November 13, 2013 / 5:31 PM / 5 years ago

Somalia's Hormuud rings up telecom profits despite anarchy

CAPE TOWN (Reuters) - Hormuud Telecom Somalia, one of the largest mobile operators in the country, plans to halve rates from the current $0.02 per minute once a newly laid fibre optic cable network is functional, its chief executive said on Wednesday.

The company has been operating since 2002 despite the anarchy that has plagued Somalia, and has survived over the years only because of the warring parties’ need for communications, chief executive Ahmed Yuusuf said.

The company makes some $40 million in turnover annually, although the average revenue per user is a mere $2 from its 2 million subscribers, Yuusuf said.

Since 2005, the firm has lost more than 50 employees to the shelling and gunfire that have bedevilled Mogadishu and much of the Horn of Africa country for 22 years.

Fighting has eased markedly of late since Islamist al Shabaab militia were driven out of Mogadishu, with life for many Somalis quieting down and many diaspora Somalis coming back, but sporadic guerrilla attacks persist.

“We face a lot. The biggest problem is anarchy from those in confrontation,” Yuusuf told Reuters on the sidelines of AfricaCom, an annual industry conference in Cape Town.

“If a site is burned, we repair it without claim, without complaint, that’s it.”

Hormuud has 2,000 sites across central and southern Somalia and has laid a terrestrial fibre network in Mogadishu to speed up connections. It is now part of international terrestrial links connecting to neighbouring Kenya through a cable.

Hormuud expects call and data costs to drop by 50 percent once that link is fully functional, which is expected to happen soon. The company, which already offers 3G connections, will start trials on a 4G network in 2014 and expects data charges to be only $0.03 per megabit, a third of the current cost.

Yuusuf said 45 percent of his 5,000 employees are Somali engineers, although he has to import skills for sophisticated work once in a while. Most of the time, vendors can access the network remotely, reducing the risk of kidnapping or being caught in crossfire.

The company has 5,000 shareholders made up of Somali speakers, whether from the diaspora or ethnic Somalis in Kenya, Ethiopia and Djibouti. Hormuud has been paying dividends since its third year of operation, he said.

Although it does not have a formal taxation and regulatory regime, the peripheral costs of operating in an environment such as Somalia are much higher than what a normal telecom would have to pay, Yuusuf said.

Every site employs at least five people for security, just to get some buy-in from the local community.

“Oh my god! We have more than taxation, everybody is taxing us,” he said. “Taxation is just maintaining the community.”

Reporting by Helen Nyambura-Mwaura; Editing by Ed Stoddard and Mark Heinrich

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