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

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.

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

Something to Grin about for Malawi's mobile users?

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."

Something to Grin about for Malawi's mobile users?

Are some African markets already contested by too many cellcos?

In yesterday's post, I tried to examine an idea articulated last week by MTN CEO Phuthuma Nhleko in an interview with the Financial Times - that there will be an African showdown leading to "fewer players with larger footprint, bigger balance sheets, more economies of scale".

Nhleko notes that 2008 saw more players entering the continent's smaller markets, some of which now have three, four or five competing operators in the mobile space.

One notable example must surely be Benin. The Francophone country ranks 31st in Africa in terms of the size of its population. Five mobile operators now compete in a market which is home to around 8 million people. The fifth entrant, joining the fray in June last year, is a subsidiary of Nigerian cellco Globacom. Yesterday I recounted some of the difficulties and delays faced by Globacom owner Dr. Mike Adenuga on the company's home patch. The Benin market has also presented challenges for the Nigerian company. A Wireless Federation article in September described how Globacom was protesting about radio spectrum allegedly withheld by the Beninoise Government. The article cited an anonymous Globacom insider who reported urgent appeals to the state to release spectrum by state-run MNO Libercom. "Sources," said the article "disclose that most of the spectrum released to Globacom so far was in the 1800MHz band but not the promised 900MHz band and this could disrupts the operator’s plan for expansion." Network expansion, in terms of capacity at least, might well be high on the agenda for Globacom's Benin operation - according to an IDG article published not long after the operator launched services, the Nigerian cello sold 600,000 SIMs in fewer than 10 days. By December Globacom Benin had around 700,000 subscriptions according to Informa Telecoms & Media's World Cellular Information Service, outstripping two much longer established operators - the aforementioned Libercom and locally-owned Bell Benin Communications. Presumably, in the consolidation scenario envisaged by MTN's Nhleko, it is these strugglers that would be more likely to fall by the wayside than Dr. Adenuga's Globacom Benin.

With four mobile operators serving a relatively small population, the Central African Republic, one of the poorest countries in the world and among the ten poorest countries in Africa, seems to me like another quite congested market. The country's 2007 census recorded a population of around 4.2 million, the 36th largest in Africa. Mobile penetration is very low, standing at just over 11% according to December figures from WCIS. This would suggest that, despite the rather limited overall market size, there remains a decent growth opportunity for each of the existing competing mobile operators. The likely ARPU from further waves of mobile service adopters, however, is surely very low: the CAR is heavily dependent on foreign aid and the presence of numerous NGOs which provide services that the country's Government is ill-equipped to deliver to the populace. The very presence of numerous foreign personnel and organisations in the country, including peacekeepers and even refugee camps, provides an important source of revenue for many citizens. While the country is self-sufficient in food crops, much of the population lives at a subsistence level. Political instability has also hampered development. As recently as 2006, over 50,000 people in the country's north-west were at risk of starvation due to protracted violence. This looks like a daunting set of trading conditions for the four mobile operators. Of these, the one to join the market most recently was France Telecom-backed Orange CAR, which has rapidly built a 25% share of the market since launching its commercial activities in December 2007.

Another well-funded later entrant in the CAR is the Moov-branded Atlantique Telecom operator, part of a group of African operations in which the UAE's Etisalat now holds a 70% stake. The CAR operation has been in business since 2005.

While the overall size of the CAR mobile market has grown quickly from a low base since the newer competitors set up their operations, with mobile penetration growing from just 1.30% at the end of 2004 to today's double-digit level, Orange and Moov have massively eroded the market share of the two longer-established MNOs. Of these, Telecel Centrafrique may now be in a better position to fight back, having been reacquired last year by Orascom Telecom.

If these two countries are truly representative, it would appear that MTN's Nhleko is quite right to contend that competitive conditions in smaller African markets may not be favourable for the support of as many competing MNOs as are currently in business. However, as last week's FT article noted, following the collapse of merger talks last year with India’s mobile groups, Bharti Airtel and Reliance Communications, Mr. Nhleko himself may be under pressure to prolong the whistlestop expansion of his six-year tenure. Mr. Nhleko acknowledges that "to maintain our growth, somehow we need to try and find larger markets". The FT piece insists that he appears focused on African opportunities, such as long-awaited new licences in fast-growing Angola and Ethiopia, one of the few countries that maintains a state-run monopoly. MTN’s balance sheet, says the article, "shows it is poised to pounce."

Let's see if further African expansion by MTN and other powerful groups this year drives the widely predicted wave of consolidation across the continent's mobile markets.

Are some African markets already contested by too many cellcos?

The going gets tougher in African mobile markets?

By writing here quite regularly about developments in Africa, I might have created the impression that I am a regular visitor to that continent. Not so. While it has been my pleasure to meet many telecoms sector executives who work hard to grow their businesses and widen the availability of services across Africa, these meetings have always taken place either on European soil or in the Middle East. Typing with crossed fingers might sound difficult (and painful), but that is what I need to do today because I am fervently hoping to avoid any last-minute problems which might prevent my finally correcting this glaring omission from my experience of world travel. All going well, I should soon be representing my company in Kenya on an admittedly too-short trip to the East African country.

With this in mind, it is perhaps understandable that one article which caught my eye around a week ago was a Financial Times piece about predictions made by MTN boss Phuthuma Nhleko. The influential South African businessman believes the continent will see a wave of telco sector consolidation in the next 1-2 years, and the article contends that this will result from both new entrants and more established competitors struggling to maintain healthy margins in increasingly crowded markets.

At first sight, you might think that there is plenty of room to play in Africa, where mobile penetration stood at just 37.75% by December 2008, according to the Informa Telecoms & Media-run World Cellular Information Service. The FT's Tom Burgis feels that this figure is "far lower than in all other regions." For me, the fact that WCIS logged just 44.64% penetration across the Asia-Pacific region suggests to me that while Africa does stand out, it is clearly not the only part of the world where further robust subscriber growth looks like a possibility.

Despite initially appearing to pick out Africa as the stand-out telco sector investment opportunity of 2009, the FT's Burgis first raises then dashes hopes of truly excellent growth prospects there, arguing that "all but the earliest arrivals in most countries have struggled to make inroads, despite often having to build infrastructure from scratch."

Does that claim stand up to examination? Let's take a look at Africa's most populous state, Nigeria. Here, the country's very first mobile operator is actually among the laggards: WCIS market intelligence suggests that M-TEL, the mobile arm of wireline incumbent Nigerian Telecommunications Limited, had fewer than 260,000 subscribers at the end of 2008, down from around 700,000 in December 2006. At the end of 2005, M-TEL subscribers numbered over one million.

So what has caused this alarming exodus of M-TEL customers? While the success of MTN and others has hurt in recent years, the arrival of the South African cellco's Nigerian subsidiary in 2001 did not immediately cause a reversal of M-TEL's fortunes. Quite the reverse, in fact. The country's first-to-market MNO continued to grow well when MTN and fellow 2001 entrant Econet Wireless Nigeria hit the local mobile scene.

Any subscriber loyal to the latter ever since its launch would be forgiven for having become a bit confused by regular branding changes. Econet was redubbed Vee Mobile in 2004 as a result of a protracted wrangle that I won't even try to summarise here. 2006 saw another rebranding when the MNO was acquired by Celtel International, another transaction not without twists and turns. A notable difficulty was the the last-ditch attempt by Econet Wireless to block the USD 1 billion acquisition. At the time, Informa's Global Mobile reported that Econet, as a co-founder of the cellco, had "long asserted preemptive rights" and was claiming to have "raised more than US$1.5 billion to acquire the company" while protesting that it had been "prevented from making payment."

By the time Celtel brand made its debut in Nigeria, the pan-African mobile group founded by Dr. Mo Ibrahim had already been acquired by Kuwait-based MTC, now known as Zain. In 2007, when MTC came up with the Zain brand, it was announced that the Celtel name would continue to be used across the group's African footprtint, at least for a while. As Global Mobile Daily reported at the time, the the decision to retain the Celtel name "was aimed at maintaining continuity", precisely because of how recently the operations in Nigeria and Kenya had been rebranded.

Fast forward to August 2008: after barely two years of operating with the Celtel name, the Econet-Vee Mobile-Celtel branding roadshow arrived at its most recent stop.

"Zain wants to be one of the top 10 mobile operators in the world within the next three years, and it has developed the Zain brand as the main vehicle for that global aspiration, because the company sees mobile telecoms as a commoditized business in which branding is one of a few important differentiating factors that are available to it," said my former colleague Matthew Reed at the time. Matt, the Middle East & Africa Intelligence Centre editor continued with words of warning: "Celtel is one of the best-known and most successful homegrown brands in Africa, and there are risks - as well as huge costs - in rebranding the Celtel operations. Zain also regards its One Network scheme as an important differentiator, but to some extent it can be copied by other multicountry operators."

The Nigerian market entry of MTN and Econet-Vee Mobile-Celtel-Zain (phew!) was enabled by the January 2001 auction of some GSM licences, with one reserved for existing player M-TEL, which up to then had run a TACS network used by around 40,000 subscribers. My understanding is that the Nigerian Government had intended to sell three licences in addition to the one put aside for M-TEL. One of these was not used.

One 2001 AllAfrica article that I found today tells the story of how Mike Adenuga, a billionaire businessman, banker and oil mogul had hoped to take part in the country's GSM revolution. His company, Communications Investment Limited (CIL), had emerged as one of the auction winners of the three slots auctioned by the government, but, the article states "barely a month later, things [had] turned sour for CIL and its quest for a digital mobile telephone licence." What went wrong for CIL, continues the article, "depends on who you talk to" with the the Nigerian Communications Commission saying that "CIL failed to pay for is licence in time" and CIL saying "it had demonstrated that it had produced the funds but was delaying the final stage of payment, because it was trying to clarify the status of the frequency it had been allocated."

"When you begin from day one with a frequency that is encumbered, that puts you at a disadvantage with your competitors," a spokesman for CIL told Allafrica at the time, adding that CIL "realised that the frequency given to it by NCC had previously been awarded to another company, and was the subject of a court case."

After this frustrating delay, Mike Adenuga finally got to compete in the Nigerian mobile arena in 2003, when Globacom launched services. Since then, the company has gone on to acquire over 16 million subscribers, including the roughly 30,000 that have been persuaded of the value of 3G services since Globacom's W-CDMA network launch in February last year. Going to market later than the 2001 auction winners does not seem to have prevented Dr. Adenuga's company from establishing a solid presence in the market, although it is worth noting that Globacom's market share has been declining fairly steadily since peaking at around 31% in the Spring of 2007. Globacom, now with a 25% share of the Nigerian market, has sought growth opportunities elsewhere in West Africa, rapidly establishing a solid presence in Benin and buying a mobile licence in Ghana, where sub-50% mobile penetration and a population of over 20 million may present a good growth opportunity.

Given the MTN CEO's comments reported by the Financial Times this week, it will be interesting to see if Globacom's foray into Ghana proves challenging in terms of maintaining decent margins. Back in Nigeria, we can watch how Etisalat manages to fare, having entered the market as recently as last year. Despite Globacom being pushed back in terms of market share over the last couple of years, with 16 million subscribers, it seems hard to argue that going to market later than its competitors has hurt the company badly in the sense of establishing a presence.

I will be interested to see how far an examination of further African markets in future posts will dig up evidence to support the notion that the going is about to get tougher for new entrants and established players alike.

The going gets tougher in African mobile markets?