November 3, 2009 / 11:11 AM / 10 years ago

Somali mobile phone firms thrive despite chaos

MOGADISHU (Reuters) - Somalia’s mobile phone business is booming despite the almost daily artillery fire that flies over expensive satellite dishes and the violence that has brought misery to the population of the Horn of Africa nation.

Yahoo Inc's mobile phone product "Yahoo! Go" loads on a phone in California, May 5, 2008. REUTERS/Mike Blake

The three largest firms, Hormuud Telecom, Nation Link and Telecom Somalia, have a combined 1.8 million mobile users who enjoy some of the world’s cheapest calling rates, allowing them to stay in touch with their loved ones amidst the conflict.

“This business is very important during this time of conflict when everybody wants to know what is happening at every moment. It is a way of survival in every conflict zone,” Ali Ahmed Nur, managing director of Nation Link, told Reuters.

“Running a business in Somalia is very risky. Sometimes our employees cannot get to work because of insecurity,” he said.

Besides being crucial for keeping in touch with family, insurgents say they receive orders for attacks by text message, African Union peacekeeping soldiers are bombarded with threatening calls from rebels and government depends on mobiles.

One telecoms firm is also expanding its network to coastal ports used by pirates, who make thousands of dollars from ransom payments from ship-owners but have to rely on expensive satellite phones at the moment.

Despite the tough environment, the sector has attracted investment from wealthy individuals and Somalis living abroad.

With mobile phone use at about 18 percent of the population, Somalia lags its neighbour and east Africa’s largest economy Kenya, where it is above 40 percent, but it is ahead of several other poor African nations.

The money invested is small by international standards — less than $10,000 can be enough to buy a share certificate in one of the firms. But it is a relatively large sum in a country where nearly half of the population is dependent on food aid.

MAKING PROFITS

“We make profits but we keep investing to survive. Shareholders reinvest, they want continuous dividends,” Nur said, declining to give financial details.

Ahmed Mohamed Yusuf, chairman and CEO of Hormuud Telecom, the biggest network with more than a million subscribers, told Reuters it would move to 3G networks in the near future and that the firms were planning to unify international dialling codes.

Some smaller operators, such as Telenet International and Somafone, were kept out of an interconnectivity deal between the three big firms signed in 2005.

Abdullahi Hussein, executive manager of Telecom Somalia, said the deal presented benefits for companies and subscribers, but he admitted they had marginalised the smaller players.

“In a way it seems we had agreed to control of the market but our intention was to ease the burden on our poor customers,” he said, adding they could now afford cross-network calls.

The deal forced firms such as Somafone to change tack to survive. It now offers the lowest international calling rates of 0.30 U.S. cents per minute compared to 0.50 U.S. cents for the three big firms — making it a popular choice for many Somalis who depend on remittances from relatives abroad.

Somali telecom operators use the U.S. dollar and other regional currencies in their operations to avoid problems associated with an extremely weak Somali shilling.

“We prefer dollar and other regional currencies since the country has no central bank that circulates the shilling,” Ahmed Galool, public relations director of Salaam Somali bank, which partners with Hormuud Telecom, told Reuters.

A hundred dollars is equivalent to 3 million Somali shillings, which apart from being heavy to carry, exposes money traders to the risk of robbery in the lawless state.

The telecoms sector employs more than 6,000 Somalis and a few foreign engineers, mainly from Asian countries. Officials said the companies try and stay out of the country’s 18-year-old conflict, which involves complex tribal and ideological differences.

“We have been handling services that all people need whether they are politicians or ordinary people and I can say our business has boomed well, so we are not involved in the political atmosphere,” said Hormuud’s Yusuf. “It is against our interest to support any party in Somalia.”

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