French telecom operator Orange is considering exiting the east African telecom market as a result of anticipated stiff competition from Kenya's Safaricom and Bharti Airtel.
Orange, Kenyan's third largest mobile operator, said it is considering a pullout from the Kenyan and Ugandan telecom markets if the possibility of acquiring additional partners in the two countries to make its business viable fails. The company said it may not be able to fight Safaricom and Airtel following their acquisition of yuMobile, previously owned by
India's Essar Group.
The US$100 million acquisition of the company by the two rival operators has consolidated their operations and increased their share in Kenya's mobile market, effectively putting pressure on Orange.
Kenya is Africa's third largest telecom market after Nigeria and South Africa and is currently experiencing more investment than many countries in Africa.
Orange Telecom press officer Tom Wright said, "one option would be to find partners in these countries to ensure the necessary financial resources are available to maintain investment and support the development of operations."
However, the other option available is to pull out of the East African mobile market by selling the company. The company has already hired Lazard Consultants to help it with strategic review.
But African telecom analysts including Amos Kalunga, a telecom analyst at Computer Society of Zambia, are warning that if the company decides to exit the east Africa market, "the buyer of the company will not have it easy in the region and may end up exiting the market as well, because large operators are heavily competing to outdo each other in order to remain in the business."
Safaricom is Kenya's largest operator, followed by Airtel. Orange is third, with a market share of only 7.1 percent, comprising less than 3,000 subscribers.
Orange entered the Kenyan mobile market after buying a majority 51 percent stake in Telkom Kenya, a state-run operator, in 2008. The company later bought additional shares in Telkom from the Kenyan government to reach a 70 percent share of the company.
In Uganda, the company is facing equally serious competition from MTN, Africa's largest operator, and Airtel Uganda. Orange entered the Ugandan market in 2009 promising to revolutionize the country's telecom market. In 2012, the company, however, announced the sale of its wireless telecom tower network in Uganda to Eaton towers.
Orange began to face even stiffer competition in Uganda last year when Airtel Uganda acquired Warid Telecom for about $100 million. Orange Kenya experinced a drop in its revenue to 9.7 billion Kenyan shillings (US$114 million) in 2013 from 10.2 billion shillings in 2012.
Generally, competition in the provision of mobile phone services in the region is what is chewing into operators' revenue.
The problem is compounded by the fact that the voice market is becoming saturated while revenue from short messaging services is also dropping, forcing operators to depend on revenue from internet and data services.
Orange currently has operations in 15 African countries, including Botswana, Egypt and Niger.