|3 THE PRESENT - NAMIBIA'S TELECOMMUNICATIONS
3.1 Institutional Developments
There are four ideas within the field of institutional development which were identified after the Namibian Independence and which were realised.
3.1.1 First Idea: Commercialisation
The first idea concerns the need to consider what has to be done actually in the government administrations for transport and communications. A feature of the present arrangements in Namibia, and probably in several other countries in Africa as well, is that the Ministry of Works, Transport and Communication is responsible for many different activities. The Ministry is not only responsible for policy formulation, regulatory affairs, monitoring, etc., but it is also involved in operational aspects on a significant scale. It is thus a producer of e.g. postal and telecommunications services, airport services, road maintenance, maintenance services of government buildings and maintenance services of vehicles and heavy plant used for construction activities. There is a world-wide trend away from such a way of running things, either through the creation of autonomous authorities through incorporation or through an outright sale of certain components to private investors. The purpose of these reforms is to separate out operational activities from the other - "normal" - functions of government. Indeed, the Namibian Government has already completed the commercialisation of the former Department of Posts and Telecommunications into Telecom Namibia Limited (see figure 2: Management Structure of Telecom Namibia) and Namibia Post Limited on 1 August 1992. Both state owned companies are profitable undertakings and are paying or - at least should pay - taxes as from 1994 onwards. This, of course, does not mean that the new telecom and postal corporations will neglect its social obligation to provide services to every community, but that a longer term financial strategy can be pursued which was not possible under the past Government budgeting system.
Today, nearly two years later, the fruits of this far-reaching decision are beginning to appear. Both, Telecom Namibia and Namibia Post have already concluded much of the preliminary spadework in the complex restructuring exercise. Serving the changing needs of all Namibian communities will ensure the steadily growing income for the two corporations, without any cross-subsidisation. Expansion plans can be kept on target and outdated equipment can be replaced on an ongoing basis. Telecom Namibia is on a sound, profitable track with new development capital works for approx. US $ 25 millions per annum for the next five years (details will follow later).
3.1.2 Second Idea: Cost-Effective Administration
But institutional reform does not just mean delegation and the separation of operational functions from other functions, such as policy making and regulation. There is a potential for changing the way things are done in respect of the "conventional" government functions as well. This applies in particular to small countries like Namibia, which must at all points in time consider how to establish a cost-effective administration.
Institutional reform implies decentralisation. It does, however, not necessarily mean that the Government should completely give up its say. There are still problems to be concerned with, e.g. the suitable way of regulating "natural monopolies" such as ports, railways and telecommunications. This is a very important consideration, because it has to be ascertained that new regulatory instruments and arrangements are not counterproductive, but rather support the intention of institutional reforms.
3.1.3 Third Idea: Management Of Regulatory Controls
Assistance in the field of design and management of regulatory controls is the third idea under the heading Institutional Development. This is a "project concept" that could be expanded competition policy as well, although this is an area which is not a concern for communications alone. The understanding of the issues involved and of the proper approach to the formulation and implementation of a competition policy has to be developed.
3.1.4 Fourth Idea: Policy Formulation
A fourth idea regards policy formulation. The impression is evident that there is no other continent where communication issues are debated as intensively as in Africa, and with the advent of the "Regional African Satellite Communications Organisation" (RASCOM) there is the wind of change also blowing in this regard. When the "integration package on the communication sectors" is designed and compiled, attention should be given to whether there is a need to supplement those activities that are already ongoing in this area to make sure that all reasonable efforts are being made to develop Africa into the Continent of the United Nations of Africa.
3.2 Assessment Of The New Policy Concept For Telecom Namibia
The realisation of the "First Idea: Commercialisation of Telecom Services in Namibia" will be dealt with in more detail in order to assess our first experiences and the actors and variables that play an important role in this process. It is interesting to note that the major players in this important policy decision were not different interest groups in Namibia like business pressure groups, the trade unions or any international institutions and investors but it was rather a principal decision by the first independent Government of Namibia to optimise the scarce national resources after a long history of colonial oppression and exploitation in order to initiate national development, eradicate poverty and create a new "post-Apartheid Namibia" by bridging the "first world" and the "third world" Namibias.
In line with the Government of Namibia´s declared policy to embark on a new economic approach by deregulating certain functions of the state and opening up the markets to encourage international exposure and competition, the Communications Division under the Ministry of Works, Transport and Communication was divided into four separate entities on 1 August 1992.
The four entities are as follows:
Telecom Namibia Ltd. and Namibia Post Ltd., incorporated under the Posts and Telecommunications Act, 1992, are both subsidiaries of the parent company, the Namibia Post and Telecom Holdings Limited, and are operating under the laws and regulations pertaining to a company registered in terms of the Namibian Companies Act. The accountability for the corporations's financial matters is resting with the Management and its Board of Directors.
Telecom Namibia's first two years of existence marked yet another enormous challenge to the young Republic of Namibia. It was a year in which it was witnessed to experience the ambitious and dramatic separation and managerial restructuring of the country's postal an telecommunications services. During this period of dynamic change, new and exciting opportunities came up and together with it also increased responsibilities to respond faster to customer needs. The demand for the modernisation of data communication services remained a burden throughout the year.
3.2.2 The Financial Period
This first Financial Report of Telecom Namibia Ltd. covered the period from the day when the Company was incorporated on the 1 August 1992 to 30 September 1993. Thus, the first financial year of operation comprised 14 months. The financial year of Telecom Namibia runs normally from 1 October to 30 September.
3.2.3 Progress Report
During the first two years after the commercialisation of Telecom Namibia, the following major achievements formed part of the highlights of this period:
- Considerable planning went into the formulation of the Business Plan
of the Company
3.2.4 Company Performance: Telecom Namibia
Telecom Namibia's performance during the first three years was characterised by numerous positive developments and excellent financial growth. The Profit and Loss Statement and Balance Sheet for 1994/95 indicated that the Company, to a very large extent, is dependent on its telephone operations. Out of the total revenues of N$ 225 million, 95% can be attributed to the telephone services.
The income before interest and taxes is N$ 63,6 million, or a profit margin of 28%. This gives Telecom Namibia a strong and healthy position for expanding its business.
Total assets amount to N$ 306 million. Of this total, the liquid assets represent 51%, which is a high figure. On the other hand, the fixed assets amount to 42%, which is a low figure in the telecom sector.
On the costs side, labour costs run up to 46% of the total costs. Costs for international accounting is also a large cost component (15%), mainly due to the present country's dependency on routing all its international traffic through South Africa.
The depreciation for 1992/93 was less than 10% of the revenues. This increased very rapidly due to the large investment programme and was N$ 30,931 million in 1995..
A long term investment programme has been developed and it is anticipated that investment will amount to approximately N$ 150 million per annum.
Long-term loans have been taken only from the parent company, Namibia Post and Telecom Holdings (NPTH). The NPTH loan amounted to N$ 63 million at an interest rate of 12%. This loan was converted to equity in 1995.
The total equity, comprising of shareholder's equity and retained earnings, amounts to N$ 215 million. The Return on Equity, defined as net income divided by total equity, is 37%, which is twice as high as the shareholders' expectancy.
3.2.5 The Structural Changes Of Telecom Namibia
At its inception, Telecom Namibia inherited a basic (governmental) management structure with a fundamentally weak regional representation. There was a strong traditional focus on technology and the management style was geared towards the perpetuation of the pre-Independence-status-quo. A fresh approach was adopted to focus more on customer care and market-related as well as social issues.
Changes were instituted in the Company, decentralising the business into flexible units, with greater and almost autonomous decision-making powers in certain matters, in order to improve management and enhance service quality. This strategic and crucial step was taken to achieve the Company's firmly established goal - to become a truly customer oriented service enterprise committed to providing practical and affordable solutions to the telecommunications needs of every customer.
The transformation process preceded very smoothly and the Company continued to be an integral part of the Namibian business community. With the ambitious approach of its new and dedicated Management, the Company proved to be capable of producing significant, sustainable, long-term profits and to serve its stakeholders, namely its customers, shareholders, employees and suppliers.
3.2 6 New Regional Structure
The national operations were divided into four regions, covering the Namibian geographical areas of the North, Central, South and Windhoek City. Each region is headed by a Regional General Manager reporting directly to the Managing Director. The regional structures are based on three components:
- Construction, including local cable networks, farm lines, local
trunks, radio systems,
3.2.7 New Centralised Structure
The Centralised Structure was also re-designed and two separate divisions were additionally established, namely Buildings & Real Estate and Public Relations.
The Centralised Structure comprises of the following divisions:
For the two past years management criteria, objectives and strategies for Telecom Namibia were stressed. Today it can be stated without any doubt that all indicators reflect the significant progress that Telecom Namibia has made during its transformation.
There is still much to be done and the process of change will be continue! The Ministry of Works, Transport and Communication of the Republic of Namibia relies on the potential of Telecom Namibia´s personnel who played an important role in the attainment of the targets which were set by the Government.
3.3 The Present Prospects For Telecom Namibia
3.3.1 Namibian Telecommunication Market
220.127.116.11 Telephone Services
The Namibian telecommunication market is, compared to African standards, a well developed market. The number of telephone lines are approximately 5/100 inhabitants which is more than 5 times the average of the African continent. The demand for service is presently higher than the supply. The usage per line is also high on average US $ 60/line and month for automatic service.
In the rural parts of the country, outside the main cities and villages, telecommunication facilities are poor and the services provided don't meet up to normal standards. Many customers in these areas are connected to farm party lines and usage of the full service is normally not possible. The major part of the rural areas, including minor towns and villages, are still served by manual exchanges.
The average growth for automatic exchanges over the past 12 years has been 6% per year in new services. The total demand for telecommunication services can be estimated to 120 000 telephone lines for the next 5 years. However, the estimated growth will be 10% per year, bringing the average number of telephone lines to 8/100 inhabitants, which will be the same as in South Africa at present.
To meet this demand investments have to be approximately US $ 20 millions per year. To open up an independent international gateway another US $ 13 millions have to be invested over the next three years, thus bringing the total need of annual investments to US $ 25 millions for the next three years. The expected growth in revenue will be US $ 7 millions per year, assuming 10% growth in new services and 5 % growth in traffic.
Telecom Namibia Limited covers approximately 98% of the market for telephone services. Competition for local traffic comes only from one other operator, namely the "Consolidated Diamond Mines (CDM)" in Oranjemund. For international traffic the only competition is presently "Hubbing" via South Africa. However, in April 1995 competition came from a local operator of cellular telephony. More competition will come in the future in line with government policy which is based on competition and deregulation. For instance, banks will set up their own satellite communication links primarily for data communication, but experience from both Europe and USA shows that these facilities also will be used for voice communication.
18.104.22.168 Data Communications
The market for data communications is looking for higher speed and more reliable services. The present service provided represents leased analog lines and a x-25 packet switched network. Today the major banks are asking for digital 64 kilobit services. If such a service would be available the demand would also be there for high speed transmission facilities in the City of Windhoek which would also be used by insurance companies and the major private industry.
The competition on the market comes mainly from the potential customers themselves who will establish their own data communication networks (i.e. the Municipality of Windhoek, the breweries etc.), firstly at their own premises but later extended and connected to other sites, both domestic and internationally. It is expected that Telecom Namibia's share of the market will not exceed 70% including leased lines. The total turnover is approximately US $ 3 millions per year thus representing a relatively small market for Telecom Namibia. It is, however, essential to be present on the market, also to protect the more viable telephony market especially for the business customers.
The supply of modems for DATA and TELNET services on the customer premises is totally left to the private suppliers. Telecom Namibia only supplies the modems on the exchange side but this is not regarded as "Customers Premises Equipment (CPE)". On the DATA and TELNET side Telecom Namibia supplies only baseband modems to the customers, on a rental base. Telecom Namibia's share, however, is still around 40%.
Furthermore, the private suppliers only sell modems and give some back-up service. With the current economic constraints customers start to prefer rental of modems and maintenance contracts. Also due to these constraints and stiff competition, suppliers offer cheap modems to their customers. There is thus a market to enter by offering a specialised end-to-end modem service on a rental base. Telecom Namibia's DATA customer growth is above 10% per annum and that of TELNET is above 20%.
22.214.171.124 Customer Premises Equipment
126.96.36.199.1 Residential Telephone Services
Whenever a customer requests the services of a single telephone line, Telecom Namibia will supply the line connection and sell an telephone instrument. The instruments are sold by various private shops in town and Telecom Namibia (Pty) Ltd. Customers have a wide choice between various types of instruments.
188.8.131.52.2 Business Customers
The provision of PABX's to business customers is open to free market competition and Telecom Namibia is actively competing in this market. Telecom Namibia is offering the following range products: DPS 2/4, DPS 5/10, BTS 60, BTS 24, BTS 128. The DPS equipment is classified as "keyswitch" equipment and the BTS equipment as PABX equipment. Additionally, Telecom Namibia maintains various PABX's and EPABX's from Siemens, STC, Philips and Plessey that were supplied to Namibian ministries in the past via open tenders and systems that were maintained by Telecom Namibia before suppliers were allowed to maintain their own equipment.
Customers utilising Telecom Namibia's equipment and services may rent or buy the equipment. They have a choice of purchase or lease. Telecom Namibia also maintains the rented equipment free of charge because maintenance is included in the rental. This is in sharp contrast to how the other suppliers operate. They offer purchases, rental and lease contracts and then various types of maintenance contracts. Some of these contracts are up to ten years. Telecom Namibia allows these suppliers to connect their own telephone instruments as extensions onto their PABX's. These suppliers are also allowed to be responsible for the maintenance of the in-house cable network, after Telecom Namibia's approval. At the moment there are five other licensed competitors in the market for providing PABX's.
The main competitor is Siemens, but only in the Windhoek and Swakopmund area. Siemens is the only competitor that has more than three people employed to maintain their systems. Telecom Namibia is the only PABX supplier that can offer an effective maintenance service in rural areas because of the availability of technicians in these areas and the dial-in facilities Telecom Namibia has on her system to do remote maintenance and fault finding.
The main PABX market in Namibia is in the area of 2 to 5 exchange lines connecting 5 to 15 extensions. The availability of detailed call-accounting and call-barring is the main selling feature on PABX's. Due to economic constraints business managers more and more want to control their phone costs. In this regard the DPS is not a suitable system because it cannot do call-barring and costing on individual calls. It is in this area where in particular Siemens has an edge on Telecom Namibia's small range of equipment and Telecom Namibia introduced BTS 70 and BTS 224 systems.
With six licensed competitors already in the market and two other suppliers (Ericsson and Chercor) that indicated their interest to enter the market, the market in Windhoek is very tight and competitive. In the rural areas the competition is not so tight and Telecom Namibia has the virtual monopoly. Due to the current economic decline and the resulting cash flow problems business started to experience, the selling of new systems is difficult and customers start to prefer rental agreements.
The annual income on only the rental of the BTS and DPS equipment is US $ 3,5 millions. Charges collected on installation and transfer requests should generate an additional income of well above US $ 0,5 millions. In summary, besides the call charges that these customers generate an annual income of US $ 4 millions and higher can be collected by staying in the PABX market.
184.108.40.206.3 Telex Services
The demand for telex services is going backwards and is of no interest to other business enterprises. However, there is a small demand by customers to let their telex services work into a PC via a PC-Telex converter. Telecom Namibia has 100% of the CPE market on the Telex service side.
At the moment (February 1996) there are 315 telex users renting T1000 and 90 users renting T1200 machines. Generating an annual average income of US $ 200 000, the traffic has decreased with up to 80% over the last three years.
4 CONCLUSION: NAMIBIA'S TELECOMMUNICATIONS -
LINK TO AFRICA
Namibia is as far as the telecommunication sector is concerned technically one of the most developed countries in Africa. It is the first priority for the Government to maintain and upgrade the telecommunication systems in an optimised way. For historical reasons physical infrastructures were always unbalanced to the disadvantage of indigenous Namibians. This imbalance was consequently addressed after the Namibian Independence on 21 March 1990 and visible change has taken place since then.
The technical progress has to be supplemented by institutional reform. A process of commercialising the former Department of Posts and Telecommunications within the framework of the Ministry of Works, Transport and Communication was initiated after Independence and completed in August 1992. Telecom Namibia is one of the success stories of the country and has made great strides towards an efficient and modern telecommunications network without any cross-subsidisation and without failing to fulfil the social commitments which are a heritage of the colonial era.
Africa's efforts should aim towards a unified approach as far as the economical strengthening of the African Continent is concerned, with the ultimate goal of the United Nations of Africa". If Africa's decision makers play their cards correctly the currently marginalised Continent of Africa and especially the regions of Southern Africa will be one of the best regions on earth. There is thus less justification for Afro-pessimism today than there was in the 1980s. In the wake of recent fundamental political changes, a wind of change has generated processes in almost every African country, making possible new pluralistic, political as well as economic and institutional structures on the basis of which African governments will be subject to controls and balances in the future.