Senegalese Telecom Market Attracting Leader in Money Transfer

Senegalese Telecom Market Attracting Leader in Money Transfer

Is a wind of economic patriotism blowing in the Senegalese telecom sector?

In February 2017, the Luxembourg-based telecom company Millicom announced the signature of an agreement for the disposal of its subsidiary Tigo Senegal which is the second telecom operator in the West-African country. This operation is considered as particularly worth noting since the acquirer of Millicom’s business is the Senegalese money transfer company, Wari. The latter was created in 2008 and records between 600 and 700 million transactions per year valued at 4 billion euros [1].

The value of the deal between Millicom and Wari is estimated at $129 million (XOF80 billion).

Perceived by most of the observers as a sign of economic patriotism, this acquisition of Milicom’s subsidiary in Senegal by the Senegalese businessman Kabirou Mbodj has marked the Senegalese business environment during the past few weeks.

Apart from the patriotic enthusiasm, this operation obviously has several strategic implications both for Wari and Millicom.

From Millicom’s perspective, the Marketing Director of Tigo Senegal argues that the Tigo sale is part of Millicom’s strategy to gradually dispose its African operations and focus more on its investments in Latin America where its business is more profitable.

Millicom operates globally within 13 countries across Latin America (8 countries of presence) and Africa (5 countries covered: Chad, Ghana, Rwanda, Tanzania, and Senegal). In 2016, 14% of the company’s revenue was generated from its operations in Africa [2].

Before the sale of Tigo Senegal, Millicom divested its operations in DRC to its competitor, Orange in April 2016.

For the money-transfer company Wari, this acquisition is strategic on several levels:

• The provision of the money transfer service is directly linked to the use of telecom technologies and services (SIM cards, USSD codes generation) which are generally under the monopoly of the telco operators. With the purchase of Tigo, Wari will have access to the telecom infrastructure and can truly compete with one of its main “challengers”, Orange Money.
• Wari will also benefit from the “most valuable asset” of Tigo which is its telecom license whose validity has been validated till 2028 by the Senegalese government. The market share of Wari in the money transfer market could also be increased by leveraging Tigo’s customer base (3.9 million as of December 2016).
• The effect of economic patriotism shown by some Senegalese citizens can also help Wari gain additional market shares on both the money market and telecom front.

Indeed, this operation is worth noting in the Senegalese business environment but it will also be interesting to observe the transition and consolidation phases of both Wari and Tigo Senegal. Behind the patriotic enthusiasm, the Senegalese customers’ prime concern is to have a better quality of service at competitive prices. The combination of these elements will help to constitute a solid basis for sustainable economic development.

Sources

[1] https://www.wari.com/fr/a-propos/a-propos-de-wari

[2] http://www.millicom.com/media/8404750/millicom-overview-strategy-2016.pdf

http://www.aps.sn/actualites/article/sonatel-71-milliards-d-investissement-en-2016

https://www.tigo.sn/espace-presse/millicom-a-signe-un-accord-avec-wari-pour-la-cession-de-sa-filiale-au-senegal

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Fatou Ndiaye, Associate at Infomineo.

Infomineo is a business research provider, with a focus on Africa and the Middle East. By performing primary and secondary research, Infomineo provides its clients, which include the majority of the leading global management consulting firms and several Fortune Global 500 companies, with high-quality data that leads to decision making a success. For more information please contact info@infomineo.com.