Developing Telecoms Watch

Goodbye

2010-07-09T14:23:00.000+01:00

I am no longer working in a telecoms sector role and have therefore decided to cease updating this blog. Thanks to all who visited here and found it useful, and to the various advertisers and media partners with whom I had the pleasure of doing business.

Vodafone to quit Egypt?

2010-05-21T14:10:00.002+01:00

This blog is (usually) written on a Sceptred Isle whose citizens (subjects) are currently wondering what life is going to be like under a newly cobbled-together coalition government. This is rather a novel state of affairs because the our electoral system is carefully ~~rigged~~ designed to crown a decisive winner and deliver the 'strong government' we Brits are supposed to favour. Usually this works out fine, with a healthy majority and almost unchecked power conferred upon the winners. There's never even been the need for those 'winners' to command a majority share of the votes cast, much less the support of a majority of those eligible to vote.

During its election campaign, the senior partner in the new government issued dire warnings about the terrible consequences should the voters be unwise enough to elect a hung parliament. The markets, we were warned, would respond unfavourably, leaving our fragile economic recovery exposed to the fall out of their nervousness.

Perhaps this was not too far wide of the mark. The markets continue to be volatile in the early days of this new administration, with Nick Fletcher of the Guardian reporting another bumpy week of trading.

Bucking the current downward trend, however, writes Fletcher, is mobile behemoth Vodafone.

"The mobile phone group has had a busy week", observes Fletcher, winning an Indian 3G licence... and reporting a doubling of annual profits. Today, Fletcher reports, its shares have jumped 2p to 131.45p, making it the biggest riser in a falling FTSE, following reports it plans to sell its 55% stake in its Egyptian business.

One such report, from TeleGeography, suggests that the buyer of Vodafone's controlling stake in the Egyptian MNO may be incumbent wireline operator Telecom Egypt, already the owner of the other 45% of the business.

The article also suggests that if no agreement can be reached between Vodafone and Telecom Egypt, the fixed-line operator may seek another route into the domestic mobile sector, perhaps trying to secure its own wireless licence, should the government, as rumoured, offer a fourth mobile concession in the future.

India's cellcos to balk at mandatory switch to solar-powered equipment?

2010-05-21T10:49:00.098+01:00

Solar power: mandatory for India's cellcos?

The green credentials of DevelopingTelecomsWatch are pretty weak - this blog has never dedicated an entire article specifically to an examination of the environmental impact of telecoms technology.

Moreover, the only time DTW has discussed 'green' technologies at length, when wind and solar-powered mobile base stations were evaulated more than a year ago, the focus was mainly on cost benefits for operators. Just a cursory mention was made how such solutions compare favourably - in terms of environmental impact - to diesel-powered generators in the vast numbers of sites where electricty distribution infrastructure is inadequate across developing countries.

Even in terms of the narrower arguments about cost control, last April's article was by no means constructed entirely of fulsome praise for wind-powered and solar-powered mobile network infrastructure. It was noted that while running costs can, of course, look very attractive, the costs of investing in new solar panels and wind turbines themselves are not trivial. DTW also reported concerns on the part of the GSM Association about the results of trials of sun and wind-powered base stations.

Mobile operators, then, mindful of these questions, could presumably be resistant to any attempt to make reliance on these green technologies mandatory.

This is precisely the situation which could be facing cellcos in India.

Writing for India's Economic Times earlier this month, Subhash Narayan asserts that the country's government "may ask telecom companies to install solar panels to generate backup power for cellphone towers, a move that could hurt the sector already troubled by a squeeze in margins."

A proposal being finalised by the Ministry of New and Renewable Energy (MNRE), writes Narayan, "is aimed at containing the use of polluting diesel gensets to provide back-up power" and "could increase the cost of network expansion significantly"

"The green drive will prevent these engines of development (telecom towers) from becoming grave environmental hazards," said an official with MNRE. "We are discussing the proposal with various stakeholders. A cabinet note is proposed to be finalised thereafter to get the clearance for the scheme," the official said, requesting anonymity

Predicatably, the industry response, as reported by Narayan of the Economic Times, is not terrible enthusiatic. "This could significantly impact the margins of companies already under pressure due to rising spectrum cost and the cut-throat competition in the sector," said 'an executive with a large private telco'.

Narayan asserts that the Indian government is not keen on providing any subsidy for solar power equipment, but says it could offer them soft loans under refinancing schemes of Indian Renewable Energy Development Agency.

This skepticism from India notwithstanding, one can still find evidence of cellcos in developing countries going down the green power route. Chinese vendor, ZTE, for example, seems to have encouraged MTN's Cameroonian opco to take delivery of an unspecified number of solar-powered base stations.

Afrique Occidentale & Centrale Com: De retour au Sénégal par demande générale

2010-05-06T16:29:00.012+01:00

The Zain-Bharti transaction: How will West African mobile markets be affected?

Mais non! DevelopingTelecomsWatch has not become a francophone blog. The frenchified title of today's offering is in honour of the fact that a noted West African telecoms conference is, after two years in Nigeria, to be hosted in Senegal in June.

Geopolitically, West Africa is defined by the UN as consisting of: Benin, Burkina Faso, Côte d'Ivoire, Cape Verde, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone and Togo. Of these, just four are countries where English is an official language. Of the others, two are Lusophone states and ten are French-speaking.

The organisers of the aforementioned conference have found that this linguistic diversity in the region creates certain challenges for them. Nigeria, as by far the largest market in West Africa, seemed to be the logical place in which to host the event for the last couple of years. Certainly, relocating the conference to Abuja (from its previous venue of Dakar, Senegal) two years ago paid tremendous dividends in terms of boosted attendance numbers and a good buzz of activity at the 2008 and 2009 iterations of the gathering. This was achieved, however, at the cost of making the event a tad less attractive for delegates from the numerous French-speaking markets. This effect was somewhat mitigated by ensuring that simultaneous English-French translation was available during all conference sessions, but perhaps not as much as was hoped given that this year Informa Telecoms & Media have moved the show back to Dakar again.

Given that delegates from telecoms operators attend for free, Informa monetises its Com World Series events (of which West & Central Africa Com is one) largely by selling sponsorship packages and exhibition space to the telecoms technology vendors that do business with those operators. These vendors will doubtless remain keen on the potential of the large (and fragmented) Nigerian telecoms market and might be concerned about not having a good tradeshow route-to-market to address this now the conference has headed back to Dakar.

With this in mind, I guess, Informa are also running a specifically Nigerian event in Lagos this year. This will make its debut in September.

In the meantime, what can we expect to be discussed at the Dakar gathering?

I guess one hot topic - addressed via offline chitchat if not via presentations and panel discussions - will be the effect of Zain's withdrawal from the region. The Kuwaiti group currently controls opcos in Burkina Faso, Ghana, Niger, Nigeria and Sierra Leone - as well as others in markets elsewhere in sub-Saharan Africa. As discussed ad nauseum in DTW posts passim., all of these are now set to be in the hands of giant Indian cellco Bharti Airtel. DTW's most recent article, mainly a brief exploration of whether India's mobile market is set to consolidate, did a little to talk up the ways in which Bharti Airtel might be able to reinvent Zain Africa by introducing the low-cost business model which it has empoyed on home turf. So let's see how much tougher sub-Saharan markets are set to become for Zain/Bharti's competitors.

This acquistion, however, may yet take a little while longer to conclude. One reason for this could be resistance from the governments of the countries in which the Zain-owned opcos are set to change hands. That said, there have been recent signs of these obstacles being overcome.

Back in March, for example, as reported by India's Economic Times, the Government of Gabon said it "disapproves" of the sale of Zain's Gabonese assets to Bharti Airtel and reserves the right to take "all necessary measures". Late last week, Reuters was reporting that this objection had been resolved.

It will be interesting, then, to see how long it takes to deal with any further problems of this kind. If the difficulties do continue into June, it should be interesting to connect with Tiemoko Coulibaly, Vice President of Zain's Western Africa operations at West & Central Africa Com in Dakar.

There will be many other reasons to attend the event - but connecting with the likes of Mr Coulibaly could be motivation enough for anyone who does business with Zain in Africa and now needs to keep on top of how the change of ownership is set to change the game.

India: operator space to consolidate while handset market gets more fragmented?

2010-04-22T17:04:00.005+01:00

Maarten Pieters: Vodafone India CEO predicts market consolidation

Last week, a broad range of news outlets were carrying the claim that just 31% of the population of India were known to have access to a toilet and 'improved sanitation' in 2008. This is clearly a regrettable state of affairs, with dire consequences for public health, life expectancy and economic development.

Ordinarily, however, it does not follow that the seriousness of an issue always correlates strongly with the willingness of the global media to give it coverage. It was a welcome surprise, then, to see this particular issue given some space even by the website of the thin, brightly coloured newspaper given free at UK railway stations to daily commuters such as myself. After all, this is an organ whose print version dedicates just a few pages to what I would really call 'news' - far more space is given over to celebrity tittletattle and TV listings.

How, then, did this story successfully compete for space even in that kind of context?

The key seems to have been handing the global media an compelling, ready-written headline. The person responsible for doing so in this case appears to be Zafar Adeel, Director of the United Nations University’s Canada-based think-tank, the Institute for Water, Environment and Health.

So how did Dr. Adeel manage to craft a headline sufficiently eye-catching so as to propel this important but unglamorous issue up the news agenda last week? He did so by building it around the assertion that more Indians have access to a mobile phone than to a working toilet. Presumably, the desired effect on readers in Europe and North America was to stimulate a thought process along the following lines: 'More cellphones than toilets? That's crazy! Toilets have been around forever and are one of the most basic facilities expected for a civilised life - but the mobile phone is a recently invented luxury item.'

Such a characterisation of the mobile device would be understandable when articulated by someone who ticks the following boxes:

lives in a wealthy, developed country and has not had the opportunity to see mobile phones being used on the city streets or in the villages of (for example) Kenya, India or Bangladesh
is old enough to remember when mobile phones were seen as an expensive status symbol used only by wealthy executives
has not thought about how access to communications services can improve the lives of poor people by connecting them with time-saving information and services

Regular readers of this blog, and anyone working in or around the telecoms sector in emerging markets/developing countries, however, would be much less likely to think of mobile phones in this way. They would probably be inclined to realise that is precisely because developing countries have weak infrastructure that the mobile phone has rapidly become a truly vital part of the lives of even very poor people in such nations. Numerous examples of this have been decribed in DTW posts passim. Rather than trawl through all of those, readers might like to look at a nicely succinct round up of observations on this topic, made recently Anand Giridharadas, writing for the New York Times.

Giridharadas observes that there is "a global flowering of innovation on the simple cellphone" and that "from Brazil to India to South Korea and even Afghanistan, people are seeking work via text message; borrowing, lending, and receiving salaries on cellphones; employing their phones as flashlights, televisions and radios." He goes on to assert that "many do all this for peanuts", noting that "in India, Reliance Communications sells handsets for less than [USD] 25, with one-cent-a-minute phone calls across India and one-cent text messages and no monthly charge — while earning fat profits."

Readers of this blog, particularly any working in India's mobile sector, might on one hand take pride in seeing such achievements talked up but may, on the other hand, not fully recognise the idea of an industry revelling in 'fat' profits.

Certainly, the feeling in India may be that at the very low tariff levels referred to by Giridharadas, not all operators may continue to be viable. Sypmathetic to this view is Maarten Pieters, CEO Of Vodafone India. Speaking to the Economic Times last week, Pieters observed: "It’s all about scale because we have very low tariffs here. If you compared the tariffs here, it’s about 10% or what we get in Europe in the Vodafone Group as an average tariff. So, how can you survive as an operator on those low tariffs that is by creating scale and it is very clear that it will not be able for 10 people or 10 operators to create that scale, which means there needs to be some form of consolidation".

Pieters does not expect this consolidation of the mobile market to happen overnight, however, because it would not be facilitated by India's current M&A rules. "So, we first need to see some changes of the rules and then you will probably see consolidation."

Indian mobile operators, then, have to strive for profitability in an extremely tough environment. Quite often, I have heard industry watchers articulate the view that this should equip the country's cellcos very well for meeting the challenges of extracting a profit from developing countries elsewhere in the world. Also out there is the feeling that any Indian MNOs with international ambitions will need to be mindful of quite different challenges they may face.

Writing last month for telecoms.com about the purchase of Zain's African opcos by Bharti Airtel, for example, Matthew Reed observes that "Bharti will be looking to reinvent Zain Africa by introducing the low-cost business model that it has pioneered successfully in India" and "will also be hoping to achieve economies of scale across its Asian and African operations, which together will make it the fifth-largest mobile operator in the world".

Reed does offer words of caution, however, arguing that "operating in Africa does present particular challenges, some of which will be new to Bharti, despite its credentials as an emerging-market operator."

"The takeover of Zain Africa", writes Reed, "will give Bharti operations in 15 different countries, each of which has its own political and regulatory conditions, and some of which present some political risk. The diversity alone will be something new for Bharti, which only had mobile operations in India until it made recent moves into Sri Lanka and Bangladesh."

Reed also observes that while tariffs in Africa have traditonally been rather higher than those Bharti Airtel has to live with on home soil, the giant Indian cellco is entering many African markets at a time when higher levels of competition have more recently been pushing down prices. "In much of sub-Saharan Africa", Reed adds, "the infrastructure is poor and distribution is difficult."

Maarten Pieters of Vodafone India, meanwhile, is almost uniquely well qualified to make predictions about how his company's major competitor is likely to fare as it embarks on its African adventure - between 2003 and 2005, he was the CEO of Celtel International, the collection of African operators acquired by Zain and subsequently sold on to Bharti Airtel. Pieters has also served on the board of Millicom International Cellular, the multinational mobile group whose African assets currently include opcos in Chad, DRC, Ghana, Mauritius, Rwanda, Senegal and Tanzania.

Pieters offers words of encouragement: "Bharti is a very fantastic company. I really admire them. They have done a very good job in India. They have a very good management. If anyone can make a success out of the old Celtel assets, then it’s them. So, I am very happy that they are in good hands."

While, as Pieters argues, consolidation of the Indian mobile operator space may be inevitable, the handset market, conversely, seems to be becoming more fragmented. Priyanka Joshi of the Business Standard writes that "the segment has seen entry of one mobile vendor every month." For the year 2009, Joshi asserts, "new vendors registered a combined market share of 12.3% of the total 101.54 million mobile handset sales."

Examples of new market entrants offered by Joshi include Wynn Telecom. "Starting May this year, writes Joshi, "the company will launch seven dual SIM handsets priced under Rs 5000 and will also get ready to manufacture handsets in India."

Some new entrants, explains Joshi, will build a business around devices tailored to meet the needs of users in India's vast rural areas. Olive Telecommunications is one example of a company with this strategy.

It will be interesting to observe, then, whether the mobile services and mobile handsets markets do indeed move in these opposite directions - with the former consolidating down to a smaller number of operators of scale and the latter continuing to offer opportunities for innovative new entrants.

More chances to network with telecoms and government bigwigs from Turkey, the Caucasus and Central Asia

2010-04-13T12:05:00.001+01:00

'tis the season to go networking with telecoms bigwigs from Turkey and the CIS, it seems. Having not long returned from one industry talking shop in Istanbul, DTW is hoping very much to be able to attend another one later this month.

The conference in question is the 9th annual Caspian Telecoms event, to be held in the city's Hilton Hotel on 28th and 29th April. DevelopingTelecomsWatch is proud to have joined the conference's roster of media partners for the first time this year.

In the coming days, I will take the time to say more about this event and why it may well be worth attending for anyone doing business with telcos, telecoms regulatory agencies and telecoms/IT/information ministries of the countries in this region.

For now, I would simply encourage readers to follow the links in this short introductory note and review the organiser's web site.

Eurasia Com: doing the business in Turkey and the CIS

2010-04-07T09:35:00.008+01:00

Back in January, I wrote about the Eurasia Com conference which the good folks at Informa Telecoms & Media host annually in Istanbul, taking place in either March or April. At the time, I thought it was unlikely that I would be able to attend. Happily, it did turn out to be possible after all, meaning that I am able to report some of what was discussed at the Conrad Hotel on 23rd and 24th March.

For those not familiar with the event or with the wider series of related conference-plus-exhibition events of which it is a part, a few words of explanation:

Informa's Com World Series evolved from what was once known as the GSM (and later GSM>3G) World Series of events. The GSM series was itself a spin-off of the GSM World Congress (now Mobile World Congress), of which Informa was the original founder.
The GSM World Series brought scaled-down versions of the main event to a selection of locations ranged around the world's emerging markets. In each location, the aim was to gather large numbers of decision-makers from the mobile operators of the region around the host city. These locations included cities in Africa, Asia, Latin America and Central and Eastern Europe.
The Com World Series brand was introduced a few years ago to reflect a perceived need to offer meeting points for a broader community than just GSM mobile operators. The organisers were mindful of the idea that the previously quite sharp fixed-mobile distinction was becoming increasingly fuzzy around the world. They thought about what had once been pure play mobile operators offering other kinds of broadband service, either by building new networks (copper, fibre, fixed-wireless) or in partnership with established fixed-line operators. They thought about new mobility propositions from companies whose previous offerings had not been in the cellular space. They thought about incumbent fixed-line operators merging with previously quite separate mobile business units (think in terms of what Deutsche Telekom is doing all over the CEE region).
Throughout this evolution, Informa's series of events has stuck to a pretty successful business model, which is still in place today - operators (and other telecoms service providers) attend for free, with most of the revenue coming from any organisations with products and services to sell into the operator space. This includes the major network technology vendors and all manner of software companies, systems integrators, consultancies etc.
Eurasia Com is a relatively new part of the Com World Series, although this year's iteration was the fourth to take place in Istanbul, having been relocated from Almaty, Kazakhstan, where the event first took place in 2006.
The challenge which the organisers face - and which I feel they met pretty successfully this year - is bringing together a crowd from what are quite diverse markets. A large Turkish contingent (representing the likes of Turk Telekom, Vodafone Turkey, Turkcell, Avea and Koc.net) mixes with delegates from the former Soviet republics of Central Asia and the Caucasus, making it necessary to arrange for everyone to gain from presentations in Turkish, Russian and English. If you attend next year, expect to spend some time wearing a headset which pipes the simultaneous interpretation right into your ears.

That, then, is a little about the event, its origins and how it works on the day. The challenge mentioned above (making the conference relevant for both Turkish delegates and for guests from the CIS) was dealt with this year by having elements of the second day billed specifically as a 'Turkey focus' session, thereby acknowledging that there probably do exist some differences between the concerns of the local audience of those of the visitors from the former Soviet republics where market conditions are quite different.

I am pleased to report that this worked well. As a veteran of more conferences than I care to remember, I have got used to seeing events looking busy on day one and feeling a lot less vibrant on the second day. At Eurasia Com 2010, delegate numbers were, I think, possibly even higher on 24th March than they had been on 23rd.

So, what was discussed during these two days of slideware, panel sessions and offline networking? Well, in the sessions I managed to catch, highlights included:

Informa analyst Gemma Bunting cautioning delegates to remain open minded about real mobile penetration rates across the CIS, noting that multi-SIM usage makes accurate measurement quite difficult and pointing out that in the supposedly saturated Russian market over 20 million subscriptions were added by operators last year.
Informa's Bunting noting that ARPU is declining sharply in some markets - Uzbekistan was given as an example - USD 9/month in 2007, dropping to USD 4/month by 2009.
Gemma Bunting wondering about the impact of Tele2's acquisition of a mobile operation in Kazakhstan and observing that the Swedish group is known for its aggressive pricing.
Ineke Botter, CEO of Azeri cellco Bakcell indicating the a mobile money offering from her company might not be iminent but was certainly "on the roadmap".
Mustafa Kiral of Russian telecoms investment group Altimo indicating that his company is in the market for opportunities to acquire majority stakes in telecoms operators in emerging markets - African markets were mentioned.
Altimo's Kiral sounding lukewarm at best when the conference Chairman asked if Altimo is considering investments in the wireline space.
Mehmet Hasanov of Aztelekom talking up the revenue potential of the wholesale business and wondering why telcos' marketing people are generally so inclined not to get excited about it.
A few snippets about the planned privatisation of Tajiktelecom.

I was not surprised, also, to learn more in offline conversations than I did from listening to presentations. The lesson here, for those few conference veterans who do not already know, is that it's important to get proactive at these gatherings - get among the delegates and speakers, working the room and maximising the opportunity to develop a good number of valuable contacts under one roof.

My guess is that 2009 was at least moderately challenging for conference organisers and that delegate numbers across the events industry may have been negatively affected by financial worries on the part of target audiences. My recent experience in Istanbul, however, just went to confirm that there continues to be no substitute for making face-to-face contact with potential new clients and partners and that events of this type can be a pretty good one-stop-shop for doing so. I would also particularly recommend this and other events in Informa's Com World Series for the way in which they gather crowds from given higher growth regions around the globe.

Zain Africa Done Deal Watch

2010-03-31T17:14:00.004+01:00

Former Zain CEO Al Barrak - exit from Africa caused his departure?

During 2009 DevelopingTelecomsWatch became somewhat preoccupied with the fate of the African assets of MEA mobile powerhouse Zain. As speculation mounted about whether these operations were up for sale and, if so, who the prospective purchasers might be, DTW managed to churn out no less than thirteen Zain-themed articles, the first of these appearing on 12th June. Scratching away at persistent rumours like a mutt with fleas, this blog was still whining on about the story on 18th August.

The whole series of ramblings rejoiced in the clunky title 'Zain Africa Speculation Watch', which has been revived and paraphrased here with today's offering.

Along the way, a number of potential suitors for Zain's African opcos got a mention. These included France Telecom and Vivendi plus Indian operators Reliance Communications and BSNL.

All these months later, it seems fairly safe to assert that the speculation stage is finally over, with shares in another Indian cellco, Bharti Airtel, edging higher on the back of news that it will sign a USD 10.7 billion deal to acquire the Zain's African telecom assets later today.

If, as now appears to be virtually certain, the Indian MNO does manage to conclude this deal, it will be a case of third time lucky, as noted recently by Shalini Singh of the Times of India, who reminds us of Bharti Airtel's two fruitless attempts to engineer a tie-up with South Africa's MTN, another saga which had some coverage here at DTW. As well as observing that the Zain Africa purchase will "catapult Bharti to the rank of the sixth-largest telecom service provider in the world by number of subscribers", Singh feels that it is "an ironic twist of fate" that one of the Indian firm's major competitors in its new markets will be MTN.

With this mega-deal now on the brink of proceeding, perhaps the time is right to ask that Bharti Airtel has to gain (and lose) from competing in so many new markets at once, and to ask what motivated Zain to quit Africa less than five years after entering the continent's mobile arena via the acquisition of Mohamed Ibrahim's Celtel International.

James Middleton of telecoms.com writes that "for Zain, the deal represents a retrenchment of the company's strategy as well as good value." Middleton argues that while the company has succeeded in transforming its brand and in building up an impressive customer base across sub-Saharan Africa, it has struggled to operate profitably.

Quoted in James's article is his fellow Informa Telecoms & Media employee Nick Jotischky, a principal analyst with the firm. "Perhaps it turned to the managed services model too late in the day and failed to leverage its supplier relationships so as to build in sufficient economies of scale", says Jotischky, who suggests that this is where Bharti Airtel will focus its efforts.

"Whilst it will, no doubt, be confident of controlling its costs, Airtel will aim to build up its brand equity characterised by reliability very quickly," says Jotischky. "But reliability alone will not be enough – the newcomer will have to show itself to be innovative as well. In an already competitive marketplace, Bharti will not just be competing with other mobile operators for a share of wallet but with other brands in adjacent consumer goods sectors. This means that Bharti will be under pressure to offer services that are directly relevant to end-users and this will differ from market to market."

James Middleton talks up the chances of the Indian cellco maximising the value of this large new investment. "Bharti has a heritage in making network sharing and outsourcing deals work and will not be afraid of being aggressive on per minute pricing," he writes. "The company is also well versed in addressing the difficulties of serving a largely rural, high-churn, low-revenue market."

Inspired by this transaction, Informa's telecoms.com is currently running a series of articles offering 'ten tips for investing in Africa'.

Informa offer their first tip, that operators need to be innovative on pricing, while noting that mobile tariffs in much of Africa are high compared to those in some other emerging markets. "For example", runs the telecoms.com article, "Zain Kenya’s lowest tariff is about [USD] 0.04 per minute, for on-net calls.. compared to India, where Reliance Communications offers tariffs that are as low as [USD] 0.01 per minute, for both on-net and off-net calls." The article continues by pointing out that the fact that tariffs in Africa are relatively high is reflected in ARPU levels: "In 4Q09 blended monthly ARPU across Africa as a whole was [USD] 10.49 – but in India blended monthly ARPU in 4Q09 was much lower, at just [USD] 2.73, and falling.

However, the article observes that mobile tariffs have already come down in many African markets in the past couple of years as competition has intensified, often because of the market entry of new operators. Usage in Africa, meanwhile, the article contends, has increased over the past couple of years too. African MoU, however, remains "half that of India's, which does suggest that there is potential for substantial further growth."

This growth opportunity notwithstanding, the gist of Infoma's 'tip' is that "African operators are probably best advised to avoid getting into the kind of price wars that are taking place in the Indian market", where ARPU halved during 2009, creating a big squeeze on operators' profits.

Rather, Informa advises, "African operators should aim to demonstrate more of the innovation in pricing that is already evident on the continent through plans such as Zain's One Network, which allows subscribers to pay local rates when roaming, and MTN's MTN Zone, a dynamic tariff plan that charges lower rates when the network is not busy."

Let's see whether Bharti Airtel considers this to be sage advice as it embarks on its African adventure.

On a personal note, I will be interested to see whether the Indian cellco will make many changes to the management teams running its numerous newly-acquired opcos - and to listen out for a sense of how far Zain's people around Africa welcome the change of ownership. One opco CEO apparently quite upbeat about all of this is Zain Zambia MD David Holiday:

Presumably less positive about Zain's sales of its African assets is the man who masterminded their acquisition for the Kuwaiti group, former CEO Saad al Barrak, who resigned in February.

At the time, Emeka Obiodu, a senior analyst at Ovum, said: "Al Barrak championed this expansion push – buying Celtel, and aiming to make Zain one of the top ten mobile operators by 2011. But his whole ambition was blown to pieces by the owners who wanted to sell off in Africa."

While Al Barrak and his strategy do appear to have some detractors, Obiodu does not seem to be among them: "He’s taken MTC, this small company from Kuwait and transformed it into Zain, a global mobile powerhouse. He didn't bite of more than he can chew, but his vision diverged from the vision of the owners. When we did some financial analysis on Zain, the company wasn’t doing particularly badly. It wasn’t like he ran the business into the ground, although you have to concede that some of the small markets in Africa were seriously under-performing."

Now we will see whether Bharti Airtel has the patience and vision to stay in these numerous African markets for longer than Al Barrak's former company elected to do.

East African opportunities unclear as cellcos remain coy about data ARPU

2010-03-19T16:20:00.017Z

Kenyatta Int'l Conference Centre, Nairobi: venue for this year's East Africa Com

Last year I had the pleasure of visiting Nairobi, Kenya for the first time, building meetings around the excellent East Africa Com conference and exhibition.

This year, given that my day-to-day commercial activity now does not give me much exposure to Africa, I will not attending. Were I still more active in Africa, however, I would certainly want to be there - and I would encourage anyone who does business with the telecoms operators of the East Africa region to head for the Kenyatta International Conference Centre on 27th-28th April.

This year's event will be graced by the presence of the Hon. Samuel Poghisio, the host country's Minister for Information & Communications and by Charles J.K Njoroge, Director General of telecoms regulatory agency the CCK (Communications Commission of Kenya). I don't recall the Kenyan Government and authorities being represented at such a high level at the 2009 event, so the organisers are to be congratulated for the upgrade.

Sponsors and exhibitors will doubtless also be impressed by the number of operator CEOs to whom they will have access during the two days of discussions. Of these, two of the biggest hitters are Michael Ghossein, CEO of France Telecom-controlled Telkom Kenya, the country's incumbent fixed-line operator and Michael Joseph, the long-standing CEO of Kenya's dominant (78.8% market share, according to WCIS) mobile operator Safaricom.

This may be one of the final conferences appearances for the latter, Joseph having announced his impending retirement. He joined the Kenyan operator in mid-2000, when Vodafone first invested in the company. Since then, he has guided the company from a subscriber base of fewer than 20,000 to over 15 million today. Along the way, Safaricom has become renowned for its M-Pesa mobile money transfer service, which has brought the advantages of financial services to very large numbers of Kenya's largely 'unbanked' population. Safaricom also attracted praise this week from Alexander Grouet of Mira Networks, a leading provider of connectivity and billing tools between business and mobile networks in Africa.

Grouet asks: "Would you plan a trip to a foreign destination if you didn't know what the place looked like, what there was to see, how much a hotel room cost and what local transportation was available?" Having concluded that most readers would not, Grouet then invites us to imagine that what we’re talking about is not your vacation, but your business. "Well that’s pretty much what it’s like for most content providers wanting to penetrate the SSA [sub-Saharan Africa] market", he continues. "Despite the hype, the market metrics WASPs crucially need in order to make the next step, such as data ARPU or WAP traffic, are virtually inaccessible. Even traditional market data resellers don't offer it, as optimistically named Africa VAS reports almost exclusively include blended indicators rather than content-specific ones." I don't recall if this is a fair accusation to direct towards the good folks at the reports business of Informa Telecoms & Media, the organisers of East Africa Com.

Even if it is, Grouet suggests that the fault for the scarcity of these vital data lies with operators. "Out of the 26 operators in the 5 countries I worked on last year (Nigeria, Kenya, Ghana, Senegal and Cote d'Ivoire) only 2 to my knowledge," he writes, "publicly released their data ARPU." The two cellcos in Mr. Grouet's good books are Safaricom and Starcomms, a Nigerian CDMA carrier.

"The most likely explanation for this", ventures Grouet, "is that the data figures are still so low on most networks that operators simply don’t want to release them at this stage." According to Grouet, even Safaricom's data ARPU, including M-Pesa, stands at just USD 1 monthly, while the figure for Starcomms, including EV-DO dongles, is just under USD 2 per month. "But at least, we know where they stand, and we will be able to measure their progress when they next update those figures," Grouet continues.

Grouet hopes that other African operators will break their silence on the topic of data revenues, not least because that unwillingness to share data "only has the counter-productive effect of making it harder for international content companies, who precisely could help operators boost their data traffic, penetrate their markets."

Let's see how many cellco attending East Africa Com agree with these sentiments. Were I to attend this year, I would probably like to pursue that line of questioning, not least because I have received marketing emails from Informa which suggests that the region's operators are somewhat focused on data services.

A speaker likely to turn in an entertaining presentation is Noel Herrity, CEO of Tanzania's Zantel, an operator in which the UAE's Etisalat owns a 51% stake. Mr. Herrity delivered a compelling, nicely paced talk at the 2009 iteration of the conference and delegates will be hoping for more of the same. Perhaps we can be optimistic about that - Herrity may be in buoyant mood in light of recent reports indicating that the operator has begun recording net customer additions again, following two quarters of net loss.

One speaker for whom it could be challenging to stay 'on message'? Bashar Arafeh, the COO of the East Africa Region for MEA mobile group Zain.

This might arise as a result of delegates' curiosity about the future of Zain's African operations. Subject to takeover speculation for many months now (see DTW articles passim.), these assets could well be the property of giant Indian cellco Bharti Airtel before too long. The most recent developments in this long-running saga may soon prompt a revival of the popular mini-series (well, it generated more hits than usual) which appeared here on-and-off for much of 2009, rejoicing in the clunky title 'Zain Africa Speculation Watch' (and variations thereon).

Other CxOs appearing on stage at next months event include:

Hans Paulsen, CCO, Uganda Telecom
Themba Khumalo, CEO, MTN Uganda
Ali Bin Jarsh, CEO, Canartel, Sudan
Julius Kinyua, CEO, Flashcom, Kenya
Geoff Goss, CEO, Celsys, Zimbabwe

I'm sure this year's event will once again be a useful place to do business, gain market intelligence and enjoy the company of a crowd who always seem very open to networking and making new contacts.

Libya: diplomatic wrangles fail to derail Vodafone's plans

2010-03-04T15:40:00.015Z

Vodafone services: coming soon to a Socialist People's Arab Jamahiriya near you...

One African republic has been hitting the headlines recently, as the effects of a diplomatic row between that country and a European nation is now affecting citizens of many other states. This is a particularly thorny issue given that much European money has been poured into the construction and oil sectors of that North African nation. People carrying the passports of most major European economies are now prevented from travelling there. This must be causing great disruption to companies whose personnel usually need to spend time in the African state.

One giant global mobile business, however, seems to not to have been too seriously affected.

In July last year, DevelopingTelecomsWatch made some positive noises about the investment climate in Libya. While there was some head scratching about the attractiveness of the North African country's mobile market (mobile penetration was a hefty 141.58% at time of writing - it is 159.42% now, according to WCIS), it was noted that relations between the USA and the Colonel Gaddafi regime had improved to the point whereby foreign investors might not fall foul of restrictions set by the U.S. Treasury's Office of Foreign Assets Control.

More recently, however, relations between Libya and some western countries have once again become rather strained, causing Tripoli to stop issuing visa to citizens of the twenty-five European countries of the Schengen passport-free zone. At the centre of this dispute is Switzerland, which, according to a Libyan newspaper report of February 14th, had denied entry visas to nearly 200 Libyans, including Gaddafi, members of his family and other senior officials. As a helpful Reuters timeline explains, this Swiss move came after wrangles that had continued since June 2008, when police in Geneva arrested Hannibal Gaddafi, one of the Libyan leader's sons. Gaddafi jr., along with his pregnant wife, were taken into custody following allegations about the mistreatment of two of their employees.

By February 26th of this year, both the European Union and the United Nations felt forced to respond to Col. Gaddafi's subsequent call for jihad against Switzerland, announced as the row has escalated and become yet more bitter. By March 1st, analysts were commenting that the row has exposed weaknesses in Swiss foreign policy and damanged the country's reputation as an impartial global mediator.

Citizens of countries in the Schengen zone, meanwhile, continue to be refused entry to Libya.

From his name, I would hazard a guess that Mr. Colin MacDougall is either an Irish or a British citizen. As such, he would be a national of a country that has chosen to opt out of Schengen's border control arrangements. This would explain his recent present in Tripoli, representing Vodafone, on whose behalf he formalised a Partner Markets agreement with state-owned Libyan mobile operator Al-Madar.

MacDougall seems to work for the Partner Markets unit of the giant cellco, which enables subscribers of operators in which Vodafone has no equity to enjoy exclusive access to a range of products, services and devices from the UK-headquartered group. Partner operators also gain from Vodafone's experience in supply chain management, the acquisition of enterprise customers and improved network inter-working. In turn, Vodafone customers can gain from improved roaming arrangements in countries where Vodafone does not otherwise have a presence.

Over the last few years, I have had the pleasure of meeting several people attached to Vodafone Partner Markets and know that they work pretty hard to maximise the value of the numerous relationships they manage worldwide. In light of the recent wrangles, and keeping in mind the eccentricities of the state which owns Vodafone's latest MNO partner, one wonders whether this will be an especially challenging relationship to maintain. However, given that oil-rich Libya is of vital economic significance and that the Vodafone teams who run these partnerships appear to be so adept at meeting tough challenges, I daresay this will prove advantageous to the shareholders and customers of the global mobile group.

The road to hell...

2010-03-02T15:22:00.024Z

... is paved, as Dr. Johnson didn't ever say, with good intentions.

One such intention was set out here in the most recent DTW post, namely that this blog would review some of the predictions made in the Industry Outlook report that is made available for free downloading by Informa Telecoms & Media. The plan was to zero in on any predictions relating specifically to emerging markets and developing countries.

Two months have passed since that rash promise was made and not a peep has been heard from this once prolific blog - no fewer than 147 posts saw were published here in 2009.

Apologies, then, to anyone who has found DevelopingTelecomsWatch to be a useful source of news, commentary and speculation and who now wonders whether the blog has fizzled out of existence. Happily, for anyone that cares, this is not the case. That said, I do not expect to be writing anything like as often in 2010 than was the case last year. My commercial activities are, I am pleased to report, taking up far more time now, suggesting that this year will be more profitable than the one we have left behind us. I do hope that regular readers are facing this first year of a new decade with similar optimism.

Failure to deliver on good intentions notwithstanding, then, perhaps DTW and its writer are not on that proverbial road to hell.

What of our industry and its interests across emerging markets? Hellbound? Or good times ahead?

Belatedly, then, with two months of the new year having already passed, let's attempt to answer those questions by taking a look at a couple of the predictions made by the crystal ball gazers at Informa:

'So-called emerging markets will transition into a new phase of competition based on services and bring into question the validity of the term "emerging market" as it is understood in the telecoms sector today.'

Informa's report notes that "Until now, the term 'emerging market' in the context of the mobile sector has been used as a catch-all phrase to describe markets characterised by low penetration rates, a proliferation of mobile network operators, steep drops in the price of basic communications and resulting explosive mobile subscription growth."

This is familiar territory here at DTW. Numerous times, reference has been made to markets in which the price of mobile services has been squeezed down to a level that makes life very hard for some of the competing cellcos. In July last year, for example, this blog covered the decision of Millicom International Cellular to withdraw from all the Asian markets in which it once did business - Sri Lanka, Laos and Cambodia. The latter country certainly matches the Informa's report's reference to "a proliferation" of MNOs. No fewer than nine (!!) cellcos are currently fighting for business in a country with just 14.8 million inhabitants. Here they all are, with market share figures from Informa's WCIS product:

Cellcard (GSM, 42.12% market share - the operator in which Millicom had a stake)
Metfone (GSM, 18.86%, owned by Viettel of Vietnam)
Mfone (GSM/W-CDMA, 15.52%)
Hello (GSM, 13.38%, controlled by Axiata)
Star-Cell (GSM, 3.56%, part of the TeliaSonera group)
Beeline Cambodia (GSM, 2.90%, owned by Russia's Vimpelcom)
qb (W-CDMA, 1.95%)
Latelz (GSM, 1.32%)
GT-TELL/Excell (CDMA, 0.39%)

Regular readers may have spotted that from time to time I like to share video clips of telecoms operators' TV advertisments from around the world. Latelz (AKA Smart Mobile), as the list above suggests, is one player that may need some pretty compelling advertising if it is to become a more significant player. You decide how powerfully the Smart Mobile case is made by these:

Cambodia is a pretty extreme case, perhaps, but DTW has also examined a number of African markets which seem to be ripe for mobile market consolidation. I daresay there are many more around the world in much the same state.

While I am insinctively in favour of competitive environments which offer value and choice to consumers of mobile services, I do also sympathise when I speak with employees of operators that are struggling to improve shareholder value in the context of dramatically slashed prices. These guys, it sometmes seems to me, can feel as if they are on that proverbial inferno-bound round. If Informa's prediction is on the money, however, perhaps that fiery destination need not be reached this year.

On to the next prediction with an emerging markets/developing countries angle...

'Mobile banking efforts will continue to proliferate in emerging markets, but in the short-term these will be more important as a customer acquisition and retention tool than as a genuine driver of significant new operator revenue streams.'

The efforts made to date in this area got some coverage here last year. In May we noted that giant cellco Bharti Airtel was looking to tap into the big opportunity presented by the fact that 85% of the citizens of its Indian home market do not have bank accounts. By August, readers were invited to consider whether mobile operators would necessarily dominate the market for mobile banking services aimed at turning a profit while going some way to alleviating the poverty of subscribers in developing countries. An alternative that we discussed was the possibility of operator-neutral solutions gaining traction.

The chaps at Informa were have not been alone in keeping discussions of this sort on the agenda for 2010. Indeed, mobile banking in emerging markets got a mention during the plenary session of last month's Mobile World Congress. Simon Rockman of the Register noted, however, with some distaste, "that transforming the lives of millions of people by giving them bank accounts – something that can make the difference between eating and starving - didn't garner the same round of applause" as that received by the GSMA project aimed at making every mobile phone use the same charger."

Writing up his notes from the Congress the following week, Rockman also wondered at some of the number crunching around the scale of the m-banking opportunity. He noted that day four of event saw an assembly of the mobile money working group that has received USD 12.5m from the Bill and Melinda Gates Foundation and is working towards the GSMA's target of getting 20 million of the billion people who have a mobile phone but do not have a bank account onto the first rung of the financial ladder.

Ignacio Mas, writes Rockman, gave a detailed account of what the Bill and Melinda Gates Foundation wants to achieve: "They wanted the very poor and insecure to be able to save", targeting people living on less than USD 2 per day. "As much as they have low subsistence incomes", reports Rockman, "the real problem is stability - they might only find work occasionally and have to eke out money until they next find work. Or if they are farmers they get paid seasonally at harvest time."

Without access to banks, continues Rockman, such people are very vulnerable: "They will often give the money to people they trust for safekeeping but these are people in a similar situation to themselves. Lack of stability means people get multiple jobs. They can't concentrate on what will get the best return and pull themselves out of poverty because they have to opt for stability."

This, and other challenges, blight the lives of so many people around the world that it does seem reasonable to suppose that a huge opportunity does exist for the telecoms industry to provide what the retail banking sector cannot in underdeveloped countries.

Well, I enjoyed finally finding the time to write something here after such a long hiatus - but will refrain from making rash promises about when the next article will appear. More soon, I hope, though.

Telco sector bigwigs converge on Istanbul

2010-01-04T15:57:00.083Z

Doing telco sector business in Turkey, the Caspian region or Central Asia?
......head for Eurasia Com at Istanbul's Conrad Hotel this March.

A belated Happy New Year to all loyal readers of (and occasional visitors to) DevelopingTelecomsWatch.

I daresay some of you will have found 2009 above-averagely challenging and are looking forward hopefully to a more prosperous and settled year ahead.

With this in mind, DTW will soon be evaluating some predictions about what 2010 may have in store for those of us with an interest in the telecoms sector in emerging markets and developing countries worldwide.

In the meantime, we will be using the announcement of the conference agenda for this year's Eurasia Com conference in Istanbul as the inspiration for a look around developments in Turkey, the Transcaucasus region and Central Asia. These are the markets from which the event gathers telecoms sector leaders for two days of discussions and networking.

My guess is that I will not be able to attend the conference - taking place at Istanbul's Conrad Hotel on 23-24 March - but I would definitely recommend it as a useful place to make new contacts and catch up with existing ones if you do business with the telecoms operators of that part of the world. I feel qualified to make this recommendation, having attended two iterations of the event, and having been involved in its development between 2006 and 2009.

This year's speaker panel includes a glittering array of telecoms leaders from both the host country and from numerous CIS markets. Those able to attend will have the opportunity gain a uniquely valuable opportunity to learn from these panellists - and some will doubtless advance their cases for doing business with the speakers' organisations.

While I daresay, however, that many of the presentations and public panel discussions will be somewhat insightful, my experience of attending many conferences has taught me that delegates can learn far more by being above-averagely proactive. This means being a real participant rather than a mere attendee. It means doing more than just scribbling/typing notes during the conference sessions. It means more than downloading the presentation slides.

So, if you make it to the Conrad Hotel in Istanbul, be sure to come prepared with the questions you particularly want answered. Then make the effort to direct those questions to relevant speakers, keeping in mind that however effectively the sessions are moderated, there will not be time for the Chair to deal with everyone who has something to ask. Should your most urgent questions not get dealt with, be sure to be one of those confident people seen springing from a front row seat to shake hands and exchange business cards with the hottest speakers the second the session breaks for strong Turkish coffee. Then might be the time you will finally make your point or extract the answers you're looking for. Or your possibly rather sensitive enquiry might best be handled over that coffee and a piece of sweet, flaky baklava. Failing that, the business card you've gained could be the key to setting up post-event conversations.

Question time: get the answers over coffee and Turkish treats at Eurasia Com

Does this all sounds like advice that's basic to the point of being a bit patronising? I hope not. It is, after all, offered as a result of having watched countless conference delegates fail to maximise the value of the investment their companies had made by paying for them to attend - even with the free tickets for which employees of telecoms operators and service providers are eligible at Eurasia Com and other Com World Series events, some costs are implied, be it plane tickets and hotel bills for out-of-town delegates, or just the cost of being away from the day job.

If you do decide to attend, and do attend on a mission to learn about developments in the region covered by the conference, what questions might you direct to the numerous worthies on the speaker panel?

Given that the CIS markets of Central Asia and the Transcaucasus region were among the first places that Russia's major telecoms players looked for international growth opportunities, you would hope that Eurasia Com is able to offer access to their top management. The event does not disappoint - gracing the stage for the opening Keynote Session will be Mustafa Kiral, Vice President of Altimo and Oleg Raspopov, who heads up the 'Foreign Subsidiaries' Business unit of giant Russian cellco MTS.

Any industry watchers with a strong interest in the latter company, might be tempted to try and squeeze in a question about the operator's hopes for its mobile broadband offering in Moscow, now that 3G services can finally be made available in the Russian capital. A full year after 3G services were offered in other parts of Russia, Muscovites learned last month that the country's military authorties were finally ready to cede control of the necessary spectrum and enable operators to switch on their W-CDMA base stations.

Given Mr Raspopov's responsibilities, however, and given the geographical coverage of the conference agenda, perhaps it might be more germane for delegates to ask the MTS man whether his company has any interest in further extending its CIS footprint. At present, MTS subsidiaries compete in Uzbekistan, Turkmenistan and Armenia. Away from the immediate focus region for this conference, further MTS business units operate in Ukraine and Belarus.

Strikingly absent from the MTS sphere of influence are two of the region's potentially more attractive markets - MTS does not compete in either Kazakhstan or Azerbaijan.

In June last year, MTS CEO Mikhail Shamolin told Reuters that his company was looking at acquisition opportunities in both countries, having decided that the prospects for a start-up operation were not good in either market.

It now appears, however, that the opportunity to make an acquisition in Kazakhstan has now passed. That country's mobile arena is contested by four operators, with the market split as follows, as of end-December 2009, according to the WCIS service offered by the organisers of Eurasia Com, Informa Telecoms & Media:

Beeline Kazakhstan (Vimpelcom), 43.27% share
KCell (TeliaSonera Eurasia/Turkcell), 42.87
Neo, 7.29%
Altel, 6.57%

The two leading mobile operators, then, are controlled by MTS's main rivals in the region and are therefore, surely, extremely unlikely targets for addition to Mr Raspopov's Foreign Subsidiaries Unit. Altel, too, as a rare example of a CDMA operator in the region, strikes me as a company one cannot easily imagine on the MTS shopping list.

Neo, a late entrant GSM operator which went to market in 2007, would be the logical choice for an MTS purchase. A majority stake in this cellco, however, is to be snapped up by Tele2, the Sweden-headquartered pan-European telecoms group. This transaction, as reported in December, involves Tele2 paying around USD 77 million for the 51% stake held by Kazakhstan's incumbent fixed line operator, Kazakhtelecom, which also owns 49% of KCell. According to a Wall Street Journal report, Tele2 has the option to buy the remaining 49% of Neo shares in five years' time from private investment group Asianet Holdings BV.

It will now be interesting to see how much Tele2 makes of the opportunity that MTS has declined to puruse in Kazakhstan. Interesting, too, to see how far the company's usual preference for competing aggressively on price will impact on the Kazakh market.

Speaking on a conference call, Tele2 said that Neo currently has lower prices and lower ARPU than its two larger rivals, so it remains to be seen whether tariffs can be cut further in order to gain market share. According to the WSJ article, a market share of 20% is what Tele2 has in mind.

Of further CIS markets likely to prove attractive to MTS, perhaps only Azerbaijan remain. A June 2009 article here at DTW noted that the Caucasus region country, although quite small with a population of just under 9 million, is oil-rich and relatively prosperous. It is notable, therefore, that of the three groups with footprints across the southernmost CIS markets, only the TeliaSonera-Turkcell joint venture Fintur Holdings has a presence - in the form of market-leading MNO Azercell, none of whose competitors are aligned with a significant multinational telecoms groups. Of these competitors, one will be represented at Eurasia Com by its CEO - Ineke Botter, who heads up Bakcell, is among the speakers. A cheeky question one might direct to Ms. Botter would be to ask whether she feels either her company or the third entrant, Nar Mobile, is a likely acquisition target for MTS or Vimpelcom, which similarly has no presence in Azerbaijan.

With Tele2 having seized the opportunity to move into the Kazakh market, conference delegates may be wondering what impact this may have on the country's telecoms landscape. Questions along these lines can be raised at Eurasia Com, the ideal time for this probably being a morning session on Tuesday 23rd March which deals specifically with the rapid maturation of the Kazakh telecoms market. Fielding the questions will be Kuanysbek Bahytbekovich Yesekeev, Chairman of that Kazakhstan Agency of Information Technologies and Telecommunication, and Maxut Sauranbekov, President of CDMA operator Altel.

A new feature of the conference this year is a day two session focussing specifically on the Turkish market. A very strong line-up of speakers will be on hand to debate the key issues. These include:

Erkan Akdemir, CEO of Avea, the mobile operator in which incumbent wireline telco Turk Telekom holds a controlling interest
Mehmet Toros, Turk Telekom's VP International and Wholesale
Tayfun Cataltepe, the Chief Corporate Strategy & Regulations Officer of market-leading MNO Turkcell
John Samarron, CTO of Vodafone Turkey

This year's event looks set to be even more useful than previous iterations and I look forward to feedback from colleagues and contacts who are able to attend.

Something to Grin about for Malawi's mobile users?

2009-12-18T10:57:00.030Z

Tay Grin - star of the African hip hop scene... and Malawi's mobile sector?

It is not with any pleasure that DevelopingTelecomsWatch sometimes observes a country's mobile market and concludes that one of more of its competing cellcos surely seems doomed to fall by the wayside. All such enterprises are doubtless founded in good faith and with the firm intention to reward investors and employees for providing services to customers who will want them. A somewhat recurrent theme of this blog, however, in its first year, has been to wonder aloud about likely market consolidations around the world, and to speculate a little about which actors might be shaken out in any such eventuality.

In March, DTW picked up comments on this topic from MTN CEO Phuthuma Nhleko, spotted in a Financial Times article. Nhleko was quoted as saying that he believes Africa will see a wave of telco sector consolidation in the next 1-2 years, and the article contended that this will result from both new entrants and more established competitors struggling to maintain healthy margins in increasingly crowded markets.

Shortly after this, DTW took a look at some examples of particularly congested competitive environments in Africa, starting with Benin, the continent's 31st largest country in terms of the size of its population. We noted that five mobile operators now compete in a country of just 8 million people.

In the same month, DTW articles asked about the potential for mobile market consolidation in Burundi and in Gabon. By June, the same questions was being asked of Tanzania. A related post the same month zeroed in on Malawi, which might be something of a different case.

In that piece, it was noted that this under-penetrated market (still only 17.47% mobile penetration as of end-December 2009, according to WCIS) may offer a decent opportunity for a new entrant. At present, a duopoly exists, with the country's mobile subscriber base split between Zain's Malawi operation and Telekom Networks Malawi, a cellco in which the country's incumbent fixed line operator Malawi Telecommunications owns a 44% stake. Market share now (as of end-Dec 2009) is as follows: Zain 71.34%; TNM 28.66% (estimated figures, again from WCIS).

The June article on Malawi noted that country's telecoms regulator felt that the services offered by these two operators were at a price point which did not offer a fair deal to consumers. Zain responded by blaming high tariffs on high taxes. The market-leading operator also claimed that as the overall mobile market grows in Malawi, it will be able to lower prices. Zain Malawi's Managing Director Fayaz King explained: "Imagine at Zain, we have mounted a network that could take up to 5 million users but we currently have only 1.5 million customers. We believe that if at least 3 million people started using the Zain network, we could start enjoying the benefits of economies of scale."

The regulatory agency apparently remains unmoved by this line of argument. Aiming to bring down prices and extend service availability to the wider population, the Malawi Communications Regulatory Authority felt that the best course of action was to open the market to a third entrant. As early as April this year, press reports were naming this third entrant - Globally Advanced Integrated Networks, the holder of the G-Mobile brand name.

Does Malawi, then, really offer a good prospect for this third entrant? As discussed back in June, there are reasons to suppose that while there are certainly numerous European countries with populations smaller than that of Malawi sustaining three or more mobile operators, the landlocked southeast African nation might nevertheless offer insufficiently attractive returns for prospective new entrants. While its high population density suggests that mobile coverage could be built out relatively cost-effectively, Malawi is, however, among the world's least developed countries, with a heavily agriculture-dependent economy and with GDP per capita of less than USD 320. Low life expectancy, high infant mortality and a high prevalence of HIV/AIDS all blight the country, with the latter draining the labour force and expected to impact further on GDP in the near future.

However, even in this context, mobile penetration is very low, as we have seen, even when compared with other underdeveloped African economies. So there could be room for one more MNO.

Is GAIN/G-Mobile, though, a likely candidate for success as a third entrant in this environment? Perhaps not. Due to the economic factors mentioned above, DTW suggested back in June that Malawi might be the kind of market where only MNOs able to leverage the scale and best practices of large groups can prevail and prosper in the long term.

G-Mobile, seemingly not aligned to any such major international telecoms group, certainly does not fit that description.

Who, then, is behind this latecomer to the Malawian mobile scene? The only person connect with the business whom I have seen quoted in the press is one Limbani Kalilani, the company's Vice Chairman. Mr Kalilani appears to be something of a celebrity in Malawi - and is working to become more well known across and beyond Africa. Although he has some track record in the telecoms industry, having set up a wireless payphone company called Phone Yanu, it is in the music world that Kalilani has made his real impact. Better known to his fans as Tay Grin, Mr Kalilani has established himself as a hip hop artist. Here he is in action:

It would be truly admirable if Tay Grin can succeed as both an international music phenomenon and a domestic business success story - more admirable still if it is his indigenous Malawian company that manages to bring the benefits of mobile communications to a larger number of his compatriots than can currently afford the services offered by the two established cellcos. DTW would be instinctively in favour of this form of African empowerment.

Are there already signs, however, that the going will prove as tough as DTW fears? Perhaps.

TeleGeography has recently reported that G-Mobile has admitted it will not be able to meet the 31st December 2009 deadline for the rollout of its network as stipulated by its licence. Instead the company plans to request an extension to the deadline from the regulator, and will make up for the delay by combining rollout phases outlined by the concession. Let's wait and see.

G-Mobile's rivals, meanwhile, are making progress of their own. TNM has launched its W-CDMA/HSDPA network, with Charles Kamoto, head of the cellco's Commercial Services division, saying that the service is initially only available to post-paid subscribers but that prepaid customers will soon have access 3G. Kamoto added: "Most less developed nations do not have this service on board for their customers but in Malawi we are very aggressive, we believe that our customers need quality, they need top-notch services and that is why we had to bring this 3.5G technology."

More musings on a latin t(r)ip

2009-12-15T11:27:00.055Z

The most recent article here was both a round up of some recent news from Paraguay and a trip down memory lane. I reminisced fondly about an interesting tour of four South American countries which I enjoyed last year. In doing so, I mentioned in passing the two telecoms cooperatives I was able to visit in Bolivia.

COMTECO HQ, Cochabama Bolivia

As the Bolivia market report from telecoms industry watchers Buddecomm notes, the Andean country is one of South America's poorest and least developed. According to Buddecomm's figures, Bolivia has the continent's lowest mobile penetration and second lowest fixed line teledensity. With regard to the former measure, data from the the World Cellular Information Service supports this claim. WCIS indicates that the country's mobile penetration stood at just 60.08% as of the end of September this year. Most other countries in South America's less affluent northern region show much higher numbers, for example:

Venezuela - 105.98%
Ecuador - 91.35%
Colombia - 83.75%

In the more prosperous Conosur region, the numbers tend to be higher still, for example:

Uruguay - 117.10%
Argentina - 115.97%
Chile - 98.33%

Certainly, Bolivia seemed to be a visibly less affluent country than others I have been able to visit in the region. Although I did spend one night in the capital, La Paz, in order to make an early flight on to Caracas (via Lima), my meetings were elsewhere. The cities I visited were Santa Cruz and Cochabamba. The former city is Bolivia's most populous and is at the heart of the country's economic activity. The latter city is Bolivia's third largest settlement, set in an Andean valley, with a magnificent backdrop of mountain peaks.

As described in the most recent post here, the purpose of my tour around South America was to drum up support for the Americas Com conference and exhibition, the success of which it was one of my tasks to contribute towards until last year. In the other countries I visited, it was sufficient to spend time just in their capital cities, travelling between meetings by taxi. This would not have worked in Bolivia, where in the wireline space, at least, the telecommunications market is highly fragmented.

In Bolivia, a national incumbent fixed line operator - Entel - does exist. This was renationalised by the left wing administration of President Evo Morales just weeks after we visited the company's Santa Cruz office. My understanding, however, is that the majority of the country's PSTN subscriptions are with the numerous cooperatives. We felt it could be useful to visit some of these. In Santa Cruz, we were received at the offices of COTAS (Cooperativa de Telecomunicaciones Santa Cruz). In Cochabamba, we visited the headquarters of COMTECO (Cooperativa de Telecomunicaciones Cochabamba).

Entel offices, Santa Cruz, Bolivia

As with the visit to Paraguay's COPACO described in the most recent previous article here, conversations with the representatives of these cooperatives (about how they might contribute to our conference) were strikingly unlike those we had at the offices of private sector telcos elsewhere in South America. Again, the themes to which our contacts warmed most readily were around bridging the digital divide and extending the availability of affordable basic services to poorer and more remotely located users.

While none of these cooperatives have constructed mobile networks, COTAS is able to compete in the cellular space. Bolivia is a rare case of a South American country in which even one MVNOs is in existence - and that MVNO is the mobile offering of COTAS, hosted by Nuevatel (which operates under the Viva brand), an MNO once owned by John Stanton's Western Wireless.

Nuevatel HQ, Santa Cruz, Bolivia

That COTAS is able to operate as an MVNO is not due to any particular encouragement on the part of the Bolivian telecoms regulator. A 2006 report from Diamond Consultants asked whether conditions, at that time, were right for the emergence of MVNOs in India. I'll admit that I haven't yet read this report very carefully, but perhaps it's safe to guess the answer might have been 'no'. After all, as recently as March this year, DevelopingTelecomsWatch was reporting on continued regulatory wrangles which looked set to delay the market entry of MVNOs in India. As part of its discussion, the Diamond Consultants report makes remarks about the state of play for MVNOs in some other markets around the world. Bolivia is observed to be a market in which the regulator has discouraged MVNOs, with policies "primarily driven by the low penetration of mobile services and the low geographic reach of the network." It is further argued that "low ARPUs meant that the discount MVNO model was not viable" The regulator's stance is described as seeing "brand and data service-oriented MVNOs... encroaching on the already limited capacity" Rather than encourage MVNOs to emerge, the report observes, the Bolivian regulator "stepped in and provided incentives to mobile network operators to improve capacity and coverage". Despite this, COTAS Movil was launched in mid-2002 to complement the cooperative's existing portfolio of fixed voice, ADSL and cable TV services.

The report puts Argentina in the same category as Bolivia - markets in which the entry of MVNOs is discouraged by regulatory agencies. Despite this, MVNO services have been launched there. As with Bolivia, this has been done by telecoms cooperatives.

Now, according to TeleGeography, a federation of telecoms coops, Fecosur, is planning to expand the reach of these mobile services, expecting to extend coverage to around 150 cities and municipalities across the country within four or five months. According to the federation’s president, Antonio Roncoroni, the service is already provided in 14 cities throughout the country under the 'Nuestro' banner. Fecosur and another body, Fecotel, jointly represent around 300 telecoms cooperatives across the country.

Having mused here more than once in the past about Latin America's cooperatives and about telcos renationalised by left-of-centre governments - and about how these organisations appear to operate a little differently from those for whom shareholder value is a key consideration - it will be interesting to observe whether this new mobile offering will have any very significant impact on the Argentinean market.

Others who finds the telecoms coops of Latin America at all interesting might like to look over a scholarly paper (dated 2005) from the The Journal of Community Informatics which I found recently and which rounds up the history of the Argentinean cooperatives quite nicely.

As the English winter draws in, thoughts of sunny days touring Latin America's telcos in the balmy days of April 2008 are quite attractive. Hence these musings today.

Memories of Paraguay

2009-12-11T16:24:00.050Z

In April 2008, your humble scribe had the very great pleasure of visiting four South American countries on behalf of events and business information company Informa Telecoms & Media. The purpose of the trip was to drum up additional support for the Americas Com conference and exhibition, held annually, and usually attracting a few hundred telecoms sector execs from around the Western Hemisphere.

While exhibitors, sponsors, delegates and supporting industry associations seemed to be broadly happy, it was beyond dispute that assembling a crowd which really represented the majority of the countries to the south of the USA was a challenging task. Various venues had been tried over the years - and each time, the location had a significant bearing on the size and diversity of the crowd. Mexican venues made for a group of participants drawn largely from that country, from the Caribbean islands and from some Central American markets. To host the event in Buenos Aires was to ensure that the group would consist largely of Argentineans and others from the Conosur region, the most prosperous segment of the South American continent. In both of these scenarios, delegates from the less affluent Andean countries would be rather more thin on the ground.

South America's largest and most populous country by far is, of course, Brazil. Iterations of Americas Com held in that country's most amazingly attractive conference location, Rio de Janeiro, did very well in terms of delegate numbers. Brazilian delegates - who quite rarely seemed inclined to travel in good numbers to venues outside their home country - were so numerous in Rio that a particular difficulty arose, however.

It was perfectly possible to lure a decent contingent of influential delegates from Spanish speaking countries to a conference and exhibition in Rio. For exhibitors and sponsors, however, picking them out from among the massively larger group of Brazilians could be challenging. It was tough, then, to create the perception of having assembled a genuinely multinational delegate audience.

It was with this in mind, and with the 2008 version of Americas Com scheduled once again for Rio, that a two-man delegation set out in April that year for meetings with a varied group of telecoms operators around South America. The week-long tour took in Venezuela, Bolivia, Paraguay and Argentina. Only the last of these had ever really been a source of significant numbers of senior delegates prepared to travel to our event when it was held outside their own country.

For someone who whose previous trips to South America had all been to Brazil, I found this to be a fascinating opportunity. In many ways, it felt as if the only thing these four very different countries have in common is that the official language is Spanish. Walking the streets and having meetings in Buenos Aires struck me as being a very similar experience to what one might expect in a southern European country - Spain, Portugal or perhaps Italy. Venezuela and Bolivia were strikingly different places - the people, the climate, the infrastructure: a different world.

Paraguay was, to me at least, the really unknown quantity - a country of which I knew very little aside from recollecting the name of its erstwhile dictator, Alfredo Stroessner and a those of a couple of its notable footballers, Messrs. Santa Cruz and Chilavert.

My colleague (translator/interpreter/fixer) and I did the rounds of the mobile operator HQ buildings in Asuncion. These varied a bit in terms of how expensively they were decorated, but the offices were not vastly different in arrangement or atmosphere to ones you might visit almost anywhere in the world. We were, however, on the way to airport, to visit an HQ which looked and felt rather different.

Vox HQ, Asuncion, Paraguay

On our travels around the seemingly quite sleepy Paraguayan capital, it became clear that the local telecoms scene was a close-knit community. Having already been shown around town by a helpful local driver who seemed to know personally everyone with whom we had a scheduled meeting, we had a nice piece of luck on our visit to one of the MNOs. The gentleman with whom we met was able to open doors at one of the organisations where we did not have an appointment fixed up. This introduction, then, led to a meeting with the Gerente Comercial of COPACO (Corporación Paraguaya de Comunicaciones), the state-owned incumbent wireline operator.

Informa's Americas region event had only recently expanded its remit from a gathering purely of GSM mobile operators. Part of our task was to increase the diversity of the audience not only in terms of countries represented but also in terms of aiming for a much broader range of telecoms businesses attending the show - fixed/mobile; state sector/private sector; involving delegates from the cable sector.

So it was wonderful to have the opportunity to visit companies in these target segments and something of an eye-opener to have conversations with the leaders of public sector operators (we also visited CANTV in Venezuela) and telecoms cooperatives, of which we managed to visit two in Bolivia.

What was novel for us was discussing the proposed themes of presentations these companies might offer at our event and hearing of topics quite different from the ones we had heard discussed by private sector GSM operators in previous iterations of the conference.

COPACO HQ, Asuncion.

COPACO, which we managed to visit just ahead of our flight to the next stop on the tour, was no exception. Our host, who was exceptionally generous with him time, was most animated when talking about how his organisation was striving to extend the availability of services to under-connected settlements. During this conversation, I couldn't help being struck by how this gentleman's language varied from what I was used to hearing at such meetings and at conferences. I don't recall hearing the terms 'EBITDA', 'shareholder value', 'market share', 'ARPU' or their Spanish equivalents during our chat. Our surroundings, too, were different. COPACO HQ lacked expensively designed marketing materials and branding. We entered through a hall in which customers could make payments. The scene there, to me at least, was somewhat reminiscent of a local government office in the UK - but before our local authorities were made to organise their activities along more commercial lines.

With this memorable discussion in mind, then, it was interesting for me to learn this week, via TeleGeography, that Millicom Cellular International-owned Tigo Paraguay has been awarded a contract to deploy mobile services in four under-served departments of the country, helping CONATEL, the national telecoms regulatory agency, achieve its universal service targets. Under the deal, Tigo will roll out networks to 35 municipalities where cellular services are currently unavailable and the Government will provide funding of around USD1.04 million to support the network deployment. In total, according to the TeleGeography item, the project is expected to cost around USD1.6 million and benefit around 20,000 Paraguayans in remote areas. The private sector, then, has a role to play in meeting some of the challenges discussed by my host on our visit to COPACO HQ last year.

COPACO itself, meanwhile, continues to harbour ambitions of entering the mobile services market. At present, according to the World Cellular Information Service, that market (the mobile penetration rate of which is 85.45%) is split as follows:

Tigo Paraguay, 53.45% share
Personal Paraguay, 32.55%
Claro Paraguay, 8.56%
Vox, 5.45%

According to a recent TeleGeography story, COPACO expects to join this list by mid-2010. With my visit to the company's HQ in mind, I'll be interested to see how their mobile offering fares in competition with the existing cellcos.

Cambodia's mobile price war: peace in sight?

2009-12-09T15:52:00.035Z

Beeline Cambodia: late entrant doing battle in a fierce tariffs war

DevelopingTelecomsWatch depends on the indispensable Phnom Penh Post for news of all things Cambodian, quoting that organ quite liberally, for example, when donning a flak jacket to report on the mobile price war which has been gripping the southeast Asian country for months.

It was also via that esteemed news outlet that DTW learned this week that the Cambodian Government has tired of waiting for the country's numerous cellcos to end to their damaging tariffs battle. A long-awaited edict setting minimum tariffs was signed by the Government last Friday, telecoms Minister So Khun is quoted as saying.

"We offered free-market principles, but operators kept having conflicts with one another, so the government needs to have a hand in it," So Khun said. The government will suspend the licence of any operators that violate the minimum tariff set by the edict, he added.

The Cambodian mobile market is currently contested by no less than nine MNOs. If there is another country with a population under 15 million whose cellular sector is split so many ways, it does not spring immediately to mind. Of that crowd of cellcos, one, so far, has reacted positively to the imposition of a minimum tariff regime. The Phnom Penh Post quotes Simon Perkins, CEO of Axiata-controlled Hello, who says he supports the initiative "to bring some structure to the telecom tariffs, in the absence of the usual competition guidelines and rules that exist in a lot of markets".

This decision, of course, comes too late for Millicom International Cellular, which announced in July that its three Asian operations (in Sri Lanka and Laos as well as in Cambodia) were to be reclassified as assets held for sale. The Luxembourg-headquartered mobile group cited problems around ongoing profitability in these Asian markets as a key reason for selling up and focusing its efforts on its African and Latin American properties. As DTW reported in the summer, Millicom CEO Mikael Grahne appeared to attribute much of the blame for deteriorating profits at Cellcard, the Cambodian cellco in which Millicom has a 58.4% stake, to the disruptive market-entry strategies of latecomers to the country's mobile arena. The same DTW piece, however, noted that another major shareholder in Cellcard does not agree with Millicom's assertion that this is negatively impacting profitability: "[There are] no concerns on profitability from our side," said Mark Hanna, CFO of Royal Group, which owns a 38.5% stake in the cellco, denying in July that margins had become tighter.

Such was the confidence of the Royal Group in this assertion that the local Cambodian conglomerate agreed to acquire Millicom's stake in Cellcard. This confidence also seems to be shared now by the Royal Group's bankers. According to a Bloomberg article earlier this month, Royal Group has hired Standard Bank Group Ltd. and Australia & New Zealand Banking Group Ltd. to arrange an 18-month bridging loan to help with the purchase of Millicom's share of the MNO.

The appetite of the Cambodian authorities for intervention in the mobile market does not end with tariff control.

Again, we are indebted to the Phnom Penh Post, this time for coverage of a debate around mobile network sharing in Cambodia.

Last month, the newspaper carried news of Minister So Khun calling for the country's MNOs to share infrastructure. So Khun said the initiative would avoid duplication of infrastructure, thereby reducing costs across the sector, as well as moderating the effect that mobile base stations are having on their surroundings.

"We do not want to see too many antennas dotted along roads in the future," said the Minister. Perhaps it would be too sarcastic to respond by asking "So why did you license nine mobile operators in a country of that size?"

Given that some of these nine are well-established players feeling the effects of the later entry of certain rivals, it seems reasonable to suggest that the response to any mandatory network infrastructure sharing might be rather mixed. As the Phnom Penh Post points out, the operators with an established presence in the market have spent many millions of dollars on infrastructure as part of their efforts to gain competitive advantage.

The Government has shared a draft of a proposed telecoms law one of whose provisions would be to make infrastructure sharing obligatory. The private sector response has been to agree that while there do exist benefits around cost reduction and environmental impact, market forces in Cambodia have not been given sufficient time to work.

"Mandatory facilities sharing will reduce the incentive on operators to build such infrastructure," said these recommendations. "This may result in less than the optimal number of towers being constructed such that when the operators commence infilling their networks to improve coverage and provide better service, they are unable to do so as all tower capacity has been filled."

DevelopingTelecomsWatch finds the mobile market of this particular Asian country to be fascinating. We'll keep watching.

Telecoms operators in developing countries are always owned by telcos from richer nations and never the other way round... right?

2009-11-27T17:28:00.032Z

Bouygues Telecom: eyed by Egypt's Orascom

While the focus DevelopingTelecomsWatch is generally on communications sector businesses in emerging markets and developing countries, a battle between incumbent mobile operators and a proposed new entrant in Canada has been covered here of late.

While events in the vast North American country are clearly beyond the usual remit of this blog, two factors go some way towards justifying the interest of DTW in this particular story.

The first of these is possibly a bit frivolous - simply the observation that despite Canada's G8 membership and status as one of the world's most affluent countries, its mobile communications industry lags behind that of many far less wealthy countries in terms of market penetration. The second factor which justifies spending some time on this story is the fact that the wannabe new cellco in Canada has its roots in Egypt and is affiliated with that country's first multinational corporation. That Egyptian company, Orascom Telecom, has built a global business across a number of developing countries, including Pakistan, Bangladesh, Algeria and Zimbabwe.

I remember sitting in the auditorium at the 3GSM World Congress in 2007 and smiling at the rather direct language used by Orascom Telecom supremo Naguib Sawiris. As Richard Wray of the Guardian also noted a the time, the opening speeches (including those from Orange's then-CEO Sanjiv Ajuha and Vodafone's then-CEO Arun Sarin) were somewhat in line with what conference veterans have come to expect - carefully prepared, lots of positive stuff about mobile communications enriching consumers' lives.

Sawiris eschewed this kind of talk altogether, preferring to announce that he was in the business for the money. While this element of the Egyptian tycoon's speech is what stood out for Richard Wray, it is another remark that interested me and which has informed my thinking about the telecoms sector. Sawiris smiled about three giant multinational mobile groups being represented on stage at the World Congress by two Indians and an Egyptian. The point, I think, was to illustrate the shift of this industry's centre of gravity southwards and eastwards from the developed economies of Europe and North America.

Having grown up with the comfortable notion of European and American countries building operations in developing countries and extracting profits therefrom, it has been interesting to watch Orascom Telecom working in the opposite direction. Weather Investments, an investment vehicle controlled by Sawiris, holds more than 50% of Orascom Telecom, and also owns Italy's Wind Telecomunicazioni and Wind Hellas of Greece.

The current attempt to shake up the telecoms sector of a highly developed economy like Canada is, then, not without precedent for Sawiris.

In Canada, however, as noted here before, however, there is fierce resistance to the arrival of Wind Mobile. For now, the prospect of a commercial launch has been stymied by a Canadian Radio-television and Telecommunications Commission ruling that the company in breach of rules on foreign ownership and control.

Today, in response to this setback, Wind Mobile has launched a campaign "geared at letting Canadians know that when it comes to wireless service, they deserve more." The goal of the campaign, runs the company's press release, "is to raise awareness about the current state of Canada's wireless industry compared to the rest of the world, and to highlight why more choice is essential."

"The heart of the issue is that Canadians pay some of the highest rates for some of the most complained-about wireless service in the world," said Anthony Lacavera, Chairman of Wind Mobile. "This campaign is about focusing the conversation to the need for real wireless competition in Canada in order to lower prices, increase penetration and finally deliver the kind of customer service that has been sorely lacking for Canadians."

Others in Canada, however, have expressed the opinion that while Orascom Telecom has probably been treated unfairly, and while the country's rules on foreign investment urgently need changing, it would be a mistake to allow Wind Mobile to take part in the Canadian market because the other players in the market have to follow the current rules, so the Orascom Telecom-backed company should as well. This is the view outlined in an editorial piece in yesterday's Globe & Mail.

As stated the last time DTW visited this dispute, more twists and turns seem likely. We will continue to watch developments with interest.

In the meantime, Mr. Sawiris has expressed an interest in participating in the telecoms market of another developed economy. TeleGeography reports that the Orascom Telecom Chairman is eyeing France's Bouygues Telecom. A tie-up with the French operator would make sense the said an anonymous Orascom official, adding: "It would reinforce our presence in the Mediterranean, improve our roaming possibilities, there would be many synergies." Watch this space. Will Egypt's Sawiris continue to make inroads into Europe's highly developed and competitive telecoms markets?

WiMAX set to drive broadband growth in Sri Lanka?

2009-11-26T11:48:00.021Z

Sky Network: WiMAX offering set to shake up Sri Lanka's broadband market?

News items from Sri Lanka's mobile market have caught the eye of DevelopingTelecomsWatch a few times of late. Most recently, DTW asked whether the arrival of the UAE's Etisalat as a player on the island nation's cellular scene would cause price competition to become even fiercer. It was noted that a sustained price war has been eroding tariffs and weakening cellcos' profitability over the last four years. Since then, further worrying figures from the country's telecoms sector have been released.

On November 11th, for example, Reuters reported that market leading MNO Dialog Telkom posted a fifth straight quarterly net loss for Q3 2009, disappointing analysts who had predicted the company would break even. Reuters reports that the telco, a unit of Malaysia's Axiata lost 438.9 million Sri Lankan rupees (USD 3.83 million) in the quarter which ended on September 30th. As well as margins being squeezed by fierce competition, the Reuters piece traces a link between between this loss and profit remaining elusive at Dialog Telekom's broadband and direct-to-home satellite TV operations.

That's the latest from the Sri Lankan mobile market. What, though, of the country's incumbent wireline operator, Sri Lanka Telecom (SLT)?

SLT, which was part-privatised in 1997, hit the headlines this week for its efforts to improve the availability of its services in the country's Northern and Eastern provinces, the areas affected by the on-and-off conflict between government forces and the Tamil Tigers, which ended earlier this year after twenty-six long years.

Harshini Perera of Sri Lanka's Daily News writes that SLT has addressed the need to improve its services in these areas by expanding its copper and fibre access networks, installing new exchanges and the CDMA base stations.

With a view to improving its broadband offering across the whole island, Sky Network, a subsidiary of SLT, will, according to Sri Lanka's Daily Mirror, be providing the WiMAX services to parts of the country where ADSL services are not offered. The Daily Mirror reports that the venture will commence operations in March 2010 and will initially provide services to Colombo, Gampaha and Kalutara Districts.

It will be interesting to watch for the impact this WiMAX offering has once launched. Australian telecoms research company BuddeComm's Sri Lanka Internet Market report indicates that Internet access and other forms of data services have lately been starting to take off in the country, but that coverage and accessibility remain limited, with user penetration estimated by the ITU to be at around 6% by the end of 2008. Buddecomm's report contends that early moves to offer broadband Internet in Sri Lanka have met with only limited success, albeit with some promising signs of growth in 2008-09. The report notes that early activity in the wireless broadband segment of the market has not yet translated into significant subscriber numbers.

2010 looks to the year during which it will become apparent whether wireless access technologies will contribute significantly to the growth of broadband services in Sri Lanka.

South Africa's Telkom: a fighting chance?

2009-11-25T09:14:00.044Z

Telkom Direct stores: a vital channel to market as the company faces challenging times?

DevelopingTelecomsWatch is picking up lots of chatter today about Telkom, the incumbent wireline operator of South Africa. This started when this morning's daily roundup from TeleGeography included the news that the company is planning to re-enter the mobile space in 2010 after only a brief period with no cellular presence.

Until almost exactly one year ago, Telkom and Vodafone had each owned 50% of Vodacom, the pan-African mobile operator with 35 million customers in South Africa, Tanzania, Lesotho, Mozambique and the Democratic Republic of Congo. Earlier this year, the UK-headquartered mobile giant secured a controlling interest in Vodacom with the purchase of an additional 15% stake from Telkom. The remaining 35% owned by the South African incumbent was listed on the Johannesburg Stock Exchange and unbundled to the company's shareholders.

When plans for this transaction were first announced late last year, Lloyd Gedye of South Africa's Mail & Guardian reported the stated rationale for Telkom's sale of its stake in Vodacom and noted that many analysts "had expressed skepticism at Telkom's ability to make a success of going it alone in the mobile space and have questioned how Telkom will survive without the Vodacom cash cow."

Back in November 2008, then, Gedye wrote that Telkom CEO Reuben September was arguing that the deal would unlock significant value for the company's shareholders because its fixed-line business had "been undervalued while it clung on to its 50% stake in Vodacom".

How much validity is there in that notion of Telkom's wireline property being undervalued? The notion is, at the very least, open to question according to An Ovum note issued this week in response to Telkom's announced plans to roll out its own mobile services. Ovum examine the background to this strategy and observe that fixed-line penetration (currently under 9%) is continuing to fall in South Africa so "mobile is clearly the communication mode of choice, and this is where [Telkom] needs to be for its customers."

However, the note continues, establishing a new mobile operation in South Africa won't be easy, as mobile penetration is already above the 100% mark and because Telkom will be competing with two large, well-established players in Vodacom and MTN.

A third mobile operator, Cell C, has achieved a 15.57% share (according to WCIS) of the country's mobile market since its commercial launch in late 2001. For other mobile service providers, South Africa has offered a very challenging competitive environment. Back in March, in an article on the prospects for MVNOs in both Africa and India, DevelopingTelecomsWatch noted that Virgin Mobile South Africa had failed to capture even 1% of the country's mobile subscriptions by the end of 2008. The significance of the recently-launched CDMA mobile offering from Neotel, Telkom's principal challenger in the fixed-line arena, remains to be seen.

While Ovum's note politely points out the level of challenge facing Telkom's proposed new mobile offering, others have responded with far less restrained language. An article by Tiisetso Motsoeneng of Reuters today quotes one analyst who certainly pulls no punches.

"To be targeting the retail market in that industry, I think it will be suicide for Telkom," Jan Meintjes, an analyst at Gryphon Asset Management said. "I fail to see how a converged strategy of fixed and mobile is going to be earning significant margins," Meintjes said. "Unless they can show to the market that there's a specific niche that they're targeting and how they can exploit that in terms of earning margins on that business that will give them an accepted ROE on their capital expenditure, I don't see how that can be value enhancing."

The Ovum note, however, reminds us that in South Africa, Telkom claims not to be starting a mobile network operation from scratch. The note points out that the group already has fixed core network assets, which are used by both Vodacom and MTN for backhaul, and an established channel to market through over 134 Telkom Direct shops. Ovum contend that Telkom can choose to "develop a new brand and associated lifestyle concept to target some of the high-spending customers". Also, the Ovum note continues, Telkom could potentially have greater appeal to enterprise customers due to an ability to bundle services across fixed and mobile networks.

Lloyd Gedye's article late last year indicated that another use of the Telkom's Vodacom windfall might be to acquire a number of new mobile licences in numerous African countries. These would be in addition to the company's existing interest in Nigeria. According to Candice Jones of ITWeb, however, Multi-Links, the Nigerian telco in which Telkom has had a controlling interest since 2006, "is in dire straits, knocking Telkom's annual results set with a R1.7 billion net loss."

Let's see if this difficult experience discourages Telkom from further international expansion. My sense all this year is that African mobile markets are more likely to consolidate than they are to offer rich opportunities for new entrants.

While mobility in South Africa offers a new source of revenue for Telkom, Ovum argue that any new revenue streams from mobile - or from enhanced ICT services currently being developed - "are unlikely to significantly bolster its financials in the near term." Of more immediate concern, Ovum contend, is Telkom's rising cost base. Ovum's note expresses the belief that by implementing best-practice approaches in its own transformation, Telkom is giving itself a fighting chance in the challenging times ahead of it.

Unsurprising news of the week

2009-11-18T03:25:00.013Z

India's Communications & IT Minister: summoned to explain falling revenues at BSNL

To my mind, the least surprising news item so far this week comes from Mansi Taneja of India's Business Standard, who reports that state-owned Indian state-owned telco BSNL is likely to exit a consortium that has been aiming to acquire a 46% in pan-MEA mobile group Zain. According to Taneja, MTNL, the other public sector operator party to the consortium, is also likely to exit since it had agreed to follow BSNL’s lead in the deal.

DevelopingTelecomsWatch has no axe to grind with regard to these two telecoms enterprises, but it won't have escaped the notice of regular readers that this blog has observed some pretty strong criticisms of their performance in their domestic market, most notably in an article written in August.

It was partly with these criticisms in mind that DTW was unsurprised when Etisalat rather than BSNL prevailed in the scramble to acquire the Sri Lankan mobile operator previously owned by Millicom International Cellular. It would, then, cause raised eyebrows at DTW HQ were MTNL to win what looks to be a hotly contested scramble to buy a controlling interested in Zambia's soon-to-be-privatised incumbent fixed line operator, Zamtel. As a recent Cellular News item points out, the list of other interested parties contains some formidable names including Orascom Telecom, Telkom of South Africa and Russia's pan-CIS cellco Vimpelcom, which has recently expanded its footprint into Southeast Asia.

Lest anyone feel that this blog returning quite regularly to the troubles of India's two major state-owned telecoms enterprises is somehow unwarranted, it is worth noting that concern about their prospects has been expressed in the highest circles in the south Asian country. Monday's Economic Times, for example, reported that Prime Minister Manmohan Singh is likely to meet the BSNL's management along with Communications and IT Minister A. Raja to look into the causes of the company's falling revenues and to find ways to improve its performance.

According to the Economic Times, BSNL says the loss in net profit and revenue is due to huge wage costs and customers deciding to terminate their fixed line subscriptions. The article states that the company has been struggling with the problem of landlines being surrendered for years now, due to a combination of the increasing popularity of mobile phone and its own service levels falling below customer expectations. In the past three years, the article reports, 6.3 million landline connections have been terminated.

This blog has also documented the company's struggles to capitalise on first-mover advantage in the 3G mobile services space or to take make much of a similar head start with WiMAX broadband services.

In light of all this, DTW remains wary of any claims that BSNL makes about ambitions to grow its business into unfamiliar overseas territories.

Orascom Telecom: continued resistance to Canadian market entry and changes at the top

2009-11-17T03:33:00.021Z

Shaw Communications: joining the opposition to Orascom's Canadian market entry

A recent DevelopingTelecomsWatch article reported on the challenges faced by Orascom Telecom-backed nascent Canadian cellco Globalive Wireless as it seeks to intrude upon what its CEO has described as the "oligopoly" of incumbent players Rogers Wireless, Bell Mobility and Telus. We noted that the Wind-branded operator has fallen foul of foreign ownership despite Orascom Telecom supremo Naguib Sawiris having been, in the words of Terence Corcoran of the National Post, "led... into bidding for spectrum and a major role in the Canadian wireless market" only to have the carpet pulled out from under his company.

As debate rages about how poorly consumers might be served by keeping Globalive out of the country's wireless market, Telus, which is estimated by WCIS to account for around 29% of Canadian mobile subs, is urging Industry Minister Tony Clement not to overturn the CRTC ruling which has stymied the prospective new entrant's plans.

According to Steven Chase, writing today for the Globe and Mail, Telus is arguing that a relaxation of the foreign ownership rules would be unfair "because other companies stayed within existing ownership rules when bidding for frequencies in the 2008 wireless spectrum auction." Telus, which also offers wireline telephony, broadband and TV services, has joined forces with another telco headquartered in Western Canada, Shaw Communications, to publish an open appeal to Mr. Clement in the press.

Chase writes that the two operators are asking the Minister to ignore calls to reverse the October 29th decision by the CRTC. It would send "a very bad message to companies that complied with the Canadian ownership laws as they were required to do in the auction and spent over $4-billion bidding - that the rules can be changed at any time in the game," Michael Hennessy, Telus's SVP of Regulatory and Government Affairs, said in an interview.

The CEO of Rogers Communications, meanwhile, has made it clear how the wireless arm of his business would respond if the Orascom Telecom-backed startup is indeed unable to launch. The market-leading mobile operation would look to acquire the unused spectrum.

"Spectrum is a very valuable asset," Nadir Mohamed said last Friday after a speech to the Toronto Board of Trade. "It's the real estate of our business, so Rogers would be for sure interested in picking it up. I'm sure others would be."

I sense a few more twists in this tale before it becomes clear what is to become of Orascom Telecom's planned foray into North America. Meanwhile, the overall expansion strategy - of which entry into Canada's surprisingly under-penetrated mobile market was meant to be a part - will continue to be guided by Naguib Sawiris. Orascom Telecom recently announced changes to the management structure which will see Group COO Khaled Bichara promoted to the CEO role and Sawiris taking on the position of Executive Chairman.

"The telecommunication business is continuing to grow and evolve at a rapid pace, and we're reshaping OTH to be a leader in this transformation. Our strategy leverages our core strengths and capitalizes on vastly emerging trends to drive growth and profitability. Khaled is dynamic, energetic and will be able to draw on his... experience... to gear the Group into a more aggressive period of growth and transform OTH into a more innovative, integrated and agile global company," Sawiris said. "I will also remain involved in the businesses with more focus on steering the Group’s strategic growth while guiding and supporting the activities of the senior management team. I believe that the telecom market will see massive consolidation during the coming years, and with the new structure I will be able to devote more time and effort in this direction," he added.

With Sawiris now free to focus more sharply on growth opportunities, it will be interesting to see if the group will continue the taste for adventurous enterprises suggested by its decision to invest in North Korea. Koryolink is a W-CDMA operator in which Orascom Telecom holds a 75% stake. Having launched services in December last year, the company now has around 70,000 subscribers according to Cellular News.

For a glimpse inside the secretive and isolated country, this clip about the launch of the Orascom-backed MNO makes interesting viewing, even if the commentary is impenetrable to non-Koreans:

Aptilo Networks positive about prospects for WiMAX in developing countries

2009-11-14T06:52:00.011Z

Johan Terve, Aptilo Networks:
good opportunities for WiMAX in emerging markets

DevelopingTelecomsWatch was a proud media partner of this year's iteration of the annual Africa Com conference and exhibition held in Cape Town. The event concluded on Thursday this week, wrapping up two days of discussions and networking among the continent's telecoms operators and their business partners from the vendor and systems integrator communities.

One theme explored in some detail at the conference - via a special breakout session - was the question of to what extent WiMAX is gaining traction in Africa.

With this in mind, DTW spoke this week with Johan Terve, VP Marketing at Aptilo Networks, a supplier of pre-integrated management solutions for control of billing, user services and access in WiMAX and Wi-Fi networks. Aptilo Networks had a presence at Africa Com so we were keen to get a sense of whether this was indicative of an upbeat view of the scale of the WiMAX opportunity in Africa - and across developing countries and emerging markets more generally.

For proponents of WiMAX, the emerging markets opportunity may grow in importance - certainly if we are to believe bleak analyses of the technology's ongoing prospects in more developed economies. One such comes from Terry Norman of consulting and research firm Analysys Mason, who in August predicted a difficult time ahead for equipment makers.

Norman believes that "over the last two or three years, WiMAX has gained a strong foothold in developing countries in which there is a need for broadband, but the fixed infrastructure is poor." He feels, however, that these markets offer insufficient growth potential and size "to sustain continued investment from such heavyweights as Cisco Systems, Intel and Motorola without additional sales in the developed markets". Therein lies a problem, argues Norman, because "in the developed markets of Europe and the USA, we see some early signs of a difficult future for WiMAX."

One difficulty could be any reluctance on the part of of leading mobile operators to deploy the technology. Terry Norman writes that in developed European markets, operators are almost certainly upgrading their 3G technologies to 4G LTE in order to match the rising demand for data. Norman draws a connection between leading no leading MNOs hinting that they might adopt WiMAX and the idea that "LTE is imminent."

Johan Terve rejects the notion of that it being "too late" for WiMAX in developed markets. Terve feels that such language would suggest that "this is a race with a single winner". He believes the opposite to be true and that both WiMAX and LTE will co-exist just like xDSL and fiber do in the wired broadband world.

While Terry Norman of Analysys Mason was downbeat about the growth prospects for WiMAX in Europe and US but sounding somewhat positive about the case for the technology in emerging markets, some analysts are more cautious even about the latter opportunity.

A Cellular News article published last month asks whether there really is a big market for WiMAX in the developing countries. The article is built around opinions recently expressed by industry watchers Ovum, who find "that the confluence of several factors including technology cost, coverage, vendor support and service provider choices will limit WiMAX to only a niche technology in the emerging markets, forming part of established fixed and mobile operators' broader broadband access portfolios."

Johan Terve responded to this point by saying that "if they mean that WiMAX technology will be niche based on size, then there is an element of truth in that since in the end LTE will be bigger because of its massive support amongst mobile operators" and because "the industry expects LTE to be a replacement technology for 2G/3G mobile phones as well."

"The WiMAX market does not have the ambition to be a new mobile phone system", argues Terve. "In terms of pure mobile data technologies for portable laptops and mobile Internet devices," he continues, "the two markets will be more equal, and for the 'Wireless DSL' or CPE market WiMAX will probably be larger".

Last month's Cellular News article, however, contends that most emerging markets WiMAX operators currently have thousands, or tens of thousands of subscribers, rather than the hundreds of thousands of subscribers that they planned to have at this stage. DTW asked Johan Terve to what degree he is concerned by these modest numbers.

"We in the vendor community are always far more optimistic in growth projections than the reality," he answered. "The projections of rolled-out LTE networks and subscribers will most likely have to be revised down in the coming quarters. However, there is a big difference between LTE and WiMAX in that the tier 1 mobile operators already have a huge subscriber base just waiting for more bandwidth [and] disappointed with what the current 3G networks have been able to deliver. This will make the LTE ramp-up quicker than it has been for WiMAX having to deploy from scratch. Essentially all larger WiMAX operators are new to market, including Clearwire, PacketOne, Yota and UQ. None of them have the luxury of just adding WiMAX technology to existing cell towers. Are we concerned about WiMAX? No, we are seeing signs now within our customer and prospects base that things are really starting to move. One encouraging factor is, for instance, one of the largest operators in India that is currently deploying Aptilo’s solution. This type of operator tends to scale very quickly in terms of subscriber growth. As a company, we are continuing our multi-wireless support (currently Wi-Fi and WiMAX) and have added LTE to our roadmap to be able to cater to all the help operators need in managing their mobile data traffic."

Where, then, does Aptilo networks see some of the richest opportunities in Africa and in emerging markets more generally?

"We see the greatest opportunities with existing Internet Service Providers and new greenfield challengers in the first phase," says Johan Terve. "We also see a great opportunity with CDMA mobile operators that have hesitated to deploy EV-DO for broadband data services. Their strategy is to keep developing their voice offering in CDMA and then choose between LTE and WiMAX for data. For them LTE is a heavier fork-lift than for 3G operators and WiMAX has the benefit that it is here now, ready to deploy."

Could Terve point to any specific examples of this particular deployment scenario?

"We are currently working with one of our Caribbean CDMA mobile operator customers that will continue with their CDMA for voice and build their data broadband on WiMAX," he responded.

Aptilo Networks, then, is among those continuing to make positive noises about the value WiMAX may be able to add to the communications landscape of emerging markets and developing countries worldwide. It is likely this theme will be revisited when DTW reports on next year's Africa Com event, and it will be interesting to see how far this view has proven to be accurate by that time.

Canada's 'thirdworldish' policies to stifle wireless competition?

2009-11-07T20:30:00.005Z

Naguib Sawiris: planning to shake up Canada's wireless market

DTW’s recent article on international ambitions of India’s two major state-owned telecoms operators mentioned that one opportunity they are considering is the acquisition of a controlling stake in Zamtel, the incumbent fixed-line operator in Zambia. It remains to be seen if this joint bid from BSNL and MTNL will succeed and it does look as though some formidable players are also interested.

According to a recent Cellular News article, other interested parties include Telecel Globe (a subsidiary of Orascom Telecom), Telkom (South Africa’s incumbent fixed-line operator) and Russia’s increasingly expansionist Vimpelcom, all of which, the article states, officially began due diligence this week.

Interest in Zamtel is by no means the biggest recent news item about Orascom Telecom and might well have escaped the notice of North American readers whose attention has probably been drawn more readily to the challenges the Egyptian firm is facing in Canada.

Globalive Communications Corp. of Toronto was established in 1998, since which time it has offered competitive long distance plans. Ten years later, the company successfully made a purchase in Industry Canada's radio spectum auction, which paved the way for the creation of a challenger - Globalive Wireless - for the country's established mobile operators, including Telus Mobility, Rogers Wireless and Bell Mobility. The joint efforts of these three major carriers and regional players such as SaskTel have failed to drive national mobile penetration beyond 66.65% according to WCIS. This seems very low for a G8 country that ranks among the world's top ten trading nations. In an interview for Huawei's Communicate magazine earlier this year, Bell Mobility CTO Stephen Howe attributed this state of affairs to three factors: the relatively late licensing of digital wireless spectrum in Canada; Canada' s huge geographical area; the country's robust and unlimited-usage wireline networks.

Globalive Wireless, backed by Orascom Telecom and which had earlier this year announced its intention to launch services under the Wind brand familiar in Italy and Greece, has been led by CEO Ken Cambpell since October 2008. Cambell, whose former roles include a stint running the BITĖ Group, the Vodafone partner network in Lithuania and Latvia, would take issue with Stephen Howe's explanation for Canada's status as a wireless industry laggard. Speaking with Michael Bettiol of Boy Genius Report last month, Campbell lays the blame squarely with the country's wireless carriers:

"Here we’ve got a situation where we pay twice as much as they do in the US, our minutes of use are half of what they are in the US, and wireless penetration is at 65%. Clearly it is a market that is under-developed and where customers simply overpay. The other thing is that in Canada our customer saturation numbers are extremely low. We’ve got a very disenfranchised and very frustrated customer base that is really ripe and in need of competition. The other thing you should know is that this country is dominated by three carriers, but if you look regionally, it is typically two carriers that dominate regional markets. Canada is effectively an oligopoly and in many regions pretty much a duopoly. There is definitely an opportunity with consumers and the numbers speak for themselves."

If, as Michael Bettiol contests, Canadians have "long craved for a new wireless carrier to bust onto the scene and break up what is often described as the anti-competitive practices of [the] incumbents", there must surely be much excitement in the country about the market debut of Wind.

For now, however, any excitement must be deferred a while. Globalive Communications has been in a state of limbo since late last month, when the Canadian Radio-television and Telecommunications Commission ruled that the company is effectively under the control of its Egyptian-based financial backer (Orascom Telecom) and is therefore in breach of rules on foreign ownership and control.

Terence Corcoran of the National Post despairs of the resulting "wireless mess":

"Globalive Wireless has just pumped more than half a billion dollars into the Canadian economy. That includes paying Ottawa $442-million last year for the right to new wireless spectrum, cash now already spent by the federal government stimulating road work in Saskatchewan and writing giant cheques to constituents in Nova Scotia," writes Corcoran, who also notes that "Globalive has also invested another hundred million or more preparing a new Canadian wireless network".

"Having taken Globalive's money", Corcoran continues, "Canada is now telling the company the deal is off."

Corcoran argues that the large spectrum auction fees collected by the Canadian Government would have been far more modest had the participation of Orascom Telecom supremo Naguib Sawiris not been authorised in the first place. Corcoran says that Sawiris has every right to feel mightily aggrieved:

"Whether or not it's possible to sue Ottawa over this thirdworldish policy switch and bureaucratic camel-trading, complete with secret meetings and rule-bending approval processes, it certainly looks like Globalive and its owner, Mr. Sawiris, have a case of some kind, politically and morally, if not legally. Ottawa led Globalive into bidding for spectrum and a major role in the Canadian wireless market, and then it pulled the carpet out from under the company.

This wrangle is a fascinating one for me. In the course of my work, I have spent considerable time networking with telecoms executives from Europe, North America and the Middle East who make their living running operations in less developed countries. I have lost count of the number of times I've heard (doubtless justified) complaints about the complexities and pitfalls of doing business in such markets - regulatory agencies that can be erratic and less than even-handed; taxation policies which stifle growth and innovation; foreign ownership rules which can prove limiting. It is with interest, then, that I read of a company rooted in Egypt encountering in Canada some of the problems I usually hear attributed to much less affluent and developed societies.

Knocked back in Sri Lanka, India's state sector telcos continue to eye international expansion opportunities

2009-10-27T04:14:00.024Z

BSNL: global ambitions?

DevelopingTelecomsWatch has followed, with some interest, suggestions that India's two major state sector telecoms operators - BSNL and MTNL - might be aiming to become international players.

In September, this blog went on a meandering tour of emerging markets M&A rumours, during which it was mentioned that BSNL's bid for Millicom International Cellular's Sri Lankan MNO had been unsuccessful. Tigo Sri Lanka, as reported more recently here, was eventually acquired by Etisalat of the UAE, in a move which prompted some analysts to express fear for the profitability of the island nation's other mobile operators. These commentators have noted that Etisalat tends to compete fiercely on price when coming late to a cellular market.

In the same September M&A tour, DTW also quoted industry watchers who were warning both BSNL and MTNL to steer clear of reported attempts to acquire a stake in Kuwaiti-owned pan-MEA mobile group Zain. A Mint article by Shauvik Ghosh was referenced, in which an anonymous analyst said that BSNL would be advised not to purchase a stake in Zain. "BSNL has a lot of cash on its books but it lacks the ability to execute," said the mystery man. Not shy of the odd split infinitive, the unknown analyst said "Africa is not a market for an operator to just add some revenue to its balance sheet. They have to first show that they can execute in India with the opportunities already in front of them like broadband and 3G before they can venture into bigger game like Zain." A previous DTW article discussed at some length the view that the two public sector telcos have perhaps not yet demonstrated that ability to "execute in India" to anything like a satisfactory degree.

There is evidence, though, from as recently as mid-October, that BSNL and MTNL have not been deterred by such criticism and that the two companies continues to investigate both the Zain opportunity and other potential foreign adventures.

Writing on 15th October, Mansi Taneja of the Business Standard reports that a consortium led by Delhi-based Vavasi Group is in discussions with both BSNL MTNL for a majority stake in a special purpose vehicle that is being formed for a bid for Zain.

Taneja quotes "a top source close to the consortium" who has said: "Our talks with BSNL and MTNL are on track, but we don’t have any exclusivity contract with them. We are also holding informal discussions with other telecom companies, including China Mobile, in case talks with BSNL and MTNL do not fructify."

(note to self: attempt to use the word 'fructify' in conversation this week)

Is it unfair on the two Indian operators to venture the suggestion that the giant Chinese cellco might be a far more powerful player to have involved in an audacious bid to acquire operations and subscribers across Africa and the Middle East? Way back in 2002, the Chinese operator stole Vodafone's crown as the world's leading mobile operator in terms of subscriber numbers. Vodafone was subsequently seen to stake out its credentials as the world's largest cellco by revenues. Finally, in September this year, this accolade was also swiped by China Mobile.

If the Vavasi Group does turn out to be more impressed by the credential of the world's most gigantically-huge-mobile-operator-by-every-measurement-ever than by what BSNL and MTNL can bring to a bid for Zain, where else might the two Indian operators look for overseas growth opportunities?

One possibility, again aired by the indispensable Business Standard, is a much more modest foray into Africa, namely the acquisition of a majority stake in Zamtel, the state-owned incumbent telco of Zambia, which competes in the mobile space and is the monopoly fixed-line operator. On 15th September, the Government of the landlocked southern African country announced its intention to part-privatise the telco through the sale of up to 75% of the company’s equity. Industry watchers Buddecomm, in their Zambia profile, describe the country's wireline infrastructure as "at a very low level of development, which in turn has impeded growth in the Internet sector." Zamtel's monopoly in this space is set to be threatened, continues the Buddecomm profile, which notes that "the country’s ISPs are rolling out wireless broadband networks, which will also position them as competitors in the telecoms sector once VoIP is fully liberalised", something which is meant to be "a key component in Zambia's new ICT Policy."

The Zambia Development Agency (ZDA) makes a more upbeat assessment of the Zamtel fixed network, claiming that it connects all major population centres and is undergoing a substantial upgrade, with over 80% of switching infrastructure now digital, and DSL capacity being rolled out. The ZDA claims that Zamtel’s primary fixed-wireless network is also being upgraded and expanded, with coverage and capacity expected to more than double within the next twelve months. Zamtel’s secondary fixed-wireless network, based on WIMAX technology, is designed to cover the whole of metropolitan Lusaka, and is scheduled to go live during 2010, says the ZDA.

In the mobile space, Zamtel lags a long way behind its competitors in terms of market share. The stats, estimated for September 2009 by WCIS look like this:

Zain Zambia - 72.17%
MTN Zambia - 23.12%
Zamtel - 4.71%

Zamtel, then, is struggling to compete effectively against two of Africa's leading mobile groups. There is, however, room for all competitors to grow, with Zambia's mobile penetration rate currently standing at just under 33% according to WCIS. Whether BSNL and MTNL are ideally suited to improving the fortunes of the company, however, could be questioned in light of some of the criticisms aired here about their performance in their home market of India. According to the Business Standard, the two public sector telcos are joined by seven other companies or consortia from in having successfully prequalified to participate in a bid for Zamtel.

Should both the relatively modest aspiration of buying control of Zambia's incumbent operator and the rather more grand designs on Zain both come to nought, MTNL and BSNL do appear to have ambitions to establish a presence in other regions.

Again, I am indebted to India's Business Standard for an update. According to an article of October 23rd, the two operators, along with the Vavasi Group, are planning to set up new operations in Russian and western Europe.

Under this deal, the article states, Vavasi "is acquiring frequency spectrum and licences for Russia and several western European countries" and "the same [special purpose vehicle] that is being formed to acquire a majority stake in Zain will be used to invest in the Russian operations."

Confirming the development, a senior Vavasi executive is quoted as having said: "We are in the process of acquiring a licence for the new generation (NG)-1 technology and have applied in Russia and four other European countries."

This is where I betray the fact that I am not an engineer by wondering about this "NG-1 technology". What is it? The Business Standard article claims that "NG-1 technology is an alternative to GSM and CDMA and was developed in the US universities" and that "Vavasi claims that the network needs lower capital expenditure as well as operating expenses."

I'll hold my hands up. This is a new one on me.

An inspection of the Vavasi website reveals that NG-1 is a proprietary wireless access technology the company has developed itself and which it claims "understands the need of both rural and urban areas". Impressive sounding claims are also made for the spectrum efficiency and eco-friendly credentials of the technology.

NG-1 sounds wonderful - but can proprietary kit from India really prevail against global standards such as WiMAX, HSPA and LTE?

Some grand claims, then, are being made about the ambitions of India's two major state sector telecoms companies. Some of these claims seem to be articulated rather more loudly by the Vavasi Group than by the telcos themselves. I wonder how much there is in all of this. Can two operators that have attracted much criticism in their home market really be set to emerge as global players?

CIS: Belarus set for 3G while Ukraine faces delays?

2009-10-26T07:20:00.032Z

President vs. Prime Minister: 3G licence auctions to be a casualty of political strife?

Political squabbling and paralysed decision-making now looks set to stymie the development of 3G mobile services in of one of Europe's worst-performing economies.

According to a WCIS estimate, there are just 250,000 W-CDMA subscriptions in Ukraine, whose total number of mobile subs stands at around 50.7 million. Just one UMTS licence has so far been awarded in the country, and the very low take-up of 3G services probably has a lot to do with the fact that the lone licensee is not one of the leading mobile operators best-equipped to maximise the value of the technology.

Instead, the single 3G licence was given to state-owned incumbent fixed-line operator Ukrtelecom in late 2005. The use of the word 'given' is quite deliberate here - only one licence was issued and this was handed to Ukrtelecom without a tender, a move which predictably caused consternation on the part of Ukraine's two leading MNOs. It was thought at the time that the point of giving the concession to the public sector telco was to make it a more desirable proposition for potential investors ahead of a planned privatisation. Nearly four years later, Ukrtelecom is still in state hands.

As recently as February this year, the Global Mobile Daily service from Informa Telecoms & Media reported that Turkcell was interested in the Ukrainian incumbent wireline operator. The Turkish cellco has already established a presence in Ukraine via its controlling stake in Life:), the country's third largest mobile operator by subcribers. I have read or heard nothing since then about the Turkish company's plans to purchase Ukrtelecom so I have to assume that this interest came to nothing. Perhaps a well-informed reader could comment.

With Ukrtelecom having failed to make 3G services a truly mass-market proposition, and mobile penetration having passed the 100% mark some time ago, the telco's private sector rivals were presumably looking forward to the opportunity to grow revenues by offering mobile broadband services. The chance to do so, however, now looks in doubt, as Sabina Zawadzki of Reuters wrote last week.

This is because the Ukrainian President, Viktor Yushchenko, has overturned a Government decision to allocate radio spectrum resources for mobile phone network use, thereby casting doubt on a 3G licence tender scheduled for next month.

Things certainly move fast in the East European country. It was only late last month that Ukraine's National Communications Regulatory Commission announced plans to sell a single 3G licence.

The President's decree, referring to the spectrum's use by the military, cited the need to saferguard Ukraine's defensive capabilities.

This could, of course, be a quite genuine concern on the part of Mr. Yushchenko. Those who watch the country's political scene, however, could be forgiven for wondering if the 3G auction might really be a casualty of the poor relations between Yushchenko and Ukraine's Prime Minister, Yulia Tymoshenko, a former ally of the President.

Ms. Tymoshenko and Mr. Yushchenko have not seen eye-to-eye for some time, with their difficult relationship characterised by some uncomfortable clashes. In August 2008, for example, the President's office accused Ms. Tymoshenko of betraying national interests by not backing Georgia in its conflict with Russia. In January this year, when Russian gas reached Europe via Ukraine after a two week interruption of supplies, Yushchenko said the deal clinched by Tymoshenko was a "defeat." Moscow and Kiev had been locked in a prices and debt row that cut supplies to about 20 European countries. As this year unfolded, the Ukrainian Parliament Parliament sacked Foreign Minister Volodymyr Ohryzko, a Yushchenko ally, citing his aggresive stance against Russia, and dismissed another Yushchenko ally, Defence Minister Yuri Yekhanurov, over allegations of corruption in his Ministry.

With this strife in the background, there exist precedents for Mr. Yushchenko blocking proposed transactions favoured by Ms. Tymoshenko's Government. Last month, for example, he halted the privatisation of the Odessa Port plant two weeks before its auction.

Yushchenko and Tymoshenko are both expected to run in a presidential election on 17th January, with polls showing the PM would face former premier Viktor Yanukovich in a second round. Yushchenko's popularity ratings are apparently in single digits.

Perhaps this process will need to play out before Ukraine's mobile operators can expect to get their hands on 3G licences.

MNOs in neighbouring Belarus, meanwhile, have received more positive news about the prospects for mobile broadband there. To date, only second generation mobile services are available from the country's four cellcos. The third-placed player (by market share), BeST, formerly a state-owned company 80% of which was acquired by Turkcell in 2008, in July awarded Chinese vendor ZTE a contract to build a new UMTS network. This followed the allocation of suitable spectrum to BeST by the State Commission for Radio Frequencies (SCRF). Since the takeover by the Turkish MNO, BeST has adopted the same Life:) branding as the Turkcell-controlled operator in Ukraine.

Now, according to the Belarusian Telegraph Agency, a working group for the SCRF is supporting the initiative of the Information Technologies and Communications Ministry to allocate UMTS radio bands to MTS (owned by the giant Russian cellco of the same name) and Velcom, which is controlled by the mobilkom austria group.

My understanding is that both Belarus and Ukraine have the somewhat underdeveloped wireline infrastructure which can offer good opportunities for mobile operators to grow wireless broadband revenues. Whether the economic conditions in both countries will allow for really strong mobile broadband growth, though, remains to be seen. With licensing delays in Ukraine, perhaps it is in Belarus that industry watchers will get the earlier opportunity to track the customer adoption of 3G services in this part of the world.

Sri Lanka: Etisalat entry to drive even fiercer price competition?

2009-10-22T14:48:00.020+01:00

Etisalat: set to make life hard for Sri Lanka's cellcos?

This blog has recently taken an interest in the fate of the three Asian mobile operations put up for sale by Millicom International Cellular.

Late last month, as noted here, the global emerging markets player sold its 78% stake in Tigo Laos to Russia's Vimpelcom. Prior to that, DevelopingTelecomsWatch had noticed the sale of Millicom's stake in Cambodian cellco Cellcard to the Royal Group, a fellow shareholder in that operation.

This just left Tigo Sri Lanka unsold.

The Sri Lankan mobile market is currently contested by that operation and four other MNOs. In terms of the operators' shares of the country's estimated 13.6 million subscribers (according to WCIS), the competitors are ranked as follows:

Dialog Telkom - 46.33%
Mobitel - 24.14%
Tigo Sri Lanka - 17.44%
Bharti Airtel Sri Lanka - 9.46%
Hutch Sri Lanka - 2.63%

The last time DTW offered an opinion about how this competitive landscape might change, perhaps too much was made of the likelihood of the number of operators consolidating down to four. No very sophisticated analysis was made, nor any inside information sought. It was simply the case that the prospective purchasers of Tigo Sri Lanka getting the most media coverage at the time were companies already active in the island nation. I had noted, for example, that Bharti Airtel was rumoured to be interested in snapping up Millicom's operation there, having read an article by R. Jai Krishna of the Wall Street Journal which reported comments from an unnamed person close to the development. Suggesting that any deal would be worth USD 100-120 million, that mystery source had said "in Sri Lanka, if you need to be a significant player in the market, you need to do an acquisition... greenfield, you will not be successful," by way of explaining the rationale behind Bharti Airtel's rumoured move.

This has came to nought, however. The happy new owner of Tigo Sri Lanka is none other than Etisalat of the UAE.

Commenting on this latest purchase, Etisalat Chairman, Mohammed Hassan Omran said: "This new acquisition is a clear example of Etisalat’s international investments strategy of seizing distinctive growth opportunities and maximizing value to shareholders."

He added: "Entering the Sri Lankan telecom market is a logical addition to our interests in the Asia continent. The acquisition promises attractive returns as the Sri Lankan Government is increasing its effort to promote foreign investment in all sectors. The acquisition is of a mature operator with a strong reputation for its good network and quality of service. It also offers great opportunities for synergy with our other operations in the region, particularly in the UAE, Saudi Arabia and India. We also plan to invest in this company to ensure that it has the dynamism to take the leading position in the market in the next few years and that it continues its effective role in the development and growth of the telecommunications sector in Sri Lanka."

How far, then, will this transaction affect the Sri Lankan mobile market? Shortly after it was announced, Fitch Ratings reacted with a gloomy prediction, stating that the entry of Etisalat into Sri Lanka could further delay any prospects for recovery in the country's operators' profitability.

The ratings agency's statement notes that price competition in Sri Lanka has led to a rapid deterioration of tariffs over the last four years, weakening the profitability of the operators, especially in the wake of the licensing of the Bharti Airtel-owned fifth entrant in 2007.

Fitch notes that Etisalat has tended to enter other new markets late in the race and has generally pursued a course of aggressively challenging established operators. "If Etisalat's track record is anything to go by, it is possible that it may invest heavily to acquire more market share in Sri Lanka, which will intensify the challenges facing other operators," says Buddhika Piyasena, Director of Fitch's Asia-Pacific Corporates team. Certainly, I recall a conversation a few months ago with the marketing director of one of Afghanistan's cellcos. He spoke about how the arrival of the the Etisalat-owned operator in that market had caused the price of a voice minute to tumble, with the country's nascent regulatory regime offering little by way of protection for the longer-established players.

Fitch contends that something similar could easily unfold in Sri Lanka, where "apart from lax regulation, a major reason for the heavy price-based competition... is the absence of a framework that requires mobile operators to pay other networks for interconnection." The ratings agency argues that this allowed Bharti Airtel, which has "limited coverage", to challenge other operators to the point where a full scale price war resulted. As Fitch notes, a revision to the interconnection framework is currently on the telecom regulator's agenda. When implemented in 2010, Fitch expects this to ease further pressure on tariffs.

According to Fitch, however, operators may see subscriber acquisition and retention costs - including handset subsidies, and subsidised starter packs - increasing with competition intensifying for market share.

Fitch is also of the view that a higher level of regulatory oversight over the competitive practices of operators and some intervention on tariffs is required to ensure the financial health of the industry.

Etisalat has made this latest acquisition against a background of mostly positive coverage about the group's prospects. While Q3 revenue fell slightly vs. the same quarter last year, the company posted a 5% improvement in net profit.

Also encouraging is the performance of Mobily, the Saudi MNO in which Etisalat has a 27% stake. Q3 profits were up 49.7%, vs. Q3 2008, beating the most optimistic forecasts by about 10%.

Etisalat, then, is well-placed to compete extremely aggressively in Sri Lanka. Industry watchers will doubtless be interested to observe how seriously this affects the profitability of its competitors there.

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

2009-10-10T19:45:00.048+01:00

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:

Eastern Europe: 118.18%
Western Europe: 117.97%
USA/Canada: 88.40%
Latin America/Caribbean: 84.56%
Middle East: 74.75%
Asia-Pacific: 52.19%
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.

Quick march! Military men storm the telecoms sector

2009-10-09T11:15:00.011+01:00

Iran's Mohammad Ali Jafari: Guardian of the Revolution... and telecoms tycoon?

Last week, Nugon Sovan of the Phnom Penh Post reported that the Cambodian Government is set to list three state-owned companies on the country's planned stock exchange. The three enterprises for which IPO preparations are underway are the Phnom Penh Water Supply Authority, Sihanoukville Autonomous Port and Telecom Cambodia, the country's incumbent fixed-line operator. Attracting investment to the latter company is certainly a pressing matter if the Hun Sen Government is serious about improving what I understand to be very underdeveloped wireline infrastructure.

The southeast Asian country has certainly enjoyed something of a cellular boom, with mobile penetration currently standing at 34.23%, according to WCIS. This is up from 23.54% in September 2008 and 14.86% a year before that. In contrast, fixed-line services have not been developed with anything like as much enthusiasm. The 2008 country profile from industry watchers Buddecomm has this to say: "fixed-line services [have] flattened out at around 42,000 [lines] with no sign of any revival in interest in this segment of the market." The report also contends that Internet penetration has remained particularly low, one of the biggest inhibitors to Internet growth in the country being the high cost of online access in comparison to other countries in the region.

One intention for the telco's IPO, then, must be to extend the reach of the Telecom Cambodia network and broaden the range of services available in the country. That will not happen right away, however, because a September 2009 target for launching the new Cambodian bourse has passed without construction of the planned stock market building getting underway.

Jason Szep of Reuters, writing on Sunday, reports that the global financial crisis intervened to delay the Cambodian Government's plans, ending an unprecedented boom which had seen the country's economy expand 10% annually in the five years up to 2008. Foreign investment collapsed, writes Szep, with tourist arrivals falling by double digits and garment exports, a mainstay of the economy, shrinking by 15%. Now, officials seem confident that these difficulties will soon have abated sufficiently for the bourse construction project to get back on track. "We want to do it next year," Mey Vann, director of the financial industry department at Cambodia's Ministry of Economy and Finance, said in an interview. "It'll be good timing for us with the economic recovery."

Plans for the new stock exchange seem to be quite modest. As Szep reports, the exchange expects to start small with just four or five companies issuing about USD 10 million worth of shares each. Contrast this with the experience of neighbouring Vietnam, whose first stock market launched in 2000 with an initial market capitalisation of USD 43 million, according to Szep. From tiny acorns, reasonably large oaks can grow, however. Perhaps the Cambodian Government will take some encouragement from the fact that today, Vietnam's market is worth USD 27 billion.

Yet, writes Szep, there are risks to Cambodian investors - "in Vietnam, most of the investors were local, often unaware of the risks, and many were burned as the market steered a rollercoaster course. Meanwhile, foreign investors largely sought to dip into the potential high returns of an emerging frontier market while hedging their bets with a highly diversified portfolio."

As in Vietnam, Szep continues, Cambodia is giving state companies priority with a place to sell stock. However, the reaction from inside the companies set to be privatised is not universally positive.

"We don't have any financial constraints. I don't understand the reasons we are going to be listed," said Ek Sonn Chan, who runs the Phnom Penh Water Supply Authority, which employs about 600 people, has about USD 200 million in assets and generates about USD 25 million in annual revenue. He said the company is profitable."If we become a public company, maybe we are more responsible, more transparent and maybe we can help the government allocate financial support to our company. But in the meantime, we don't know much about how it happens. It's very new to Cambodia, very new to me," he said.

I am not aware of any views - positive or negative - being expressed by the current management of Telecom Cambodia about next year's IPO. As Jason Szep writes, though, there does exist the view that the timing of the planned launch of the country's bourse may not be right for some time. Foreign direct investment nearly halved to an estimated USD 490 million from USD 815 million in 2008, writes Szep, who also reports that the International Monetary Fund expects Cambodia's economy to shrink nearly 3% this year before growing about 4% next year.

It seems that it will be in 2010, then, that we should watch for signs of Cambodia's fixed telephony and Internet segments beginning to enjoy the early stages of new growth. Whether this will ever be anything like as impressive as the growth of mobile services remains to be seen. I certainly doubt that the wireline space will, in the near future, be contested by anything like as many players as the mobile market, which, as I've stated here numerous times, has no fewer than nine cellcos jockeying for position. Again, let me take the opportunity to opine that while a good number of MNOs competing on price and innovation are needed to drive the growth of any cellular market, Cambodia seems to be a place were the level of competition may actually be excessive. I've repeated here (almost ad nauseum for regular readers, perhaps) that the aggressive pricing by the likes of Metfone and Vimpelcom-backed Beeline Cambodia has been cited as the reason for global emerging markets player Millicom International Cellular quitting the country.

Another matter given a fair amount of space here has been the fact that the first of those two disruptive later market entrants is backed by a company owned by the military establishment of Vietnam. At risk of excessive repetition, I'll say again that an army-owned cellco from a communist, centrally planned economy is surely not under the same kind of obligations to return profits for shareholders as is the case for its competitors. This affords the operator the possibility of building a mission around extending the availability of services to more remote regions and less affluent people, as Viettel-owned Metfone seems to have done in Cambodia.

Perhaps encouraged by how successful this has been, Viettel is now reportedly keen to buy a stake in Teletalk, a state-ownd GSM operator in Bangladesh, according to a recent Cellular News article.

Teletalk has not carved out a significant chunk of the Bangladesh mobile market. According to WCIS, it is currently estimated to own just 2.31% of the country's 48.7 million subscriptions. However, with mobile penetration at under 30% in the densely populated south Asian country, a nice growth opportunity may exist for any company acquiring the public sector MNO and somehow improving its performance. If Viettel prevails in its bid and is similarly successful in growing the customer base through the application of the same low-price approach used in Cambodia, perhaps a major shake up will affect the Bangladeshi market, where change of some kind has seemingly been on the cards for a while.

Back in July, in an article which was mainly focused on Millicom's exit from Cambodia and two other Asian Markets, I also mentioned that Aktel (an Axiata/NTT DoCoMo joint venture) was rumoured to be in merger talks with Orascom Telecom-backed Banglalink, whose CEO Ahmed Abou Doma had explained in a statement that apart from market-leading Grameenphone "others are continually posting losses" and that "in order to sustain in this fiercely competitive market, and in line with [Orascom's] growth ambitions", his company was "considering many strategies of which consolidation is an option."

Here, then, we have another market in which the room for growth implied by quite low mobile penetration (29.58% in Bangladesh) does not necessarily mean that a licence to operate a mobile network is also the proverbial licence to print money. If Viettel's bid is successful and if the Cambodian example is instructive, perhaps the likes of Mr Doma at Banglalink are about to find that things are about to get even tougher.

So, the Vietnamese army may be set to march into another market and inflict damage on more private sector telecoms operators.

This meandering article will conclude with the observation that Southeast Asia is not the only battle zone for military men with an eye on the telecoms market.

Another is at the western edge of Asia, where, in Iran, the state-owned incumbent fixed-line telecoms operator, TCI has been the subject of a fairly exotic form of 'privatisation'. A 51% stake in the company has been acquired by a consortium controlled by the Islamic Republic's Revolutionary Guards, a move which, according to the Guardian newspaper, is "fuelling suspicions that the organisation is quietly staging a military takeover." The Guardian article also mentions claims that a rival enterprise had been unfairly excluded from the bidding process because it lacked appropriate "security qualifications".

Also reported are warnings from critics who worry that the deal "exposes ordinary people, especially political activists, to intensified spying and electronic surveillance." The article goes on to report that this news came days after the governor of Iran's central bank, Mahmoud Bahmani, announced that a finance company owned by the Revolutionary Guards, the Ansar Institute, had been cleared to become a fully fledged bank.

The Revolutionary Guards, formed in 1979 to safeguard the Islamic revolution, writes the Guardian's Robert Tait, have built a financial empire with interests including oil and gas fields, airports and eye and dental clinics during the presidency of Mahmoud Ahmadinejad, himself a former member. Tait writes that this "empire" has been awarded lucrative building and engineering contracts "and is thought to control the smuggling of contraband into Iran."

The telecoms takeover, reports Tait, has provoked accusations that the Government's privatisation programme – required under Iran's constitution – is a sham designed to sell state assets to the Revolutionary Guards.

Journalist Mohammad Nourizad has warned that the Guards' control of TCI would be used to step up monitoring of the Government's opponents, Tait reports.

"Getting access to telecommunications management has always been vital for the security requirements of the Revolutionary Guards and the iron men behind the scenes," Nourizad wrote in a blog. "It means control over the country's entire telecommunications system, including landline telephones, mobiles, text messages, the internet and any other stuff linked to telecommunications. After that, it's a piece of cake … to trace people."

Scary stuff, if true.

At ease. Dis-MISS.

Connecting DTW to rivers of related content

2009-10-08T11:52:00.003+01:00

I am always pleased when a reader of this blog takes the time to indicate that some of what is shared here has been useful. From time to time, I receive such feedback by email or in the comments box for a given blog entry. It's even more gratifying when somone points me towards a news item that had escaped my notice or suggests a topic which might be explored.

Part of what is pleasing about such communication is that it serves as confirmation of something that I only sensed when I decided to make DevelopingTelecomsWatch a part of my working week. I had come to believe that far too much of what is presented on telecoms industry news portals is focused on what's happening in the world's most developed economies and most mature markets for communications services. Too much for my purposes, that is - because for several years, I had made a living out of developing some knowledge and a network of telecoms sector contacts specifically in emerging markets and developing countries.

I am not alone, of course. It is in emerging markets that we see new licenses, new operations and robust subscriber growth. It is in emerging markets that we see innovative new business models deployed, as service providers and technology vendor realise that industry practices from the entirely different markets of Europe and North America, for example, cannot be easily re-purposed. Further - and this is an especially satisfying part of working in the higher growth markets - it is from developing countries that we so often hear stories of telecoms services making a real impact in the areas of economic development and the alleviation of poverty.

I won't claim that this blog is unique in its remit of discussing telecoms news and views specifically from emerging markets - but I don't know of many other blogs or news portals which share this particular purpose. So, while my list of 'noteworthy blogs' in the right-hand sidebar of this site consists entirely of links to useful sites, none of those links are to places where telecoms sector issues across all emerging markets regions are discussed. That this blog has a loyal readership, however, proves that the theme around which it's built is one which arouses interest around the world.

A challenge for me, then, is identifying new blogs, portals and articles whose interests overlap with my own. I would therefore welcome anything which makes it easier to interconnect with widely distributed communities of fellow digital citizens interested in the telecoms sector in emerging markets. It would be wonderful if this blog could be linked easily with extracts of related content in any format - text, video etc. - without asking readers to navigate away from the site. To do so would be to enrich readers' experience around the theme this blog and other sources of content might have in common. I am excited, therefore, by the potential of a new service named SmallRivers, which is designed to do exactly that.

This new service enables bloggers to attach a portable network to any chunk of content - to an entire blog or to a particular article. Bloggers grab a 'sticker' from www.smallrivers.com and paste the code onto the relevant part of their own site. This enables others to contribute to your content and/or copy your sticker, pasting it into their own related content. Clicking on a SmallRivers sticker will open a sidebar showing everywhere else this same sticker can be found, what content can be found on those pages and what discussions are taking place on these blogs and websites.

SmallRivers is currently a 100% free service and it is my understanding that the developers only propose to charge (possibly) for more advanced functionality. I would like to see this initiative succeed, not least because it offers hope of connecting with like-minded souls and new opportunities for myself. I daresay many other readers would welcome the possibility too.

Sponsored post

India: cut-price tariffs squeezing margins and causing telecoms stocks to tumble

2009-10-06T08:26:00.034+01:00

A number of articles here have wrestled with the question of optimum pricing for mobile operators in emerging markets. Some of these have focused on the case of Millicom International Cellular selling its three Asian operations, having cited, in the case of Cambodia, the challenges of maintaining healthy profitability in the face of the highly aggressive market entry strategies of new entrants.

This week a price war fought amongst telcos elsewhere in Asia has cause a slide in the value of their stocks:

The lady speaking in this clip contends that the first shots in this Indian tariff war were fired by Aircel (India's seventh largest cellco by market share) and Tata DoCoMo, the recently-launched GSM proposition from CDMA operator Tata Teleservices, arising out of its strategic alliance with Japanese mobile giant NTT DoCoMo.

In August, Tata DoCoMo made waves by becoming the first Indian mobile brand to offer per-second billing. Some media sources contend that impressive subscriber additions for the operator since then have been largely driven by the attractiveness of this innovation. Surya R Kannoth of the Economic Times, writing today, says that the most aggressive response to this yet has been from Reliance Communications, which on Monday announced a flat, cheap per-minute lifetime tariff for all calls - local, NLD, on-net, offnet, inbound/outbound roaming - made by both CDMA and GSM prepaid users. All this comes for no monthly fixed charge, but with a one-time set up fee of Rs48 (around one US Dollar).

The commentator speaking in the video clip above argues that this tariff causes the spread between cost per minute and revenue per minute to become very narrow, "and that would hurt profitability going forward." She goes on to quote analysts who say that the tariff is "disruptive" and will put pressure on major players such as Vodafone, Idea Cellular and Bharti Airtel, whose Chairman said today that prices in India have hit rock bottom. In light of the damage to share prices seen this week, investors in the various mobile operators will doubtless be hoping that this really is the case.

Bharti Airtel is getting consecutive mentions at DTW, having been the subject of the most recent article here, which was about how India's market-leading cellco has been disappointed by a second failed attempt to create a merger with the Africa and Middle East cellular powerhouse MTN of South Africa. In that article I mentioned, not for the first time, that there exists the belief that competitive pressures in its home market will continue to make the exploration of foreign investment opportunities very compelling for Bharti Airtel. I take today's news of a price war and tumbling telecoms stocks to be a pretty solid plank for that argument. I also reported the opinion that the Indian cellco might want to take a good look into acquiring some or all of the assets of Zain, the availability of which has been talked up for months now, not least here at DTW, where we ran a whole series of articles on speculation around the Kuwaiti group's possible exit from Africa.

A Business Standard article run on Saturday contends that not only is this a likely scenario, but that the Indian operator may need to take on its one-time suitor in a battle to take control of Zain. This idea seems to be drawn from the fact that last month, MTN CEO Phutuma Nhleko told journalists that his company would consider buying the African assets of Zain if the deal with Bharti Airtel did not go through.

What next for Bharti Airtel in the wake of scuppered MTN deal?

2009-10-03T12:44:00.004+01:00

Sunil Bharti Mittal: looking to new opportunities in the wake of scuppered MTN deal?

Will they? Won't they? Will they? Won't they?

No. Not now - and maybe not ever.

Of the two big telecoms M&A deals discussed by this blog over the last few months, one has definitely stalled, seemingly not to be revived again this year.

We've been here before. Giant Indian cellco Bharti Airtel and South Africa's multinational mobile group MTN failed to come together last year. Now, after months of discussions and a repeatedly extended deadline for those talks, the two firms have once again failed to find a way to combine their assets into one giant emerging markets player which would have been the third largest telecoms company in the world, according to the Indian MNO's statement about the scrapped merger plans.

Bharti Airtel maintains that the planned alliance "was a vision based on solid fundamentals" and that "substantial synergies could have been captured" with the proposed transaction. The Indian firm's statement indicates that much thought was given to the "the sensibilities and sensitivities of both companies and both their countries" and contends that "the proposed deal structure took into account their leadership in their respective geographies to ensure continuity of business - including listing, tax residencies, management, brand etc." With what sounds like a note of regret about a missed opportunity, the statement expresses the opinion that "the deal would have been a significant step in promoting South-South cooperation - a vision of the two countries."

So what's gone wrong this time? The Bharti Airtel statement indicates that failure to gain the approval of the South African Government is what has caused both companies to take the decision to disengage from discussion. James Middleton of Informa Telecoms & Media also describes the aborted transaction as a case of both firms failing to convince the Zuma Government, which is MTN's biggest shareholder via the Public Investment Corporation (a pension fund), of the value of the deal.

Another Informa scribe, the shadowy 'Informer', in his usual playful manner, reaches for the fairly obvious metaphor of a cancelled wedding and has some fun with it. Writing yesterday, the mystery man of Mortimer House jokes that that "the parents of the bride-to-be" were "clearly unimpressed by the quality of her suitor."

While the Indian firm expresses the hope that "the South African government will review its position in the future and allow both companies an opportunity to re-engage," it's probably legitimate to wonder if there will be the appetite to revisit this again for a third time. I'm all in favour of persistence - God loves a tryer and all that. I've also learned, though, that 'no' often means... 'no'. Happily, I've not had the chastening experience of asking several times for a lady's hand in marriage and being repeatedly spurned. My guess, though, is that I'd probably start to take the hint at the second knock-back. If Sunil Bharti Mittal and his management team feel at all like that, then this recent disappointment begs a new question: What next?

In its statement about the failed tie-up with MTN, Bharti Airtel stated that the company "will continue to explore international expansion opportunities that are consistent with its vision and bring value to its shareholders." I would expect that to be the case, having expressed the view back in February that competitive pressures on home turf might force the Indian operator to identify investment targets around the world.

As the year has unfolded since then, some of these pressures have not proven to be as strong as might have been feared. For example, one threat my February article identified was state-owned operators (i.e. BSNL and MTNL) stealing a march in the 3G space and in the WiMAX services arena. As we have seen here since, however, it now appears that the two big public sector telcos have failed to make much of this this first-mover advantage.

Other pressures do continue to exist, though, even in a massively booming market. Since that February article, India's mobile operators have added almost 100 million subscriptions. Bharti Airtel's share of the vast subscriber base, however, has slipped a little, with ground conceded to a strongly performing Reliance Communications and to smaller players whose market share has improved a bit, notably Aircel and Russian-owned MTS India.

Where, then, will the giant MNO seek new growth opportunities outside its home territory? Back in February, I aired the view that Bharti Airtel may be almost uniquely well suited to the challenges of African markets, noting that the Indian operator has to cope with the lowest tariffs in the world while sustaining growth. More than once, when reporting the rumoured sale of a set of African mobile operators, this blog has noted that those operations are rather less profitable than the parent company's properties in the Middle East. Bharti Airtel, then, might be the most obvious fit to purchase those assets. The group being referred to here is, of course, Zain.

So, could the failure to tie-up with MTN now put the Indian operator in the frame as a suitor either for Zain's African portfolio or for a stake in the entire Kuwaiti-headquartered group? Maybe. Consider this from the chuckling 'Informer':

"You shouldn’t stick around where you’re not wanted... there are, after all, plenty more fish in the sea. The Informer suggests that Bharti has a look at Zain, instead. Zain gives the impression of being a little more, how shall we say… available."

If this were to happen, I'd guess that a link-up with MTN would be permanently off the cards, due to the significant overlapping of the Zain and MTN footprints.

CALA region privatisation, nationalisation and liberalisation: variety is the watchword

2009-10-01T18:46:00.038+01:00

Central America and the Caribbean: varied telecoms markets

When I wrote in late August about the quasi-nationalisation of Belize Telemedia, this was in response to being urged to do so by a Caribbean-based regular reader of this blog. That reader also suggested a number of other stories from his part of the world that I might dig into and discuss here. Alas, an extremely busy September prevented me from updating DTW as much as I ordinarily like to - and what I have written has tended to be on subjects about which it's been relatively easier to construct a discursive piece without significant research. To have done justice to any of the ideas suggested by my Caribbean correspondent would have required more thought and time than I can currently spare.

It is fortunate, then, that Tammy Parker of Informa Telecoms & Media, has rounded up some notable news items from around the Caribbean and Central America and built a useful article whose theme is an examination of very varied approaches to competition by governments in the region. I hope Ms. Parker's article, and my own reactions to it here, are of interest to this blog's most regular Caribbean-based reader and to others who visit this blog.

Parker starts with a mention of the situation in Belize, where Dean Barrow, the country's Prime Minister, has seized the 94% of the telco's shares that had been held by companies associated with British businessman and Conservative politician Michael Ashcroft. Parker reports the same twists and turns previously discussed here, but does not give space to the contention that Belize Telemedia is not actually under the control of Lord Ashcroft. That contention, some readers will recall, was made in statement from the Hayward Charitable Belize Fund posted here by an anonymous person, whom I assume to be either an employee of that Fund or of a PR firm working on its behalf.

The DevelopingTelecomsWatch article about the goings on in Belize concluded by considering the question of whether the seizure of Belize Telemedia shares would discourage pan-Caribbean mobile group Digicel (or some other likely foreign stategic telecoms sector investor) from taking an interest in the country. I wondered whether a buccaneering company such as Digicel might actually look more favourably at the Belize opportunity if it were quickly to become apparent that Mr. Barrow is earnestly trying to break a telecoms monopoly, i.e. rather than just trying to gain somehow from attacking the billionaire ally of his domestic political opponents.

Tammy Parker is not so sure. As she points out, the entire expropriation process, from initiation in the nation's legislature to the actual Government takeover, was amazingly swift, taking just two days. Parker also notes that new Belize Telemedia board members include Anwar Barrow, the son of the Prime Minister, and his mother, Lois Young, as Secretary. The Belizean Government, reports Parker, has said that it hopes the full nationalization of the company is temporary, since it would like to offer shares to other investors, to encourage investment and competition in the nation’s telecommunications market.

Parker feels, however, that potential investors will be wary of entering a country where the government "so wantonly takes command of a private business and places the prime minister's family members on the board, whether for seemingly good reasons or not." She also contends that the Government "still wants individual institutions and people to be limited to a stake in BTL of 25% or less, ensuring that none has majority control", arguing that "the ownership restriction is likely to turn off potential investors, keeping major regional players, such as America Movil, Cable & Wireless and Digicel, far from Belize's shores."

Tammy Parker then takes a look at Costa Rica, which she describes as "moving in a completely different direction by opening its long-closed telecommunications market to new entrants".

The country is apparently set to issue three mobile network licenses, probably in 2Q10, creating, for the first time, competition for the cellular business unit of incumbent monopolist telecoms operator and utilities firm ICE (Instituto Costarricense de Electricidad). As Parker notes, while ICE has excelled in building a basic landline service in Costa Rica (the nation’s fixed-line penetration exceeds that of much of Latin America), the national mobile sector is something of a laggard. According to WCIS, the mobile penetration rate across South America, Central America and the Caribbean stands at 84.45%. The figure for Costa Rica is just 57.29% - and this is not one of the region's poorer countries. Although high inflation and under-investment in the national infrastructure continue to be problems, Costa Rica has consistently been among the top Latin American countries in the Human Development Index, ranking 50th in the world in 2006. It looks, therefore, that the lack of a liberalised mobile sector, rather than any general economic malaise, is what has stifled the take-up of cellular services.

When competition does come, it may be the case that ICE will need to up its game in several areas. The company's management, for example, will hope to have moved on from what seem to be quite serious mobile network quality issues affecting subscribers right now. Two days ago, news portal Inside Costa Rica reported that ICE expects problems with coverage and SMS delivery to continue into next year. An ICE official is quoted as advising customers to make calls and send messages during off-peak hours.

The final stop on Tammy Parker's whistle-stop CALA tour is in the Bahamas, where, "more than a decade after government leaders proposed the privatization of Bahamas Telecommunications (BTC)", a process has finally been launched a process to sell a 51% stake in the company to a partner that will also gain operational control. Apparently, the plan is for fixed-line telecommunications services, including cable TV, IPTV and Internet services, to be liberalised first, with mobile services set for liberalisation two years after the privatisation of the incumbent telco.

The new investor in the Bahamian telcoms firm will face some challenges right away. According to Neil Hartnell, writing last month for local newspaper the Tribune, BTC has seen the revenues derived from its international long distance business fall by 80.7% between 2004-2008. VoIP offerings from local firm IndiGo Networks as well as from the likes of Skype, Vonage and magicJack are blamed for this collapse. This has caused BTC to approach the recently incorporated Bahamian utilities regulator, asking for fixed-line international calls to be removed from the list of services in which the telco is deemed to have significant market power.

"Given the alternatives available to end users with respect to outgoing international long distance services, there is a case to be made to have international long distance excluded from the basked (sic) of price-regulated services," BTC said. "The inclusion of outgoing international long distance as part of price regulated services impedes BTC's ability to compete with licensed and unlicensed operators."

Tammy Parker's article concludes with the observation that "it will take time to assess which of these three countries will be most successful at bringing about the sought-after improvements in its telecoms market." Parker feels that "not only are their different approaches likely to yield vastly different results, but thorough execution of their plans will be paramount to generating the changes that they seek."

For those interested in the CALA region then, I guess it will be necessary to keep watching. DTW will try to do likewise.

Bridging the digital divide that can exist in the world's most affluent countries: news from Kuujjuaq

2009-09-29T14:24:00.019+01:00

The regions most often covered by this blog are Africa, South Asia and SE Asia - quite predictable given the remit of rounding up news about the strategies of telecoms companies in developing countries and emerging markets worldwide. Some of the most enjoyable articles to write have been those discussing to what degree and in which ways telecoms technology is able to alleviate poverty and improve lives in these part of the word.

I had not imagined, then, that I would ever write an article here about something happening in North America. That, however, is precisely what I feel compelled to do today, albeit with reference to a part of that continent obscure enough for me not to have heard of it before now.

Thanks to my fancy being tickled by the comic touch of a nicely opportunistic headline writer at TeleGeography, I now know just a little more about Nunavik, a vast territory (larger than California) which is located in the northernmost part of the Canadian province of Quebec. This huge area has fewer than 12,000 inhabitants, 90% of whom are indigenous Inuit people.

The wackily-titled TeleGeography piece tells us that the small population centres of Nunavik are set to be covered by a CDMA mobile network by the end of this year. Driving this project is Lynx Mobility, a communications enterprise whose core business is the delivery of cellular services to remote communities, with satellite backhaul deployed throughout. According to the Lynx Mobility website, the company's approach encourages local ownership of assets, with the communities controlling and branding their own cellular services. The aim is for this to create local employment, training and new skills.

I was struck at how closely this language resembles a lot of what its written about the benefits of mobile communications in developing countres, which I find interesting when I consider that Canada is among the world's wealthier nations, with a nominal GDP per capita which ranks 18th in the world.

The remote villages of Nunavik, it seems, do not enjoy the general level of prosperity for which Canada is known. Charlie Watt, a Senator representing the region, arguing that Nunavik residents pay excessively high sales taxes, believes that his constituents endure a state of relative poverty serious enough to create social problems and alienation. A recent article from Nunatsiaq News, a newspaper which serves Nunavik and the neighbouring Nunavut region, supports this view, stating that 30% of Nunavik households live in poverty - and that Nunavimmiut are up to three times more likely to live in poverty than people in southern Quebec. The sociologist from whose work this article is drawn concedes that similar levels of poverty can be found even in some neighbourhoods of Montreal, but he feels that "what is perhaps unique about Nunavik is the scope of certain conditions of poverty, such as the low level of education, the proportion of household budgets dedicated to food, the proportion of single-parent households, the high rate of unemployment [and] the statistically lower remuneration paid to Inuit compared with non-Inuit."

In numerous articles here and elsewhere can be found the argument that access to communications services improves the productivity and the living standards of poorer people in developing countries. To what extent this will be true for the people of snowy Nunavik is something I could only guess at. One thing that perhaps could be cause for optimism, however, is the community ownership business model of Lynx Mobility. I infer from the little I've read about this organisation that more emphasis is put on offering services to the previously under-connected than on generating significant profits. This ought to enable the provision of services at prices the region's poorer people will find genuinely affordable. This is all guesswork on my part, however. As ever, I invite any readers more familiar with the situation to contribute via the comment box.

Cambodia continues to benefit from the growth of telecoms and Internet services - but is the growth truly sustainable?

2009-09-27T03:15:00.004+01:00

The gimlet eye of DevelopingTelecomsWatch roves back to Cambodia today, where a mobile operator given a fair amount of coverage here for its impressive subscriber growth is also quickly carving out a huge slice of the country's ADSL market.

That cellco is one whose aggressive pricing has stimulated comment here more than once, most recently in an article about a bitter dispute over cutthroat tariffs between two of its rival MNOs. It is this brutally competitive nature of the rather crowded Cambodian mobile market which prompted global emerging markets player Millicom International Cellular to sell its stake in one of the players in this rather rough game.

The MNO doing well in the broadband space is Metfone, an offshoot of Viettel, an operator from neighbouring Vietnam which is owned by that county's military establishment. Viettel, as discussed in a March DTW article about telecoms organisations affiliated with the governments of socialist regimes, has built a strategy around delivering services to lower income population segments. Low prices are clearly an important component of that strategy. For Metfone, the aforementioned strong growth has yielded an estimated 15.06% market share (by end-August) according to WCIS. This has been achieved in just seven months, the operator having launched services in February of this year.

So, while the likes of Millicom balk at the notion of the razor-thin margins that very aggressive pricing must yield in an already lower-ARPU market, Metfone's Vietnamese owners are less squeamish. I have opined here more than once that the company's being rooted in the state of a socialist country must confer on its managers a quite different view of acceptable levels of profitability than the ones expected in more orthodox market economies.

This formula, however, undeniably produces strong consumer acceptance of communication services. Now, according to a recent TeleGeography article, which states that Metfone now commands 60% of Cambodia’s ADSL market and 50% of the country’s landline connections.

The affordability of broadband may soon receive another boost in the southeast Asian county. Nathan Green of the Phnom Penh Post writes that Cambodia's connection to a high-bandwidth fibre-optic cable linking Southeast Asia to the United States is expected to go live before the end of this year, and that services will be of a higher quality than those enabled by current connectivity in the county. This is apparently because connectivity is presently sourced from operators in Thailand and Vietnam that tend to provide the country only with their overflow capacity.

So telecoms and Internet services continue to penetrate Cambodian society, although this improved availability is in some cases being driven by pricing strategies which may not be sustainable if commercial logic (as most of us understand it) is applied.

MTN-Bharti Airtel tie-up: yay or nay?

2009-09-26T10:55:00.009+01:00

India's PM: supports Bharti Airtel-MTN tie-up

More than once I have warmly recommended articles written by Matthew Reed, the editor of the Informa Telecoms & Media Mobile Middle East & Africa Intelligence Centre. The latest interesting discussion from Matt, with whom I had the pleasure of working towards the end of my own stint as an Informa person, concerns confusion surrounding major telecoms M&A deals across the MEA region which he covers.

Anyone who watches these markets - or indeed who reads this blog on a regular basis - will not be surprised to learn which two potentially huge and seemingly stalled deals are the focus of Matt's article:

the prospective sale of a stake in MEA mobile group Zain, or perhaps just the sale of its African operations
the long-mooted cash and share-swap tie-up between giant Indian cellco Bharti Airtel and South Africa's multinational telecoms group MTN

I only propose to spend time on the latter here today.

Matt Reed notes that talks between Bharti Airtel and MTN, which began in May and have been extended twice, most recently to a deadline of end-September, seem to be heading toward the wire once again without resolution. Matt's article is dated 22nd September, so we are now four days closer to that wire.

So what's holding up the mooted mega-merger? A significant problem, reports Mary Lennighan, writing for Total Telecom yesterday, is the effect of a recent tightening of India's takeover rules. This move apparently means that MTN could be forced to make an open offer for an additional 20% of Bharti Airtel, which in turn would create financial and regulatory problems. The first of these is the business of finding a large quantity of cash to fund the open offer - Lennighan reports esitmates of up to USD 9.35 billion.

Secondly, the proposed deal would put Bharti Airtel well over India's 74% foreign direct investment cap - MTN would hold 25% of the Indian MNO directly, and its shareholders would have an additional 11%. The extra 20% stake would give the South African company a 56% chunk of its new partner. SingTel already hold 30.4% of Bharti Airtel - hence the FDI cap problem.

This is not the only potential legal problem faced by the deal makers. The other, writes Lennighan, concerns the insistence of the South African Government that the merged entity should be listed on both the Johannesburg and Bombay stock exchanges. Indian law prohibits Bharti Airtel from any such dual listing.

These problems may be surmountable, however, at least if the deal is supported at the highest levels, which does seem to be the case. According to an article in yesterday's Economic Times, Indian Prime Minister Manmohan Singh has admitted to discussing the merger at the G20 summit in Pittsburgh with South African president Jacob Zuma. Singh expressed support for the deal and also stated India's willingness to discuss any outstanding issues.

This looks encouraging for proponents of the deal, but should either party be approaching this marriage with caution? An editorial piece in South Africa's Financial Mail this week suggests that this might be the case for MTN and its many shareholders - the telecoms giant apparently appears in the portfolios of dozens of unit trusts, and many retirement funds have significant stakes, including the Public Investment Corp., which holds an 11.2% stake on behalf of members of Government pension funds. The opinion piece warns that shareholders will have to evaluate the proposals carefully, and ask whether the expected benefits will compensate for the risk. The article commends MTN for an exceptional international growth record, comparing this favourably with Bharti Airtel's more limited career as an international player. The writer also refers to the Indian cellco being part of the wider Bharti conglomerate, with its "different culture." Without saying much about what might go wrong, the Financial Mail opines that "institutional investors should be concerned that the huge value that has been created in MTN - and which may come in the future - is not frittered away by an unwise deal."

Matt Reed, writing about the 2008 failure of these two giant telecoms companies to come together, notes that reportedly, a factor in that failure was South Africa’s worry that control of MTN, which is perceived as a national champion, could pass into foreign hands. This, at least, is something that the Financial Mail does not consider as a legitimate reason for a 2009 deal hitting the rocks. Government should avoid taking decisions based on national pride, ideology or an aspiration to protect or create a national champion, says the editorial piece. "Those would be the wrong reasons, and could lead to poor judgments with bad results. There are no grounds so far for assuming jobs [in South Africa] would be at risk because of an MTN deal with Bharti Airtel."

There may be reasons, then, to believe that this deal will get done reasonably soon. Or will be be discussing deadline extensions throughout the next few months?

M&A mystery tour: Zain, Tigo Sri Lanka, Vivendi's foray into Brazil

2009-09-19T10:37:00.012+01:00

Zain Group: all operations up for grabs?

Over the (northern hemisphere) summer months, this blog became very preoccupied with whispers about a 'for sale' sign supposedly being slapped onto the African assets of Kuwait-headquartered mobile group Zain. So much so that an inelegant title (Zain Africa Speculation Watch) was cobbled together for what quickly became a series of articles. That series ran to no less than thirteen episodes, such was the number of conflicting rumours doing the rounds from June to August. Of late, though, this long-running tale has meandered in a new direction - towards the idea that a significant stake in the whole Zain group may be sold, not merely its operations in Africa.

A reading of media reports coming out this week suggests this is looking increasingly likely. One such comes from Tom Gara, writing for the UAE's English language newspaper, the National. Gara reports that the Kuwaiti group leading the sale has announced that it will sell its stake in Zain to a consortium of Indian and Malaysian investors. The Kharafi Group - whose other activities include construction, civil engineering and the manufacturing of consumer goods - officially owns about 10% of Zain, writes Gara, but is believed by analysts to control up to 25% of the telecoms firm through subsidiaries and associates.

Gara reports that on Tuesday this week, a Kharafi subsidiary ran an advertisement in Kuwaiti newspapers, inviting investors owning fewer than 300,000 Zain shares to participate in the sale. "We hope that this preserves the rights and interests of small shareholders and gives them priority," the advertisement said.

What of the prospective purchasers? Gara describes them as a consortium led by India’s Vavasi Group and backed by Malaysian billionaire Syed al Bukhary. This consortium has apparently indicated that a purchase price has yet to be confirmed.

Gara also states that "two large Indian state-owned telecommunications companies that were originally listed as members of the consortium have since denied making any decision on the deal." Regular readers will surely know that this refers to MTNL and BSNL. The latter, says Shauvik Ghosh of Indian business newspaper Mint, writing earlier this week, may not want to pick up a stake in Zain because of an urgent need to hold on to its cash to maintain interest earnings, to pay for 3G spectrum and to fund an ongoing restructuring programme critical for long-term profitability. The last point certainly chimes with the critical analyses of BSNL's performance reported here at DTW.

The Mint article also quotes analysts who are similarly critical of the state of BSNL. One of these, who remains anonymous, warns that the public sector telco would be advised to stay away from the Zain stake purchase. "BSNL has a lot of cash on its books but it lacks the ability to execute," he says. "Africa is not a market for an operator to just add some revenue to its balance sheet. They have to first show that they can execute in India with the opportunities already in front of them like broadband and 3G before they can venture into bigger game like Zain."

One foreign adventure which certainly seems not to be on the cards for BSNL is its mooted purchase of the Millicom International Cellular operation in Sri Lanka. On Wednesday, India's Economic Times carried the news that the state-owned firm had bid for the Tigo-branded cellco. By Friday, the Business Standard was reporting that this bid had been rejected. "They have not considered our bid", BSNL Chairman Kuldeep Goyal told a reporter. "We had quoted a value [that] we thought was appropriate but it has fallen short of their expectations."

This blog recently opined about the likely consolidation of the fiercely competitive Sri Lankan mobile market, with one possibility being that Bharti Airtel could purchase the Tigo-branded MNO - the giant Indian operator already has an operation in Sri Lanka. The recent Business Standard article also mentions rumours of Bharti Airtel's interest in the transaction - as well as interest from another prospective purchaser already present in the Sri Lankan market, Malaysia's Axiata. The only seemingly interested party still being mentioned whose presence in Sri Lanka would not lead to market consolidation is the UAE's Etisalat, which is also mentioned in the Business Standard story. Total Telecom reported on Monday that the Emirati firm has indeed submitted a bid.

Plenty of interest in Tigo Sri Lanka, then. Let's see who prevails.

What news, though, of erstwhile protagonists from the early episodes of the now-fizzled out Zain Africa Speculation Watch mini-series here at DTW? Regular readers may recall that the whole hoo-ha was initially set off by rumours of interest from French telecoms and media conglomerate Vivendi. Having heard nothing since about that the company's plans, I was interested this week to read a report from my former colleague at Informa Telecoms & Media, Mr James Middleton. While the Zain Africa business came to nothing, James writes that the French group seems to remain keen on increasing its footprint in emerging markets beyond Morocco, where it controls Maroc Telecom. Vivendi, perhaps best known by telecoms watchers for its controlling stake in French cellco and broadband player SFR, has now launched a EUR 2 billion offer for 100% of Brazilian fixed line carrier GVT, which offers VoIP telephony, corporate data, broadband, internet services and pay TV, writes James.

As of June 30, 2009, GVT had approximately 2.3 million customer lines in service, including voice, broadband, data and VoIP services. It is one of the smaller players competing against giants like Oi, América Móvil and Telefónica.

So, after wandering across Africa, South Asia and South America, here concludes another whistle-stop tour of telecoms M&A stories from emerging markets. Let's see which of these has further to run.

Millicom's Asian sell-off: two down, one to go

2009-09-18T00:28:00.017+01:00

Vimpelcom's Beeline brand: next stop Laos

Back in late July, global emerging markets mobile group Millicom International Cellular announced that its Asian assets were up for sale. Since then, this blog has tracked other telecoms groups' interest in these operations.

The first confirmed transaction was the sale of Millicom's majority stake in Cambodian mobile operator Cellcard to another of the existing shareholders, the Royal Group. When Millicom first announced its intention to quit Cambodia, Mikael Grahne, the company's CEO, explained that this was partly due to the negative effect on profitability caused by the disruptive market-entrance strategies of the new players that have recently flocked to the Southeast Asian country's crowded mobile arena.

When DTW first covered this story, we saw that the Royal Group's CFO Mark Hanna was quick to dismiss any such concerns about profitability. We have also seen here, however, that in the months which have followed, Mr Hanna has himself felt the need to attack a new entrant for allegedly selling services below the cost of delivery. The apparently disruptive player in question is Beeline Cambodia, controlled by giant Russian mobile firm Vimpelcom.

As the dispute between mobile operators in Cambodia rumbles on acrimoniously, then, perhaps it is legitimate to wonder if a similar set of circumstances will unfold in neighbouring Laos, another country from which Millicom has been seeking to extract itself.

With a mobile penetration rate of just 27.14% (end of June, according to WCIS), Laos would appear to be quite attractive in terms of growth potential. WCIS estimates that Millicom's Tigo-branded operation has built a 17.01% share of current subscriptions since its own market debut back in 2003, when it became the third entrant.

The longest-established mobile offering in Laos is that of the country's incumbent fixed-line operator, Lao Telecom, in which the the Government of the Lao People’s Democratic Republic holds a 51% stake. Via a company named Shenington Investments, the other stakeholders are Thai communications satellite operator Thaicom, ST Telemedia, and Qatari telecoms group Qtel.

While the later entrants have, of course, eroded Lao Telecom's share of the mobile market, this share has only fallen as far as the 60% mark - still a dominant position. I will not pretend to know a lot about the telecoms market of Laos, but I note that the country profile available from Australian research firm Buddecomm mentions that "the rate of regulatory reform continues to lag well behind industry development and has the potential to derail the progress already made if the reform is not speeded up." This, perhaps, explains the qualified success of those challenging the national incumbent telco in the mobile space and might be part of why Millicom preferred to focus its efforts elsewhere.

Undeterred by such challenges, however, is the purchaser of the 78% stake that Millicom International Cellular held in Tigo Laos. That purchaser, as I learned yesterday from TeleGeography, is none other than Russia's Vimpelcom, whose Cambodian Beeline-branded operation has been offering aggressively priced services and arousing the anger of its competitors in the process. If Vimpelcom is planning something similar in Laos, perhaps the arrival of Beeline's low-price offerings will accelerate the growth of the country's modest mobile penetration rate. It's also possible that any such strategy would cause the same friction as seen in Cambodia. Beeline comes to Laos and grows its SE Asia cluster. Let's see if there's a sting in the tale.

Regarding Millicom's plan to quit Asian markets and sharpen its focus on Africa and Latin America, just one task remains - the disposal of its asset in Sri Lanka. DTW has noted in previous articles that interest seems to be strong. The last I read about it, both India's BSNL and the UAE's Etisalat remain in what some are describing now as a "race" to buy Millicom's Sri Lankan operation.

DevelopingTelecomsWatch - age notwithstanding, pleased to be a part of YPBLOGS.com

2009-09-17T15:50:00.006+01:00

I'd like to think that I approach everything I do with a reasonable degree of professionalism. Whether it's accurate to describe myself as a young professional, though, is open to question. While I do still feel pretty youthful, it seems that almost half of the thrusting young go-getters who visit YPBLOGS.com feel that a dusty old geezer like your humble scribe is far too long in the tooth to be known as a young professional.

YPBLOGS.com is a fast-growing blog aggregator, currently over 14,000+ articles strong. The site's creator describes it as the place for young professionals to find up to the minute news and information that matters. This is achieved by aggregating blogs - 200+ sites are checked automatically every 10 minutes for updated articles, to which links are posted.

On one hand, the blogs added to the site are very diverse in terms of the topics they cover - banking, personal finance, investments, career advice and new media news are among the fields I've seen discussed. On the other hand, the bloggers who have added their sites seem to be less diverse in terms of where in the world they are located. My observation is that, at present, voices from North America are by far the most numerous. Europeans like myself are a rarer breed at YPBLOGS - and bloggers from developing countries and emerging markets worldwide seem to be rarer still.

I'd like to see this rectified, not least because, as this blog often makes clear, innovative technologies, services and business models are being incubated all over the world - inventiveness is certainly not the sole preserve of those of us living in the most developed economies and the most affluent societies. In the telecoms space, it is in developing countries such as Kenya that bleeding-edge mobile financial services solutions are being developed and refined. That country is even home to the 18-year old mobile services entrepreneur who has developed an SMS-based solution which enables car owners to keep track of their vehicles, offering a defence against theft.

YPBLOGS is a useful arena in which to absorb the ideas of younger bloggers, thinkers and innovators. I feel, however, that this community would be even richer were it to be joined by innovative writers from developing countries. I would therefore urge the many readers of DevelopingTelecomsWatch who hail from Africa, Asia and Latin America to add their voices to the conversations aggregated at YPBLOGS.com - and don't be put off if you're over thirty.

Visitors to YPBLOGS.com were asked: What is the age limit for considering a person a "young professional"? The most common response (49% of respondents so far) was 'under 30'. Well, I don't fit in there - but this has not deterred me from taking advantage of the site or from enjoying the interesting material it aggregates.

So I call for an invasion of the over-30s and from developing countries. We can make YPBLOGS even better.

Sri Lankan mobile market: one way or another, consolidation looks likely

2009-09-14T01:26:00.007+01:00

Sri Lankans queue to get their hands on Airtel 's low price offers earlier this year

When Bharti Airtel's Sri Lanka operation Airtel Lanka launched its cut price services in January this year, the new cellco became the fifth operator competing for a share of the country's mobile market. The number of mobile service providers in the island nation, however, may soon be set to fall back to four. This will depend, though, on which party comes forward to snap up one operator currently sporting a 'for sale' sign.

Up for grabs is Tigo Sri Lanka, one of the Asian operations that Millicom International Cellular is keen to sell. When this blog first commented on Millicom's planned withdrawal the three Asian markets in which it has done business, Axiata (formerly Telekom Malaysia International) was mentioned as a possible purchaser of two of these operations - Tigo Sri Lanka and Cambodia's Cellcard. In both cases this would lead to market consolidation - in Sri Lanka, Axiata has a controlling stake in market-leading cellco Dialog Telekom; Cambodian MNO Hello is a wholly owned subsidiary of the Malaysian group. As discussed in the most recent DTW article, however, it was another existing shareholder in the Cambodian cellco (the Royal Group) which eventually relieved Millicom of its stake in Cellcard. Given that other organisations have been more recently and more regularly touted as potential purchasers of Tigo Sri Lanka, Malaysia's Axiata also seems to be out of the running with regard to that opportunity.

One potential suitor mentioned very recently is state-owned Indian operator BSNL, whose management committee approved a proposal to submit a bid to acquire the Sri Lankan operator company last week, according to Manoj Gairola of the Hindustan Times.

The public sector telco seems to have attracted considerable criticism of late, some of which has been reported here. Quite striking was the August 12th article written by Kunal Kumar Kundu, who feels that BSNL is crippled by political interference, poor demand forecasting, lack of effective budgetary control and a bloated payroll. This blog has also reported the very modest take-up of BSNL's wireless broadband offerings and negative feedback about the company's preferred franchisee business model for the development of both 3G mobile and WiMAX services. Almost as often, however, the state-owned operator has been linked here with possible overseas investments. Perhaps the competitive pressure from India's numerous private sector mobile players is felt so keenly by BSNL's management that foreign opportunities are seen as a much better bet in terms of realistic growth opportunities. This may explain the fact that in the few months since the inception of this blog, the Indian operator has been mentioned in connection with a stake in pan-MEA mobile group Zain and with a new telecoms licence in Tunisia. BSNL's interest in Tigo Sri Lanka, then, is perhaps not very surprising.

Also connected in media reports with the sale of Tigo Sri Lanka is the UAE's Etisalat, which in August was reported to be considering an investment in the country now that the long civil war seems to have finally reached a conclusion. Priyantha Kariyapperuma, Director General of Sri Lanka's telecoms regulator, reportedly met with a visiting official from Etisalat last month and told journalists that "with the war over in May, there is ample scope for investments into telecom services and infrastructure facilities, especially in the north and east," referring to the area of the island that was most affected by the conflict. Few of the reports on Etisalat's possible interest in Sri Lanka have stated explicitly that the UAE company's route into the country's market would be via the acquisition of the Tigo-branded MNO. All of these reports, however, mention the availability of Millicom's Sri Lankan operation, so perhaps it's not unreasonable to infer that the Emirati company might have had Tigo Sri Lanka in its sights.

The most recent name floated in connection with the opportunity, however, is one from India rather than from the Middle East. As with an Axiata purchase, this move would also lead to market consolidation - because the company concerned is Bharti Airtel, already present in the Sri Lanka market since January, as we noted at the top of this article.

It seems, then, that the management of the giant Indian telecoms firm is not completely absorbed by the ongoing negotiations about the proposed mega-merger with South Africa's MTN. That saga has been notable for the repeatedly-extended deadline for concluding the talks and for various parties weighing in with opinions about the desirability of the mooted deal. One recently expressed opion comes from South Africa's Communications Minister, Siphiwe Nyanda, who voiced caution over the proposed tie-up in an interview yesterday. The Minister told the Sunday Times that any deal should take into account that MTN was a "South African company with a footprint in Africa." I take this to mean that there exists concern over MTN potentially losing its identity as a telecoms group with its roots - and the bulk of its business - in Africa. The Minister's comments are certainly of relevance given that South Africa's Government-owned Public Investment Corporation holds a 21% stake in MTN.

Bharti Airtel's interest in Tigo Sri Lanka came to my attention earlier this week, when R. Jai Krishna of the Wall Street Journal reported comments from an unnamed person close to the development. Suggesting that any deal would be worth USD 100-120 million, the mystery source said "in Sri Lanka, if you need to be a significant player in the market, you need to do an acquisition... greenfield, you will not be successful," by way of explaining the rationale behind Bharti Airtel's rumoured move.

A strengthened presence in Sri Lanka on the part of the Indian cellco could be welcomed by consumers - certainly if the company continues to compete aggressively on price, a strategy that has yielded impressive subscriber growth. Since going to market in January, the new entrant had 900,000 subs by the end of June, according to WCIS market intelligence. Another Informa Telecoms & Media service, Global Mobile Daily, reported in late July that Airtel Lanka claimed to have reached the one million subs mark.

The Bharti-owned cellco, however, has seen some of its competitors crying foul over its tariffs. Late last month, for example, Duruthu Edirimuni Chandrasekera of Sri Lanka's Sunday Times, reported that some operators have threatened to cut their interconnection with Airtel Lanka to retaliate for the the Indian-owned company failling to withdraw tariffs not approved by the country's telecoms regulator.

This sounds oddly familiar - the most recent article here covered a very similar wrangle over tariffs and interconnect agreements in Cambodia. Competition in Asia's mobile markets, then, certainly seems to be brutally fierce right now. Again I find myself voicing the view that there may well be casualties when the going gets this tough.

What price on mobile market consolidation in Sri Lanka then?