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

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?

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

The challenges of doing business in Zimbabwe (continued)

In March I wrote about how the trouble political and economic situation in Zimbabwe seemed to be continuing to deter big telcos from seeking to exploit the country's under-penetrated market. One of the many challenges I mentioned then was the operator Econet Wireless suspending post-paid services due to foreign currency shortages.

Since then, it seems that the same operator has had to suspend the sales of prepaid lines, which must have been very damaging given the overwhelming preponderance of prepaid users in the customer base of any operator in an emerging market.

Happily, according to an report from TeleGeography, market-leading Econet Wireless, has resumed the sale of prepaid SIM cards, following recent upgrades to network capacity and regulatory clearance to charge users in foreign currency.

The challenges of doing business in Zimbabwe (continued)

MTN eyeing Zimbabwe?

Back in March, I wrote a short piece here about Zimbabwe's mobile market. I noted that given the famously poor state of the country’s economy, it was not surprising that Zimbabwe remains a laggard in terms of mobile penetration, even in the context of Africa, which is itself the continent with the lowest cellular teledensity. I reported a mobile penetration rate of just 12.26% (by December 2008) according to the World Cellular Information Service database maintained by Informa Telecoms & Media. As of March 2009 that figure has crept up to 12.82%. Mobile penetration for Africa overall stands at 40.05%.

In March, I argued that it would not be until there is a serious improvement in the country's overall prospects that major telecoms groups would be tempted to invest in Zimbabwe. To date, the only big player brave enough to contend with daunting challenges such as the world's highest rate of inflation has been Orascom Telecom, whose Telecel Zimbabwe operation has a 14.39% share of the market according to WCIS.

The CEO of state-owned mobile operator NetOne Cellular, however, seems to be bullish about the prospect of a proposed Government plan to sell his company to foreign investors, according to a recent Telegeography article.

NetOne boss Reward Kangai is quoted as saying that there is "huge interest" in the proposed privatisation and that "the unnamed interested parties were already present in several African countries." Kangai concedes that the operating environment might deter new entrants and claims that "the Government is considering reducing equipment taxes for telecoms companies – currently as high as 60%."

A more recent Cellular News report picks up on speculation about the identity of potential strategic investors, contending that one of them might be South Africa's MTN. Rumours to this effect were apparently heightened when the company took a stand at a recent trade fair in the country. MTN's route into the Zimbabwe market, contends the article, would be a 60% share in Telecel rather than the privatisation of NetOne. MTN, then, does not seem to be one of the "unnamed parties" referred to by NetOne's Kangai.

Why would MTN consider such a challenging opportunity? MTN spokeswoman Nozipho January-Bardill is quoted as saying: "We have always said we are looking for value-enhancing opportunities and Zimbabwe presents us with one. Zimbabwe is our neighbour sitting there waiting. The Government is embarking on a reinvention of itself and has opened up to South African companies to go in and operate there."

MTN, then, seems to have confidence in the unity Govermnent's plans to lift Zimbabwe out of the extreme economic difficulties suffered in recent years. According to the Telegeography article, "the planned privatisation forms part of a wider effort to sell state assets in the oil and infrastructure sectors to raise desperately needed funds for an economy crippled by hyperinflation." The unity Government, which took office in February, does continue to face daunting hurdles on the road to improving the lot of its citizens. Mr Kangai is optimistic, however, stating that "Zimbabwe is open for business, investors will be able to start operations here at low cost."

MTN eyeing Zimbabwe?

Zimbabwe's troubles deter (most) big telcos from investing

I seem to have been writing about the world's trouble spots rather a lot of late. Continuing in that vein, let me now turn my attention to Zimbabwe, the unhappy scene of human rights abuses and economic mismanagement leading to hyperinflation and general impoverishment. A hotly disputed election and an outbreak of cholera have added to the myriad woes of the southern African nation.

The country's parlous economic condition has naturally affected telecoms operators.

On January 28, Global Mobile Daily reported that Zimbabwe's Econet Wireless had resumed post-paid services, after they were withdrawn in November due to foreign currency shortages. The resumption of post-paid services was made possible by the Government's “belated decision to allow operators to bill subscribers in foreign currency”.

That decision, however, seems to have led to price rises large enough to alarm the Zimbabwean telecoms regulator (POTRAZ), which, according to a recent Cellular News article, has now revised telephone tariffs downwards by up to 40% in a move meant to make services more affordable. This seems to be an interim measure, pending the completion of an ongoing review apparently intended to balance the affordability of services for consumers with the viability of operators.

Given the famously poor state of the country’s economy, it is not surprising that Zimbabwe remains a laggard in terms of mobile penetration, even in the context of Africa, which is itself the continent with the lowest cellular teledensity. According to the World Cellular Information Service database maintained by Informa Telecoms & Media, Zimbabwean mobile market penetration stood at just 12.26% at the end of last year, compared to a 37.73% penetration rate for Africa overall.

This difficult market is contested by three cellcos. Econet Wireless is the dominant player, with 59.61% of the market by December 2008. Last month Global Mobile Daily reported that POTRAZ had invited Econet Wireless and its two existing competitors to apply for 3G licenses. The market-leading MNO has reportedly been ready to offer 3G services since summer 2007, but the commercial launch has been delayed by the lack of necessary frequencies that can only be allocated by the regulator, according to the GMD article.

The other two players are state-owned NetOne Cellular (25.51% share) and Orascom Telcom-backed Telecel Zimbabwe (14.88%). Willingness to Invest in countries whose political and economic climates are not to the taste of other telcos is something of a recurring theme for Egypt's Orascom Telcom. The company made headlines last year by offering mobile services in secretive international pariah North Korea. Other large international groups, however, are strikingly absent from the Zimbabwean scene. None of the bigger African mobile empire-builders - MTN, Zain, Vodacom, Orange - have made a move on what is a decent-sized market with a population of over 13 million. My feeling is that it will not be until there is a serious improvement in the country's overall prospects that any other major groups will be tempted to set up camp in Zimbabwe.

Zimbabwe's troubles deter (most) big telcos from investing