Citation
Curwen, P. (2005), "Is Africa the next battleground for mobile telephony?", info, Vol. 7 No. 6. https://doi.org/10.1108/info.2005.27206fab.001
Publisher
:Emerald Group Publishing Limited
Copyright © 2005, Emerald Group Publishing Limited
Is Africa the next battleground for mobile telephony?
A regular column on the information industries
Is Africa the next battleground for mobile telephony?
On the face of it, it does not make much sense to enter mobile telephony markets where penetration levels are high and competition is fierce. So why not try somewhere where the opposite is true, like most of Africa? The obvious answer is that it is rather more risky in all sorts of ways, not least politically and economically, and, compared to other continents, there is a far smaller proportion of the overall population with sufficient spending power to buy a mobile handset, although Motorola has recently been contracted to develop a very cheap one. Also, there is very considerable variability between individual countries, so it may not be possible to develop a strategic model that will meet with widespread success throughout the continent.
This suggests that Africa – which is defined for our purposes to include 54 countries and islands that have quantifiable mobile networks – must already be, and must remain for now, the preserve of relatively specialised operators – either African in origin or Africa specialists headquartered elsewhere. But is this the case in practice and how are things likely to develop?
Table I contains the 18 companies that had an economic interest in an African operator during either 2003 or 2004, together with half a dozen others which might have been expected to have had such an interest due either to history (colonialism) or geographical proximity. The initial two columns are based upon a company having either a majority stake in an African operator, in which case all of that operator’s African subsidiaries are also included, or a minority stake, in which case they are excluded. Columns 2003a and 2004a provide a total when the subsidiaries of minority interests are also added in. This affects Vodafone and Telekom Malaysia (four additional investments via Vodacom), Telefónica (five/four additional investments via Portugal Telecom) and Vivendi Universal (one additional investment via Maroc Télécom).
Table II examines the extent to which investment in Africa is a specialised activity. In the first place, it may be noted that the total number of investments is not all that much greater than the number of countries/islands (at 54), especially if columns one and three are considered. Clearly, therefore, either the investments of the companies cited are widely dispersed and don’t tend to compete with one another, or there are many African countries/islands where international operators stay well clear and leave the field of play to local investors. Before turning to consider that matter, we may note that there are no significant differences between 2003 and 2004. In the latter year, the proportionate figures are all a bit higher, with the difference rising only very slightly. Adjusting for the minority holdings makes no difference among the top five in 2003, but does affect the top ten due to Telekom Malaysia, and it is worth noting that if it had been the top 12, and included Vodafone, the effect would have been much more marked. Much the same can be said of 2004.
Turning to the percentages, it is evident that the top two consistently account for one-quarter of the total number of investments, that the top five account for roughly one-half and that the top ten account for roughly three-quarters and as high as 84 per cent. Clearly, therefore, investing in Africa is a relatively specialised business among international telcos, of whom there were just over 40 with investments in at least three countries, including their home market, in 2004.
But are these Africa-centric operators? Clearly, some are and some aren’t, as demonstrated by the second and sixth columns of Table I. As can be seen, Atlantique Télécom (based in the Côte d’Ivoire and trading as Telecel), Celtel International (based in The Netherlands), Orascom (based in Egypt), MTN (based in South Africa), Investcom (based in Lebanon) and Vodacom (based in South Africa) are Africa specialists; the others are not. Interestingly, where the parent company is based has little bearing on this particular matter as two of the six are not headquartered in Africa. Let us therefore turn to examine where these six specialists had their networks in 2004.
Table III provides the answer to the question about specialisation. Given that there are 54 countries/islands in the sample, it is perhaps less than surprising that these six Africa specialists have largely kept out of each others’ way, competing only in Benin (2), Burkina Faso (2), Chad (2), Congo-Brazzaville (2), DR Congo (2), Gabon (2), Niger (2), South Africa (2), Tanzania (2) and Uganda (2), even if it is the same pairs (Atlantique and Celtel, Celtel and Orascom) that confront each other in three cases. On the other hand, it is a little surprising that they do not compete in the largest African markets outside South Africa, namely Egypt, Kenya, Morocco, Nigeria and Tunisia, especially since between them the six operators account for 43 of the 79 investments listed for 2004 in Table I.
So where were the other 36 investments owned by international telcos at the end of 2004 located? The answer is that 26 separate countries/islands were involved, with competition occurring in Egypt (2), Ghana (3), Kenya (2), Mauritius (2), Morocco (2), Réunion (2), Sénégal (2), South Africa (2), and Tunisia (2). It may be noted that four of the five large markets mentioned above appear in this list, so, interestingly, competition is indeed evident among international telcos but not among the specialists. The exception is Nigeria, about which little can be said other than that it is not a happy hunting ground for international telcos, as Vodacom, mired in disputes with EWN, will no doubt attest. It may finally be noted that the only place where the two lists overlap is in South Africa, but that basically reflects the fact that it is by some margin the largest market.
So, overall, we can conclude that Africa, other than in South Africa, appears to be a tale of two telco groupings, one the Africa specialists and the other a heterogeneous group of international telcos with a limited interest in Africa relative to elsewhere. In other respects, Africa is a tale of small networks mainly financed by local interests. And is this likely to continue? So far, there has been a single transfer of African assets during the first four months of 2005, with Etisalat of the UAE buying a half share in Atlantique Télécom in April, possibly signifying a major move by Etisalat into Africa. In addition, some new licences are being sold so there may be activity later in the year. It is frankly rather difficult to understand why some of the non-specialists are in Africa at all, although their original entry may well have had nothing to do with their present strategies, and there is always the “growth potential” argument to keep them there. One suspects, however, that some of them will offload investments outside the “big five” markets to the specialists that would appear to have a clear interest in expansion over the medium term, although financing that expansion will be relatively problematic, especially in the case of the private companies. In these respects it is worth bearing in mind that until 2002 the African operator with the largest presence was Orascom Telecom, but, faced with unacceptably high levels of debt, it sold off its stakes (mostly trading as Telecel) in Benin, Burkina Faso, Central African Republic, Côte d’Ivoire, Gabon, Niger, Togo, Uganda and Zambia to Atlantique Télécom and the Gloria Trust. As holds true elsewhere in the world, owning stakes in operators that are not numbered among the top two in a given country is unlikely to be an attractive strategy even to Africa specialists.
Peter CurwenPeter Curwen is Visiting Professor of Telecommunications at the Strathclyde Business School, Glasgow, UK. E-mail: pjcurwen@hotmail.com