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Three bidders vie for Mozambique mobile licence

Mozambique shortlists three companies to compete for the country's third mobile licence

With a mobile penetration rate of less than 25%, Mozambique is viewed as a market with significant potential.
With a mobile penetration rate of less than 25%, Mozambique is viewed as a market with significant potential.

Mozambique's National Institute of Communications (INCM) has shortlisted three companies for the county's third mobile licence.

The three successful bidders were Vietnamese telco Movitel, Portugal Telecom and Uni Telecom unit TMM, and a joint venture of Angola's UNITEL SA and Mozambique's Energy Capital SA.

Speaking at a press briefing, Americo Muchanga, INCM director, said that the technical and financial proposals of the three bidders will be evaluated over the next two months, after which the INCM will announce the winner.

The winning bidder will compete with Mcel, the mobile arm of incumbent Telecomunicaçöes de Moçambique, and the second entrant, Vodacom.

Mozambique's government, which launched the tender in April, put a reserve price of US$25 million on the license.

Daniel Jones, a partner at research firm Onda Analytics, said that Portugal Telecom appeared to be "the main contender" for the licence from the shortlist announced by the regulator, particularly given the country's history of investment in Portuguese-speaking countries.

But Jones said that the winner will face some significant challenges. "The winner will have to be very careful in controlling both its capital and operating expenditure in order to run a financially sustainable operation," he said.

"Vodacom, the second mobile entrant in Mozambique, became EBITDA-positive only in its last financial year and continues to make an operating loss, due to ARPU of only just above $3."

Jones added that this loss came despite Vodacom building up a significant subscriber base of 2.3 million since its launch in 2003 and also having the highest number of subscribers per employee of any Vodacom operation.

"Typically a third entrant will struggle to match the financial performance of a second entrant for some time, as it builds up its market share. Vodacom's results are a warning for bidders for the third licence to be cautious in their plans and expect to have to support the initial investment for several years," he said.

Mozambique, which has a population of about 21.6 million people, had 4.88 million mobile subscribers by the end of June 2009, up from 3.87 million a year earlier, giving a mobile penetration rate of about 22.4%, according to data from TeleGeography.