ZTE Wins 3G-LTE Deployment Contract in Namibia

Telecom Namibia Group has awarded a USD46million contract to the Chinese vendor ZTE to build a unified mobile network to provide 2G/3G/4G mobile services and converged IP fixed/mobile applications...

 

Telecom Namibia Group has awarded a USD46million contract to the Chinese vendor ZTE to build a unified mobile network to provide 2G/3G/4G mobile services and converged IP fixed/mobile applications. Under the terms of the agreement ZTE will plan, deliver and implement the IMS (IP multimedia systems) GSM LTE infrastructure for the operator. ZTE will also replace all of the operator's CDMA base stations and integrate its IMS core with its fixed network to provide a single point for activation and service provisioning.

The deal also covers the operator's more recent acquisition Powercom which trades under the Leo brand. Telecom Namibia's acquisition of Leo was approved by the Namibia Competition Council in April 2012 on the condition that it made changes to mutual state ownership/management structures with cellular market leader Mobile Telecommunications (MTC). The deal was given final approval by the Communication Regulatory Authority of Namibia (CRAN) in November 2012.

The Namibian mobile market is dominated by state owned Mobile Telecommunications (MTC) which owns GSM spectrum in the 900/1800/2100MHz bands and also provides 3G and LTE services. By the middle of June 2012 MTC had approximately 2.1 million mobile subscribers while Telecom Namibia had only 70,000 subscribers. Even after the acquisition of Leo, Telecom Namibia is still expected to report less than 400,000 mobile subscribers for 2012. Mobile penetration is well over 100% in Namibia however the average revenue per user (ARPU) is in the region of USD7. The provisioning of LTE by both operators should provide some uplift to these low levels.

A limited number of premium device brands rather than a wide range of lesser known devices should prove popular with the market's early adopters. When MTC launched LTE in May 2012, it offered a very small range of premium devices, the Samsung Galaxy TAB 8.9 LTE tablet, the Samsung Galaxy SII LTE smartphone and an MTC-branded 4G dongle modem.

Telecom Namibia also has low frequency spectrum in the 450MHz and 800Mhz bands which it currently uses for its CDMA network. The replacement of its CDMA network by ZTE will enable it to to free up these bands which offer excellent in-building penetration and very high coverage resulting in a much lower cost of network deployment. Telecom Namibia needs to upgrade its network and offer LTE in order to compete on a level playing field with MTC. Although Telecom Namibia is also state owned, failure to offer LTE could result in the operator being branded as the low-cost operator. Although this would enable it to serve a target market, its investment in Leo suggests it plans to stay competitive and innovate with the market.

Although ZTE is heavily penetrating the African market and had contracts in over 50 countries in the continent as early as 2010. It is competing heavily with other vendors; most notably Huawei. The contract is one of ZTE's smaller contracts. ZTE announced in January 2013 that low margin contracts have contributed to lower operating profits. It also cited postponed contracts and delays to international projects as other key contributors to its prediction of a decline in operating profits for 2012.

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