Seminar on Costs and Tariffs for Member
Countries of the TAF Group
Niamey (NIGER), 23-25 April 2001
Tariff trends
Tariff Trends coming out of TAF Model
Based Case Studies
Pape Gorgui TOURE
Head, Financing Strategies Unit
ITU/BDT
pape-gorgui.toure@itu.int
Tariff trends
3000
2500
2000
1500
1000
500
Ethiopia
Sierra Leone
Burundi
Chad
Eritrea
Niger
Burkina Faso
Madagascar
Rwanda
Tanzania
Comoros
Uganda
Kenya
Central African Rep.
Togo
S. Tomé & Principe
Gambia
Zambia
Mauritania
Ghana
Angola
Guinea
Zimbabwe
Senegal
Cameroon
Côte d'Ivoire
Djibouti
Swaziland
Cape Verde
Equatorial Guinea
Namibia
4500
4000
3500
South Africa
Botswana
Mauritius
Gabon
GDP per Capita
0
0
1
2
3
4
5
6
7
8
9
10 11 12 13 14 15 16 17
18 19 20 21 22
Source: ITU World Telecommunication Indicators Database
23 24
25 26 27
28 29
30 31 32 33 34 35 36
Tariff trends
15
10
5
Chad
Rwanda
Niger
Uganda
Central African Rep.
Burundi
Ethiopia
Madagascar
Sierra Leone
Burkina Faso
Tanzania
Guinea
Cameroon
Mauritania
Eritrea
Angola
Ghana
Togo
Zambia
Comoros
Kenya
Equatorial Guinea
Djibouti
Côte d'Ivoire
Senegal
Zimbabwe
Gambia
Swaziland
S. Tomé & Principe
Gabon
Namibia
Botswana
Cape Verde
South Africa
25
Mauritius
Teledensity
20
0
0
1
2
3
4
5
6
7
8
9
10 11 12 13 14 15 16 17 18 19 2 0 2 1 2 2 2 3 2 4 2 5 2 6 2 7 2 8 2 9 3 0 31 3 2 33 34 3 5
Source: ITU World Telecommunication Indicators Database -1999
Teledensity as a function of GDP per
capita
25
20
Tariff trends
y = 0.0036x - 0.0431
R2 = 0.5076
15
10
5
0
0
500
1000
1500
2000
2500
3000
3500
4000
Scope of the study
Tariff trends
• 11 countries of various sizes
• Western, eastern-southern and central
Africa
• Based on the data directly provided by the
concerned countries
• The figures are based on cost orientated
calculated tariffs and not on actual prices
Weighted averages
• Global inefficiency: 1.97%
• Used capacity growth rate:
Tariff trends
– Average: 13.06%
– Standard deviation: 7.16%
– Interval of confidence at 95% of the average of
TAF Group member operators growth rate:
• 9.07% to 17.05%
Annual Growth rate
30%
25%
Tariff trends
20%
15%
10%
5%
0%
Cost structure of networks
International transmission
3.78%
International switching
4.18%
Tariff trends
National switching
24.07%
National transmission
22.64%
Access network
30.53%
Other investments
14.80%
Growth vs Teledensity
35%
30%
Tariff trends
Growth
25%
20%
15%
y = -0.0061x + 0.1374
10%
5%
0%
0
0.5
1
1.5
2
Teledensity
2.5
3
3.5
Revenues as a % of GDP
Tariff trends
• Average turnover is 1.69%
of the GDP
• The confidence interval of
the weighted average for
the TAF members is:
1.41% to 1.97%;
• Opportunities for private
sector
• Need for increased
investments;
• Tariff rebalancing to be
engaged progressively
0.00% 5.00% 10.00% 15.00% 20.00% 25.00%
Local orig
Total rev
6.00%
5.00%
Tariff trends
4.00%
3.00%
2.00%
1.00%
Tajik
is an
Turtk
meni
stan
Rom
ani
Kyrg a
yzsta
n
Belar
us
Lithu
ania
Arm
eni
Uzbe a
kista
n
Slove
nia
Polan
d
Alba
nia
Azer
ba
Slova ijan
k Re
publi
c
Russi
a
Bulg
aria
Latv
a
TFYiR
Mace
donia
Ukra
i
Cnzeec
h Rep
ub
Eston lic
ia
Bosn
ia
Mold
ova
Hung
ary
Comparison with ECE countries
RevLoc/GDP
0.00%
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Source: ITU Database -1998 data
Tariff trends
8.00%
6.00%
4.00%
2.00%
Guinea
Cameroon
Burundi
Rwanda
Central African Rep.
Ethiopia
Uganda
Tanzania
Madagascar
Chad
Gabon
Angola
Burkina Faso
Ghana
Botswana
Swaziland
Eritrea
Comoros
Mauritius
Namibia
Mauritania
South Africa
Togo
Kenya
Côte d'Ivoire
Senegal
Djibouti
Cape Verde
12.00%
10.00%
S. Tomé & Principe
Telecommunication revenues as a %
of GDP
0.00%
0
1
2
3
4
5
6
7
8
9
10
11 12
13
14
15 16
Source: ITU World Telecommunication Indicators Database
17 18
19 2 0 21 2 2 2 3 2 4 2 5 2 6 2 7 2 8 2 9 30
EBITDA & Access Deficit as % of
Total Revenue
Tariff trends
• Cost orientated tariffs include
transfer of access deficit
charges;
• EBITDA shows generally
high revenues compared to
real costs;
• Average EBITDA: 58% of
Total revenues
• Access Deficit average:
18.30% of total revenues
• Interval of the weighted
average for the TAF
members: 9.68% to 26.92%
• => domestic communications
price too low compared to
their cost
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
EBITDA
DEFICIT
Turnover as a % of total revenue
Tariff trends
• Turnover : 88.91% of
total revenue
• Standard deviation:
5.14%
• Confidence intervallic:
83.77% to 94.04%
100%
95%
90%
85%
80%
75%
70%
65%
60%
Return On Equity
Tariff trends
• Average return on equity:
11.55% after deduction of
inefficiency costs where
applicable:
• Interval: 9.69% to
13.40%;
• RoE from cost orientated
tariffs can be increased
without negative effect on
the actual prices
16%
14%
12%
10%
8%
6%
4%
2%
0%
Tariff trends
4.00%
3.00%
2.00%
1.00%
Central African Rep.
Guinea
Burundi
Zambia
Djibouti
Gabon
Mauritania
Ethiopia
Burkina Faso
Namibia
Madagascar
Uganda
Rwanda
Botswana
South Africa
Swaziland
Mauritius
Eritrea
Côte d'Ivoire
Senegal
S. Tomé & Principe
Tanzania
Togo
Cape Verde
Gambia
6.00%
5.00%
Ghana
Telecom investment as a % of GDP
0.00%
0
1 2
3
4 5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
Source: ITU World Telecommunication Indicators Database
Revenue structure of services
35.00%
30.00%
25.00%
20.00%
Tariff trends
15.00%
10.00%
5.00%
0.00%
D
DB
PL
SM
UT
TO
NA
T
OU
EG
SR
UT
TO
IN
RB
TU
IN
B
UR
%Local revenues
%Total revenues
• The cost orientated
structure of revenues
shows a preponderant role
for urban, interurban and
international outgoing
communications;
• The interconnection traffic
has a still limited
significance except for
fixed to mobile
communications
Intrinsic endogenous cost of services
Urban
10.36 US$ cents
Interurban
18.72
International incoming
20.00
International outgoing
20.65
Tariff trends
• Those cost do not include:
Ø Corporation tax
Ø Universal Service Contributions
Ø USO access deficit transfer induced by Regulatory
Authorities opposing tariff rebalancing
Other findings
Tariff trends
• USO constraints maintains the domestic
communications price low compared with their
cost based normal level;
• The cost orientated tariffs are lower than the actual
international outgoing tariffs;
• The interconnection rates are not cost based and
do not take part of the transferred charges (Access
Deficit) => subsidy from fixed to mobile on
domestic communications, and from mobile to
fixed on international communications.
Ghana
Telecom Investment as a % of Revenues
250%
Tanzania
225%
200%
100%
75%
50%
25%
Namibia
Gabon
Burundi
Burkina Faso
South Africa
125%
Central African Rep.
Djibouti
Mauritania
Tariff trends
150%
Ethiopia
Botswana
Mauritius
Eritrea
Cape Verde
Swaziland
Guinea
Senegal
Madagascar
Uganda
Togo
Rwanda
175%
0%
0 1
2 3 4 5
6 7 8
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Source: ITU World Telecommunication Indicators Database
Conclusion
Tariff trends
• The sector has proven to be profitable;
• The cost orientated return on equity can be
increased to around 15% to 17% without real
global price change;
• The investment level is still below its normal level
compared with the average GDP => business
opportunities;
• The interconnection rate calculation for fair
competition is urgent in almost all the African
countries