News, views and commentary from the telecoms sector across emerging markets and developing countries worldwide

Saturday, 10 October 2009

Event preview: Africa's telecoms bigwigs to gather in Cape Town, 11-12 November

That DevelopingTelecomsWatch has featured so many articles about African markets suggests that 2009 has been an eventful year for the telecoms sector in that part of the world.

Certainly, in terms of mobile subscriptions, this has been another year of high growth rates. A reading of the brochure for next month's Africa Com Congress and Exhibition in Cape Town is instructive. Accompanying the booking information and conference agenda is a neat summary of market data from the region. One soundbite: the continent passed the 400 million mobile subscriptions mark in 2Q09 and Informa Telecoms & Media (the event's organisers) tip subscriptions to rise to over 480 million by end 2009 and over 700 million by 2012.

Naturally, growth this impressive is only possible in under-penetrated regions - and Africa remains the world's least mature continental market. The world's regions, when arranged in descending order of penetration rate currently look like this, according to WCIS:
  1. Eastern Europe: 118.18%
  2. Western Europe: 117.97%
  3. USA/Canada: 88.40%
  4. Latin America/Caribbean: 84.56%
  5. Middle East: 74.75%
  6. Asia-Pacific: 52.19%
  7. Africa: 42.77%
This is not to suggest, however, that a rich seam of greenfield investment opportunities necessarily remains under-exploited in Africa. While vast numbers of people have yet to enjoy the benefits of mobile communications, and while the socio-economic benefits of connecting these people have been widely discussed, telcos seeking to address these needs will face numerous challenges.

Not the least of these is the fact that mobile ARPU across the continent, which was already low in 2008, has continued to decline as operators' customer bases expand to include ever less affluent population segments.

In Informa's African mobile market update, 2Q09, Thecla Mbongue notes that pan-African ARPU was USD 9.70, down from USD12 in 2Q08. Orange Kenya posted monthly ARPU of just USD 2.0 in 2Q09, claiming the possibly dubious honour of the lowest figure on record from any African operator.

Surely it is no easy task to extract profits from such markets at a level consistent with the demands of telcos' shareholders. So much so, that this was cited by some observers as a possible explanation for this summer's speculation about Kuwaiti group Zain seeking to sell its African operations to one of a series of rumoured purchasers.

Back in July, at the height of the chattering about this possible transaction, Informa's Matt Reed observed that "although Africa offers opportunities, it is difficult territory in which to operate." Matt pointed out that Zain’s African operations contribute almost half of the group's total revenues and accounted for 40.07 million of the group’s 64.66 million subscriptions at the end of 1Q09; but, as Matt noted, seven of the fifteen Zain units in sub-Saharan Africa made a net loss in 1Q09 while some of the group's Middle East units recorded substantial profits. While Zain Nigeria generated the largest revenue in 1Q09, the group’s second, third, fourth and fifth-largest revenues were recorded by Middle East units: Iraq, Kuwait, Sudan (counted as a ME market by Zain) and Jordan, respectively.

This all begs the question of whether Zain will stick or twist in Africa. Participants at next month's 12th annual Africa Com will doubtless be keen to draw an answer from a man who is well placed to deliver it - Chris Gabriel, CEO of the Kuwaiti group's African operations. Gabriel is profiled as something of a star turn by the organisers, cropping up with supportive quotes about the value of this growing and evolving meeting place for all those who do business in Africa's telecoms sector. At the conference itself, the Zain Africa CEO will enjoy the limelight afforded to him as Keynote speaker, opening proceedings with an update on his company's strategy and on how Zain is adapting to new market conditions. Should we assume, then, even in the context of the recent widespread speculation about the future of Zain, that the group's African operations will not be closer to changing hands by the opening day of the conference in Cape Town? After all, Zain's having committed a senior executive to making a keynote address in front of what is tipped to be a record-breaking crowd rather suggests that the group wishes to radiate confidence about its assured and continued position in the African telecoms landscape.

In this context of low ARPU and markets in which it can be relatively challenging to generate healthy profits, how should telcos design effective strategies?

The market information text component of the Africa Com brochure continues by offering the view that investors "are increasingly targeting networks offering potential in the data segment." MTN, for example acquired Arobase Telecom, the most significant challenger to the France Telecom-owned incumbent fixed-line operator in Côte d'Ivoire. The company has signed a concession agreement with that country's government, allowing it to offer data services over fibre and CDMA WLL.

This push into data services notwithstanding, Africa's low overall mobile penetration does mean that operators will need to expand their networks further into rural - and less profitable – areas, as the Africa Com market information text goes on to explain.

With conference tickets and exhibition space to shift, the Informa marketers are to be commended for eschewing the use of unrealistically gung ho language and for noting how the economic downturn has affected the availability of financing. They have resisted the temptation to say "business is booming so rush to our show to grab a slice of the action."

Also to be applauded, however, is the way in which the conference team have foregrounded the opportunities rather than the problems presented by this tough climate. For example, the event features a breakout session on how telcos can cut operating expenses by migrating towards having their networks managed by vendors.

In the plenary sessions next month, Chris Gabriel is just one of a long list of high-profile speakers with whom delegates will get the opportunity to engage.

Another is Nagi Abboud, the recently-appointed CEO of Atlantique Telecom, the African mobile group known for its Moov brand and in which the UAE's Etisalat holds a controlling stake. The group has operations in markets including Benin, Burkina Faso, Niger, the Central African Republic, and Côte d'Ivoire.

Mr Abboud is among a number of speakers who will be interviewed by the conference chairperson rather than being asked to run a slideshow and make a carefully scripted presentation. This should liven up the proceedings. However hard the organisers strive to avoid it, slow death by PowerPoint can be a feature of events of this kind, so these tweaks to the format are sure to be welcomed by the delegates looking to do business around the conference and exhibition.

Atlantique Telecom's Abboud could be asked any number of searching questions. Among these, it might be interesting to include some which zero in on the challenges his organisation faces across the Francophone markets in which it operates. In Togo this year, for example, the Moov-branded MNO was threatened with suspension of its services by the country's Ministry of Post and Telecommunications for supposedly operating without legal authorisation since 2008.

Another challenge for operators has been the willingness of regulatory agencies in some countries to license the entry of new competitors, even in quite small markets already contested by a good number of players. For Atlantique Telecom, this has been the case in Gabon, where, in February, the authorites sold a 15-year mobile operating licence to Bahraini company Bintel.

In March, DevelopingTelecomsWatch pondered the question of whether the Gabonese market had room for this new entrant. With an estimated population of just 1.5 million, mused the DTW article, could Gabon support four profitable mobile operators? On the plus side, the article argued, abundant natural resources and healthy levels of foreign investment have helped make Gabon one of the most prosperous countries in the region, with the highest Human Development Index score in Sub-Saharan Africa. This relative prosperity, however, which sounds good in terms of ARPU potential, meant that the new entrant will made its debut well after the subscriber gold rush: mobile penetration in Gabon stands at over 100%, according to WCIS. So a question the Africa Com chairperson might direct towards Nagi Abboud could be to ask how disruptive he expects this late market entrant to be in the coming months. After all, to make an impact in this rather congested space, surely Bintel's Azure-branded operation will need to entice customers away from the incumbent networks with very compelling offers.

Also set to be interviewed at the conference are:
  • Themba Khumalo, the CEO of MTN Uganda, an operator that has enjoyed notable success in the area of extending the availability of services to previously under-served regions and population segments
  • Ken Aigbinode, the Executive Vice Chairman of ZOOMmobile of Nigeria, one of several CDMA network operators competing against the GSM-standard heavyweights of Zain, MTN and Globacom.
French interests are also well-represented at this year's Africa Com. Regis Turrini will be speaking on behalf of telecoms and media conglomerate Vivendi, which has a controlling interest in Maroc Telecom, which in turn controls operations in Burkina Faso, Gabon and Mauritania. Mr Turrini, the group's Senior Executive Vice President of Strategy and Development, will doubtless have to field questions about his company's plans for Africa. Having expressed an interest in Zain's African portfolio earlier this year, Vivendi has more recently turned its attention to Brazil, where it faces a tussle with Telefónica and Telmex for control of GVT, a fixed-line operator. Does this signal an end to the French group's further expansion in Africa?

One French group which already has a very significant African footprint is France Telecom/Orange, whose emerging markets bigwig Marc Rennard will speak about where the group might look for further growth opportunities.

Expect another busy conference and exhibition in Cape Town this year. Well worth the visit for those of you doing business with a diverse range of telecoms operators from across Africa.

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