opinion


African mobile market update

Despite strong performances in the African markets, the pace is slowing down year on year and has been since 2006-2007. We forecast an annual growth rate of 26 per cent in 2009, compared to 42 per cent in 2007 and 35 per cent in 2008.

Despite the slow down however, the region’s mobile penetration rate still stood at just 43 per cent in 3Q09 – the lowest rate in the world, while the global average was 65 per cent at the same point. Moreover, the 43 per cent penetration rate is just the ratio between SIM cards and population, which means that because many subscribers own more than one SIM the actual population penetration rate is even lower.

There are only a few home-grown pan African operator groups in the region, all of them from either South Africa or North African countries. MTN, Vodacom and Orascom are the major ones, but we’ve observed recently the emergence of until now smaller African investors, such as Telkom South Africa, Maroc Telecom, LAP Greencom (Libya), Sudatel and Altech (South Africa), which are again, all based in South Africa or in North Africa. Ivorian group, Atlantique Telecom was the only independent investor based outside these two regions to have a footprint across a number (seven) of markets. The company is, however, now part of Etisalat group. Nigerian Globacom has expanded into the Benin republic, and soon will move into Ghana, and it seems to be looking at playing an important role in the West Africa region. There are still a few African investors, but the big groups (African or not) obviously have easier access to funds, which leads to consolidation.

Foreign investment is still very welcome on the continent and the most recent testimonies include Vodafone increasing its stake in South African Vodacom or acquiring Ghana Telecom. We should also mention France Telecom acquiring HiTS Telecom in Uganda and Essar taking full control of Econet in Kenya. More recently Portugal Telecom was listed among the companies bidding for a third licence in Mozambique.

Yet there are those trying to get out of the region. Zain has been looking to offload its African portfolio for some time and we could certainly say that operating in Africa may not be as financially rewarding as some would have expected. Some investors may indeed be put off by having to invest heavily and generate less profit than in more developed markets. This is why we see more interest from investors with experience in running networks at lower-cost (such as Indian investors) or existing players turning to cost-effective solutions, such as shared infrastructure or managed services.

Operators need to expand into rural – and less profitable – areas, but the economic downturn has affected the availability of financing. Lack of financing leads investors to look at ways to cut operating expenses, so site-sharing and managed networks are expected to play a bigger role in the near future.

Mobile networks are highly likely to become an essential platform to provide all type of services in Africa and the growing trends right now are internet and money transfer. Mobile technologies are increasingly being used for telecare, whereby health authorities or NGOs transmit information to patients.

It’s the big names that are worth watching. While all groups operating in Africa always pledge to do more either by expanding their footprints or by growing their existing operations, MTN and Zain have wide footprints meaning that any merger or acquisition, as well as any product innovation replicated across all the networks, will have a significant impact on the African telecoms landscape. And Essar is the first Indian investor to be expanding in Africa.

However, there are still many instances where the regulatory environment is not as friendly as it should be. The issues include: conflict of interest between the government and the regulator, high taxations, taxes introduced arbitrarily. Governments usually have good intentions but sometimes not the means to enforce their policies.

So the lesson we can learn from Africa is that one should not assess a market only on how poor its population is but more on how big the demand is. Most African economies are driven by the informal sector, which often makes it difficult to get an accurate overview on the population’s real disposable income.


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