Profitable Universal Access Providers

This 29-page feasibility study examines the opportunities in Africa for micro-scale rural telephone operators who use Global System for Mobile (GSM) communication technology to provide rural, low-income areas with communications services. The study finds that GSM technology is a financially viable way to provide communication technology (compared to providing fixed line services). Though the study uses Tanzania for evaluation purposes, the authors suggest that the findings are applicable in other rural areas of Africa.

From the Introduction

"The Swedish International Development Agency (Sida) has commissioned this assignment for a feasibility study for establishing Micro Telephone Operators using GSM technology for providing rural, low income, areas with communications services in developing countries. The study includes an assessment of the technical feasibility as regards innovative applications of existing technology and an estimation of investment costs and a market strategy for identifying licensing and competition issues as well as elaborating pricing models and demand assessment.

The study explores how GSM and associated technology could be used for deployment in rural areas with the aim to provide rural telephone services at tariffs that take into account the low ability to pay and at the same time generate long term financial viability for the service provider. The concept is to establish Micro Rural Operators that would make the necessary restrictions in service offerings in order not to compete with existing mobile or fixed line operators, even if the latter are not presently offering services to the target population.


The study was based upon the assumption is that there is sufficient demand in many rural areas in Africa to establish financially viable operations. The area of operation for the hypothetical operators have been limited to geographical areas far from existing GSM coverage and where only marginal fixed services are available. Primarily local services will be offered – and local switching for the individual areas will be preferred - in order to keep transmission costs at a minimum. The charging principles will be prepaid with differentiated local tariffs without allowing roaming for local subscribers. Access to and from the national network will be provided via interconnection to national operators. It is expected that terminating incoming traffic will provide a substantial source of revenue to the Micro Operators.

The objective of the study is essentially to confirm the hypothesis that GSM technology could be used to supply rural areas with telephone services without subsidies. Tanzania was selected as the primary target country for the study and three typical model areas were chosen for the investigations. The intention has been to make the study in sufficient detail to form the base for a pilot implementation, provided that various stakeholders verify the findings..."

Editor's note: In personal correspondence dated September 22 2006, author Olof Hesselmark offered this update: "It is now more than two years since the report was published, and it has received some attention during this time. However, we have not found any evidence that the ideas about micro GSM operators has led to any new rural operators being proposed anywhere in Africa. We think there are a number of reasons for this, but the most important one is probably the stunning and unexpected success of regular mobile operators. All over Africa (except in a few countries, Ethiopia being the largest), coverage in rural areas is extremely rapid. Competition forces the operators to look for new markets, and they have found that a radio base station in a rural area produces the same revenue stream as in the cities. Demand for telephone services is simply everywhere. Nigeria's three operators are frantically building new infrastructure across the entire country to satisfy all new users, now getting close to 30 million.

The commercial success of the operators has led to a great deal of concentration, where four large brand names dominate the scene: MTN, Celtel, Orange and Vodacom. The two largest have contigous networks "from Cape to Cairo" almost. They have all vast financial resources, and are all actively using these resources to buy out competition and expand markets.

Newcoming customers have lower and lower monthly budgets for telephone, and the operators respond to this with new offerings, for example allowing longer time with zero balance, and very small denominations for top-up of prepaid accounts. Per minute prices are also slowly falling. GSM is such a winning concept that nothing can challenge it in the next decade.


It is a great pity that the Ethiopian government as the only one in Africa has not realised that the success depends on private entreprises and competition. They continue to insist on their monopoly, thereby effectively delaying 70 million people's access to telephones for at least a decade."

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