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Few home grown survivors in Africa’s mobile sector

By Gemma Ware
Posted on Tuesday, 13 November 2012 14:50

It is a testimony to the potential of Africa’s mobile phone market that the majority of the continent’s operators are now owned or controlled by foreign players. A decade ago, there was scarcely any foreign investment in the continent’s mobile operators.

Now, apart from South African giant MTN, Zimbabwe’s increasingly successful Econet Wireless, Nigeria’s Globacom and a handful of state-owned operators, the sector is dominated by Asian, European and Middle Eastern investors. They have had a stark impact. In 2000, Africa had 15.5m mobile subscriptions. By 2011, that had exploded to 646m, according to the International Telecommunication Union.

JSE-listed MTN in South Africa remains the continent’s largest and most successful operator. From its sprawling head office in the Roodepoort suburb of Johannesburg, MTN announced profits of R12.2bn ($1.4bn) for the first six months of 2012, up 13% on the year before.

It has recently completed an internal restructuring that brought the CEOs of its South African and Nigerian companies onto the executive committee – reflecting their importance to MTN’s balance sheet.

Of R24.2bn capital spending planned for 2012, the company earmarked 62% for South Africa and Nigeria. Its longevity has allowed it to push ahead with innovation, most recently launching a mobile newspaper in Nigeria.

A lot of profits are actually exported in the form of dividends and management fees, and that doesn’t really benefit the continent per se

Gone are the days when state-owned companies held a monopoly on price. Some still exist, but they rarely have a good reputation.

Only four African countries are yet to sell licences to foreign investors: Ethiopia, Djibouti, Eritrea and Libya. Telecoms operators from the Middle East have been looking for opportunities in the Libyan market, with Etisalat, Qatar Telecom and Saudi Telecom all expressing an interest in licences.

Meanwhile, the growing footprint of Libya’s ailing state-owned LAP Green has stalled and shrunk, most noticeably when the Zambian government seized operator Zamtel in January 2012.

Infrastructure

In Ethiopia, the most under-tapped telecoms market on the continent, where only 18 million out of 80 million people have mobile subscriptions, the state invited foreign players in to upgrade infrastructure for state-owned Ethio Telecom, rather than to sell mobile licences.

Following a two-year contract with France Telecom, Ethio Telecom was in the process of inking a $1.3bn infrastructure deal with Chinese firms ZTE and Huawei in October.

Other homegrown African operators are now predominantly out of African control.

UK-based Vodafone has held a 65% controlling stake in South African operator Vodacom since 2008. Russia’s VimpelCom owns 51.7% of Egypt’s Orascom Telecom after its 2008 merger with Naguib Sawiris’s Wind Telecom.

Markets such as Kenya are dominated by foreign players. Safaricom, home of pioneering mobile-money scheme M-PESA is 40% owned by Vodafone, with the rest of its shares on public float.

The complexity of foreign ownership structures makes it difficult to calculate the proportion of profits made in the African telecoms boom that stay on the continent.

“A lot of profits are actually exported in the form of dividends and management fees, and that doesn’t really benefit the continent per se,” says Johan Snyman, telecoms analyst at Renaissance Capital.

Governments have their eyes on these profits. In early October, Kenya’s finance ministry announced a new 10% excise duty on fees charged for money transfer services, such as M-PESA.

It plans to raise KSh4.5bn ($53m) to help to cover a wage increase for teachers and doctors.

Outside South Africa, there are only a handful of telecom companies listed on African stock markets, such as Safaricom in Nairobi, Econet Wireless in Harare and Senegal’s Sonatel (part of France Telecom) on West Africa’s Bourse Régionale des Valeurs Mobilières.

Proposals to compel telecom companies in Nigeria to list have been met with resistance.

Rapped knuckles

Despite the levels of investment, governments are complaining about the quality of service provided by both foreign and locally owned operators. After a stand-off in June, four Nigerian operators – Airtel, Globacom, MTN and Etisalat – paid a total of $7.3m in fines for poor service.

The Ghanaian regulator fined MTN in May and the Rwandan regulator did the same in September.

The future is unlikely to produce more MTNs. Operators are concentrating on rolling out 3G network capability, or gearing up for high-speed 4G Long-term Evolution technology, rather than expanding their continental footprints.

The one exception, says Rencap’s Snyman, could be Nigeria’s Globacom, owned and micro-managed by billionaire Mike Adenuga.

Glo had 22m subscribers in Nigeria in June 2012, according to the Nigerian Communications Commission. The company remains secretive about its revenue. It introduced per-second billing, has driven down call costs and built GLO-1, a submarine cable linking Africa to Europe.

“Our objective in the long term is to be the biggest and best telecommunication network in Africa,” says its head of PR, Andrew Okeleke.

Despite receiving a licence to operate in Ghana in 2008, Glo Mobile Ghana only launched operations in April 2012 after paying a $200,000 fine for its delay.

Okeleke says it acquired 2 million subscribers in Ghana in its first four months.

Alongside the market’s foreign dominance, an African-owned ecosystem is taking shape to service the mobile boom. In early October, MTN announced it was selling its mobile phone towers in Cameroon and Côte d’Ivoire for $284m to Nigerian-based tower firm IHS, which already manages 4,000 towers and is listed on the Lagos bourse.

Ivorian firm Digital Afrique has a partnership with affiliates of Bharti, Orange and Vodafone to provide text message services to operators●

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