Postal & Telecommunication Sector Performance: 3rd Quarter 2018

PRESENTATION OUTLINE The presentation will cover performance of the postal and telecommunications sector in terms of: Access Usage Revenues Operating Costs Investment

SECTOR PERFORMANCE: Q3 2018 The major highlights were as follows: 4% increase in the mobile penetration rate to reach 91.9% from 87.7% recorded in the second quarter of 2018. 7% growth in active internet subscriptions to reach 7,690,134 from 7,197,279 recorded in the second quarter of 2018. 3.5% increase in the internet penetration rate to reach 55.4% from 51.9% recorded in the second quarter of 2018. 21% increase in mobile internet and data usage to record 7,395TB from 6,104TB recorded in the second quarter of 2018. 13.1% increase in mobile telephone revenue to record $331.2 million from $292.9 million recorded in the second quarter of 2018. 8.5% decline in postal and courier revenues to record $8,268,603 from $$9,033,823 recorded in the second quarter of 2018.

Q3 2018 SECTOR PERFORMANCE: ACCESS The growth in active subscribers for subscription based markets was as follows: 2nd Quarter 2018 3rd Quarter 2018 % Variation Active Fixed Telephone subscriptions 263,962 266,219 0.9% Fixed Teledensity 1.9% - Active Mobile Subscriptions 12,152,471 12,748,551 4.9% Mobile Penetration Rate 87.7% 91.9% 4.2% Active Internet Subscriptions 7,197,279 7,690,134 6.8% Internet Penetration Rate 51.9% 55.4% 3.5%

Q3 2018 SECTOR PERFORMANCE: ACCESS Fixed Teledensity As shown above, the fixed tele-density has been stagnant at 1.9% since March 2017.

Q3 2018 SECTOR PERFORMANCE: ACCESS The internet penetration rate has been consistently increasing due to the growing demand for internet and data services. Internet Penetration Rate

Q3 2018 SECTOR PERFORMANCE: ACCESS A total of 92 new base stations were commissioned in the quarter under review, bringing the total number of base stations in the country to 8,622 from 8,570 recorded in the previous quarter. The growth in base stations per technology is shown below: Growth in base stations

Q3 2018 SECTOR PERFORMANCE: USAGE The growth in usage volumes for the different services within the sector is shown below: 2nd Quarter 2018 3rd Quarter 2018 % Growth Total Voice traffic 1,321,945,157 minutes 1,381,883,849 4.5% Mobile Internet & data 6,104TB 7,395TB 21.1% Used international incoming bandwidth capacity 80,546Mbps 85,333Mbps 5.9% Postal & Courier Volumes 1,903,128 units 1,905,511 -7.1% Total SMS Volumes 3,691,835 3,872,191 4.9% The growth in SMS volumes is attributable to the growing use of digital financial services as notifications are sent via SMS.

Q3 2018 SECTOR PERFORMANCE: USAGE Mobile internet and data utilisation increased by 21.1% to record 7,395TB from 6,104TB recorded in the second quarter of 2018. Social media continued to drive mobile data usage with WhatsApp bundles constituting 32% of total mobile data usage. At 18,719TB, mobile internet and data consumption from January to September 2018 has already exceeded 15,361TB consumed in 2017.

Q3 2018 SECTOR PERFORMANCE: USAGE Despite the overall growth in voice traffic, international traffic, particularly for the fixed network, has been declining as shown below: This implies a reduction in foreign currency earnings from international voice service after set-off.

FINANCIAL PERFORMANCE Total sector revenue grew by 9.2% to record $435.5m from $398.8m recorded in the previous quarter. On the other hand operating costs increased by 15.3% to record 250.9m from 217.6m recorded in the previous quarter. REVENUE OPERATING COSTS 2nd Q 2018 3rd Q 2018 % Growth Fixed 34,474,622 34,648,297 0.5% 38,830,656 35,129,811 -9.5% Mobile 292,875,967 331,165,401 13.1% 133,454,066 166,472,388 24.7% IAPs 62,410,120 61,566,500 -1.4% 35,685,973 39,417,447 10.5% Postal & Courier 9,033,823 8,268,603 -8.5% 9,618,882 9,852,167 2.4% Total 398,794,532 435,648,801 9.2% 217,589,577 250,871,813 15.3%

Q3 2018 PERFORMANCE: INVESTMENT The fixed network and the mobile networks registered growth in capital expenditure, whereas capital expenditure IAPs and the postal & courier operators declined as shown below: 2nd Quarter 2018 3rd Quarter 2018 % Growth Fixed 4,758,393 7,085,136 48.9% Mobile 6,244,731 9,841,500 57.6% IAPs 20,395,011 14,398,684 -29.4% Total Telecommunications 31,398,135 31,325,320 -0.2% Postal & Courier 305,254 107,142 -64.9% Total Sector investment 63,101,524 62,757,782 -0.5% This resulted in an overall decline in sector investment of 0.5%.

OUTLOOK Industry growth continues to be driven by internet and data. Usage traffic for internet and data services is expected to continue rising. This will be largely spurred by innovation related to non- traditional business models such as Internet of Things (IOTs). The growth of operating costs poses a threat to operator viability and puts pressure on prices With the current foreign currency shortages in the economy, coordinated effort to combat illegal refiling of traffic becomes even more pertinent to safeguard foreign currency earnings from the international voice services. Increased use of Over- the-Top services is inevitable as consumers implement personal financial austerity measures in the current economic environment. Fluctuations in postal and courier service volumes and revenues are expected to continue due to the impact of e- substitution as the data revolution gathers momentum. Postal and courier operators also need to innovate and introduce new sustainable business models to catch up with the ever- evolving technological landscape.

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