Hits Telecom, a Kuwait based telecom group, is investing $100 million in Tanzania alone to boost its presence in African telecom market, despite economic problems in the region.
Tanzania is the second largest telecom market in East Africa after Kenya but rising inflation and weakening local currencies in the region have forced operators to raise mobile tariffs to compete for survival.
Tanzanian subscribers are now paying 1 shilling (about US$0.001) per second from 0.25 shilling per second. Competition, coupled with inflation and the high cost of doing business in the region, has steadily been digging into operators' profit margins in Tanzania over the past year, raising fears that small operators would fail to expand their networks.
The Tanzanian Communication Regulatory Authority (TCRA), the country's telecom sector regulator, has announced new interconnection rates for mobile operators.
"Hits Telecom being a small operator in Africa is likely to have problems expanding in the region because the cost of doing business keeps growing by each day. Much money is therefore needed to expand presence and network," said Amos Kalunga telecom analyst from Computer Society of Zambia.
But Hits Telecom CEO Par Erikson said last week the company has enough funds to roll out networks. In addition to Tanzania, Hits Telecom is also investing $40 million in an operation in Liberia.
Erikson said the company will steadily expand its networks in both Tanzania and Liberia because it was already in talks with major operators to share communication towers. Major operators in Tanzania include South Africa's Vodacom and India's Airtel.
Hits Telecom also has operations in the Democratic Republic of Congo (DRC) in Southern Africa and Equatorial Guinea in West Africa.
The company wants to use the DRC and Equatorial Guinea investments as stepping stones for further investment in both Southern and West African regions.