EXECUTIVE SUMMARY Mozambique has a challenging path ahead if it is to realise the full potential of the ICT sector in developing its economy and to make progress on the information communication technology targets that are intended as enabling the achievement of the United Nations’ Sustainable Development Goals. Mozambique’s successes include licensing and regulatory achievements in telecommunications, which have stimulated competition and contributed to meeting national policy objectives. Vietnamese-backed Movitel has shaken up the Mozambican mobile market with its high-investment, low-cost business model – creating the largest 2G/3G network in the country and winning an unprecedented third entrant share (29%) of the subscriber-based market in its first year of operation. Incumbents Vodacom and MCel have faced intense competition from the late entrant, with MCel being close to exiting the market. However, Vodacom gained a giant share of the market (41%), compared to Movitel (29%) and MCel, which moved down to 30 percent. The latter was the first market entrant and enjoyed the largest number of early subscribers, but was the most affected by the introduction of SIM registration requirements, which removed large numbers of unregistered users from the network. Prices for data and voice have fallen dramatically with the introduction of the third competitor and Mozambique now ranks 24th out of 49 countries on RIA’s African Mobile Pricing (RAMP) Index. Nevertheless, it places third on the 1GB prepaid mobile data index. Vodacom initially responded to this pricing pressure by investing significantly in its network and competing against Movitel on service quality rather than attempting to compete purely on price. This has proven to be a successful strategy in other African markets in which Vodacom operates, but there is little depth to the upper end of the market where people can afford to pay a premium for service quality. Without this demand in the market’s top end, competition for subscriber numbers has forced all operators to lower their prices to enable them to increase revenue and scale their operations. The inability of the incumbent mobile operator, MCel, and the fixed line incumbent, TDM, to respond to these pressures has resulted in a decision by the Government to merge the two operations by the end of 2018. While mobile phone ownership (voice services) stands at 40 percent, Internet penetration is only at 10 percent. The main reason given for not being on the Internet is the high cost of Internet-enabled devices. Like other least-developed economies, Mozambique, Rwanda and Tanzania have not reached the 20 percent critical mass needed to enjoy the network effects of ICTs associated with economic growth and development, and to harness the opportunities for the public and private sectors provided by the digital economy. Effective regulation of open and competitive markets by the Instituto Nacional das Comunicações de Moçambique (INCM) will drive affordable access to broadband networks. However, it is clear that the majority of citizens are unable to afford devices or to use broadband in the always-on, high-speed way they were intended and required to deploy cost-saving and secure cloud services, over-the-top voice and text substitutable communications services, as well as the online services that reduce transaction costs. It is recommended that any excise duties on entry-level, Internet-enabled devices be removed to meet the pent-up demand for Internet in the country that is currently constrained by the affordability of devices. Incentivising the extension of backbone and backhaul networks outside of the major provincial capitals by, for example, aggregating public demand in unserviced areas and through the provision of government anchor tenancies is also recommended. These points of presence can be used for the rollout of public access points for citizens. At the same time, the country will have to develop demand-stimulation strategies such as the EXECUTIVE SUMMARY iii