’s local unit said will counter currency volatility and ensure investment.

“We currently pay license fees in dollars and operate in shillings,” Rene Meza, the managing director of Vodacom Tanzania, the East African country’s biggest mobile-phone company by customers, said in an interview yesterday in Dar es Salaam, the commercial capital. “The shilling has been very volatile against the dollar and this could mean we have to cut back on investment to pay regulatory fees.”

The currency of East Africa’s second-biggest economy after Kenya weakened to 1,815 per dollar on Oct. 27, the lowest level since the government liberalized the foreign-exchange market in 1994, according to data compiled by Bloomberg. The shilling was 0.1 percent stronger at 1,612 per dollar by 12:03 p.m. in Dar es Salaam.

Telecommunications companies pay annual fees for earth satellite stations, switching centers and networks at a rate of 0.8 percent of turnover in dollars, according to information on the website of the Tanzania Communications Regulatory Authority.

Vodacom Tanzania is set to invest 100 billion Tanzanian shillings ($62 million) over the next 12 to 18 months to expand and improve its network coverage. “We are finalizing our budget,” Meza said.

The company is also developing software that will enable cross-border money transfers, including loans and health insurance, with Safaricom Ltd. (SAFCOM) of Kenya. Safaricom is 40 percent owned by Vodafone Group Plc (VOD), which owns 65 percent of Vodacom.

Active accounts

“We will leverage on the numbers of our sister-company in Kenya to grow our M-Pesa money-transfer service,” Meza said.

Vodacom Tanzania, which expects to have 11 million subscribers this month, said 3 million of its customers now have active money-transfer accounts.

As of June Vodacom Tanzania had 9.2 million subscribers, followed by Bharti Airtel Ltd. (BHARTI)’s local unit with 6.4 million and Millicom International Cellular SA’s unit, known as Tigo Tanzania, with 5 million, according to data on the regulator’s website. Zantel, the Tanzanian unit of Emirates Telecommunications Corp., had 1.3 million subscribers, and Tanzania Telecommunications Ltd. had 226,153.

Vodacom Tanzania is considering outsourcing its tower infrastructure, as it did with its network management, to Nokia Siemens.

“We are discussing internally whether to outsource our towers segment, because it is not our core business,” Meza said. “Telecoms companies are essentially marketing and sales units now.”

In Talks

The companies are also in talks with the Tanzanian government about introducing number portability. Meza said the service was a failure in neighboring Kenya, where he was managing director of Airtel Networks Kenya Ltd., a unit of Bharti Airtel.

“It is not about moving a number to another operator, but what value that will add,” he said. “We are in high-level talks with government and are waiting for guidelines on issues like who will meet the investment cost.”

To contact the reporter on this story: David Malingha Doya in Dar es Salaam via Nairobi at pmrichardson@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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