TNM Ready For The Second Phase…Applies For Licence Renewal
For Immediate Release
1. The Age of Telekom Networks Malawi Limited
Telekom Networks Malawi Limited (TNM) commenced operations on 13th January, 1995 as a joint venture partnership which was entered into between Telekom Malaysia Berhad (TMB) and the state-owned corporation Malawi Posts and Telecommunications Corporation (MPTC) to undertake the project of providing GSM mobile cellular telephone, fixed telephone and data network services.
TNM was offered a renewable operating licence to provide public cellular mobile radio services in the Republic of Malawi on 27th August, 1999 that is valid for 15 years to 26th August, 2014.
In April 2007 Telekom Malaysia sold its 60% majority stake in TNM to MTL Mobile Limited, an investment vehicle that was spearheaded by Press Corporation Limited.
On 3rd November, 2008 TNM listed on the Malawi Stock Exchange. TNM is wholly Malawian owned with the following major shareholders: Press Corporation Limited, Livingstone Holdings Telecom Limited, Old Mutual and the Public as well as Malawi Telecommunications Limited (MTL).
On 26th August, 2013 in line with the Legal and Regulatory requirements enshrined in both Malawi Communications Act, 1998 and TNM’s operating License, TNM submitted a licence renewal application to the Malawi Communications Regulatory Authority (MACRA). We are aware that MACRA is also in the process of renewing other operators’ licences.
TNM offers a comprehensive range of pre-paid and post-paid services; these include voice and data connectivity. The company has been a pioneer of many services in Malawi and became the first mobile operator to launch 3.5G broadband services in Malawi offering cutting edge services such as video calls, video and music streaming, high speed wireless internet access services.
TNM’s journey to building a great company has not been without any challenges which at some instances impacted the level of services as mandated by the terms and conditions contained in the operating licence.
For instance, in year 2012, there was shortage of fuel in the whole country that negatively affected availability of the Company’s network sites. Mostly hit were those sites that are not connected to the national electricity grid. The situation was also worsened by Electricity Supply Corporation of Malawi (ESCOM)’s load shedding programme which affected even on-grid sites. Unavailability of sites increases traffic in the neighboring cells which leads to congestion.
On the economic front, the Malawi Kwacha was devalued by 50% in the first half of 2012 and continued to depreciate against the US Dollar to a level which by the end of January 2013, represented more than 120% depreciation from April 2012.
Almost all of TNM network’s operational cost is denominated in US Dollar as such; TNM experienced a major increase in the cost basis of its operations. In view of this, other operational costs increased with more than 70% during this period, as most of the services and products are imported to Malawi. Additionally, the commitments for infrastructure investment and outstanding liabilities all effectively doubled in value and resulted in the accelerated deterioration of the financial position of the company.
TNM has at times also been forced to defer the construction of additional network sites due to acute shortage of foreign currency in the local financial market.
Regardless of the challenges TNM has managed to register remarkable penetration levels of telecommunication services in Malawi which currently stand at 75% geographical network coverage and over 85% coverage of the Malawian population. In a letter, dated 21st August 2008, MACRA informed TNM of its compliance with its cellular licence obligations to provide public cellular radio services in Malawi. In addition to other disclosures, MACRA confirmed that the quality of TNM’s network service meets required national, ETSI Standard and GSM MOU standards and that the network was generally compliant with required coverage of Malawi’s geographical area.
TNM’s subscriber base has grown over time, from 142,000 in 2005 to over 2 million by July, 2013, and the Company’s market share has also been gradually increasing, from 29% in 2008 to 47% in July 2013. Overall, key factors contributing to the company’s success in Malawi include good network coverage and network quality, wide distribution channels, a good understanding of customer needs, a strong management team, and a strong brand.
At its inception, TNM commenced its business with 36 base transceiver stations covering Blantyre, Lilongwe, Mzuzu and Zomba and over the years, the company has expanded its network coverage by constructing over 400 additional sites for both the 3G and 2G services.
Furthermore, TNM has successfully developed a range of products and services that cater for its diverse customer base and that base can be roughly divided into two groups: the 99% of customers who are prepaid users and the remaining 1% of postpaid subscribers. The majority of TNM’s customers are prepaid subscribers. The firm’s 1% of postpaid subscribers comes from corporate, banking, and small-to-medium size enterprise segments that generate higher annual revenue per user (ARPU) numbers than prepaid customers. In fact, TNM’s postpaid subscribers make up about 7% of the company’s total revenues.Over and above, TNM has been involved in many community activities with some focusing on the environment, including tree planting and most of TNM’s efforts have been focused on developing health, sports and education sectors. The company has for the past seven (7) years been a sole sponsor of TNM Super League which currently stands at MK65 million per annum and will run up to 2017.
4. Licence Renewal Application
It is based on this exciting journey that we are now ready to take the second phase of our history by renewing the operating licence in our desire to build a Great Company and serve the people of Malawi.
However, TNM has noted that both the Malawi Communications Act, 1998 and the operating licence do not contain procedures to govern the renewal and process as is the case with other jurisdictions.
From TNM’s research, it has been discovered that the principles and procedures for license renewal are usually fixed in the telecommunication legislation or regulatory instruments of the respective country in developed jurisdictions.
Nevertheless, in many developing countries such as Malawi, there is a tendency to leave the renewal process to the discretion of the licensing authority without providing any details on the terms, criteria and conditions for renewal. A sample study of mobile licenses shows that conditions for renewal are loosely drafted.
Therefore, in the application TNM has requested MACRA to follow principles and processes listed below to ensure an open, transparent and consultative renewal exercise:-
4.1. Methodology and Principles for Licence Renewal
4.1.1. Providing details for license renewal or reissue is an important guarantee for regulatory certainty, which is a prerequisite for attracting potential investors entering the market of developing and emerging economies. Given the risks to ongoing investment in the sector, licensing authorities should determine their approach to licence renewal as early as possible. Even within five (5) years of the expiry of the mobile licence, an operator may not be able to recover even smaller scale network investments within the remaining licence period and hence may put off investing until receiving greater certainty over their future rights. At a minimum, a licensing authority should be able to specify the approach that they will take in assessing the original licence to be renewed.
4.1.2. As much as possible, TNM would prefer that both government and MACRA strive to promote investor confidence and give incentives for long term investment. This may be achieved by favoring the principle of “renewal expectancy” or “presumption of renewal”, but also by promoting regulatory certainty and predictability through a fair, transparent and participatory renewal process.
For example, this renewal expectancy can be achieved by:-
(i) Providing details for license renewal or reissue and clearly establishing the parameters of discretion given to the regulatory body by the law, or ensuring sufficient lead-times and transitional arrangements in the event of any significant changes in licensing conditions.
(ii) Instituting public consultation procedures and guaranteeing the right to appeal regulatory decisions thereby maximizing the prospects for a successful renewal process.
4.1.3. TNM’s business plans are built upon current licence terms and conditions, therefore, any material changes to these conditions shall have a major impact on pricing of the company’s products and services. In this respect, it is important that the legal and regulatory regime has general guidelines to follow when there are circumstances where the regulator (or other authority) is entitled to vary the terms and conditions of a renewed license.
4.1.4. TNM prefers renewal process that will be fair, transparent, predictable, value adding and participatory. The Malawi Government should have a stable and predictable licence renewal regime in place and avoid handling such situations on an ad-hoc basis. This approach will encourage mobile operators to develop and implement seamless investment plans for timely technology upgrades and service developments in line with market demand thereby fuelling economic growth and improving social welfare.
4.2. Licence Renewal Process
Therefore, TNM recommends the following renewal process:-
4.2.1. TNM believes the option of public consultation is an important process for engaging stakeholders in the decision making process and it strengthens the perception of a transparent licence renewal process. This will allow the new licence terms and conditions to take into account both the concerns of the operators and consumers.
Engaging in public consultation is an important good practice for regulators – especially in the license renewal process. Consultation with stakeholders reinforces the perception of a transparent process and allows the regulator to learn the views of the proposed initiative directly from consumers, existing operators, and other interested parties. Consultation also promotes the fine-tuning of proposed initiatives (early consultations will allow interested parties to comment on structure of the process), and ensures that the regulator is made aware of issues relevant to the process.
4.2.2. Timing of execution is important so that there is no delay as TNM will be hard pressed to make significant investment decisions in the waiting period. Any delays made may lead to a scale down of long term investment projects being made by the operator. This may also further discourage the mobile operator to develop and implement new investment decisions.
Consequently, it is in the interest of consumers, society and mobile operators to have a steady licence renewal process without any major delays. Moreover, the government needs to make decisions for the licence renewal in due time; ideally three to five years before expiry of the existing licence term.
TNM appreciates the support that it continues to enjoy from both the Malawi Government and the people of Malawi sustained throughout the entire period of our existence.
Therefore, TNM expects its operating licence to be renewed within the specified timeframe before it expires on 26th August, 2014 so that the Company continues to deliver its services to the Malawian people.
TNM is excited to be part of the building blocks of the great nation and country of Malawi and invites all Malawians to join us in this journey to greatness.