African Mobile Telecoms
Are the glory days and gold rush
over?
Martin de Koning
The mobile revolution
• 1995: 600,00 mobile phones (90% in
South-Africa
• 2009: more than 300 million phones in use
an increase of 51,300%
“The mobile phone has had a greater impact
on Africa than colonization.” Salim Amin,
chairman of A24 Media, Nairobi
What technology can do for Africa
“I think technology is an opportunity not
an enemy of the people. Get the
mobile phones to people and then
see what they do with it. Some will
want to do business with it, others will
just think. So just connect them and
then stand by, because it is not so
much about deciding what people are
going to do, but giving them the tools
to do things.” Wambura, Nairobi
Mobile opportunities…
Let’s start with the good news:
• Low penetration
• Last big growth frontier
• Revenue & penetration growth
• Continued investor interest
Mobile Penetration and growth
• Sub-Saharan Africa is seen as the last big
growth frontier for mobile in the world.
• average mobile penetration rate of 50%
looking at larger markets.
• If we include Chad, Niger or Malawi, the
continental average is much lower, closer
to 30%.
• 300 million people left to be connected!
Usefulness of technology
“The beautiful thing about Africa is that we
are early adapters of technology that
solves problems. We do not have as many
cultural barriers as I see in Europe. In
Africa we are hungry for the latest thing.
You can give a farmer a phone, and you
say you can find out what the prices are at
the market, just press here; he will take it.”
Sheila Ochugboju
Comparison of penetration rates
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•
•
•
•
•
Western Europe
Middle East and N-Africa
Central and Eastern Europe
Asia
Latin America
Sub-Sahara Africa
130%
120%
120%
90%
90%
50%
Growth in revenues & penetration
• Penetration increase of 7% in 2010
• Services revenues in Africa grew 3.4% to
$ 48.7 billion in 2009; 10% in 2010; 6.5%
CAGR anticipated in 2010-2012 time
frame
• Growth is still considerably higher
compared to developed markets in Europe
and the M.E.
Increase in FDI
• Bharti paid $ 9 billion or 10 x EBITDA for Zain’s
African assets (without Sudan & Morocco)
• Normally you would expect 6-7x EBITDA
• Vodafone spent $ 18 billion on deals in Africa
and the Middle East to date
• Bharti will invest $ 600 million in Nigeria alone
over the next 3 years
• France Telecom chief has earmarked $ 8.8
billion of investment in Africa and the M.E. in
next 5 years
Most technology is African
“There is Africa in almost all technology. The
raw materials probably come from Africa,
get to China, get processed and come
back.” Rafiq Philips, South Africa
However…
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•
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Licensing issues
Falling tariffs
Declining profitability
Shrinking pool of new and loyal customers
Growth of mobile data and VAS uncertain
Unpredictable government regulation
Licensing issues
• African governments have issued (too)
many licenses. Europe’s average is 4.
• Prime example: Nigeria 11 operators!
• Only top 3 can be profitable depending on
market size, # of operators, GDP
• ‘Africa has too many licenses’ says
Millicom CEO, Mikael Grahne. Millicom
and others may sell off assets.
Falling tariffs & declining
profitability
• In Tanzania tariffs for mobile service fell by 80%
in the last 18 months
• Zain’s margins in Sierra Leone eroded from 26%
to 7% in 1 year as a result of lower tariffs
• Governments are slashing interconnection rates
• Lower earnings results in a decrease in network
expansion & quality and investment
• Opportunity: sharing assets such as tower
infrastructure but not easy. India will lead the
way!
New & loyal customers?
• All the high-revenue customers are covered
• Mining for new customers who cannot really
afford the service (already 17.7 % of monthly
income)
And are they loyal?
• 95% of all customers are pre-paid
• Churn of 6-7% per month
• Cost to mobile industry in Africa: $ 11.4 billion
per annum
Mobile data and VAS
• Reduce churn by signing up customers to
long-term mobile data plans
• Paradox: Need to sell higher-end phones
and plans when customers are used to
cheap pre-paid voice and texting
• Mobile banking the most promising VAS
but success of M-Pesa has not been
replicated yet
Technology is a global
phenomenon
“ I don’t want to separate African technology.
Technology is technology, it works where it
works, tech has no borders. With a few
adjustments, a technology that is going to solve
a problem can be adapted slightly to solve
another problem in a multi-world.” Rafiq Philips,
South Africa
Good news: low-cost hand sets and smart phones
Mercurial governments and
partners
• Government-commissioned body in Ghana
recommended renegotiating 70% acquisition of
Ghana Telecom by Vodafone
• Shareholder issues quite common in Africa
• Unpredictable changes in regulatory and tax
regimes reduce appetite of large investors
• Universal access: an unfulfilled opportunity
Lack of assets
• Major players are MTN, Safaricom,
Vodacom, Vodafone, France Telecom and
Bharti
• Further consolidation likely
• However, lack of good assets
• Last remaining major player is Millicom
Growth of the M-wave
• Growth of M-health, M-agriculture, Menvironment,
• Mobile money has a huge potential: now 12
million M-Pesa users transferring money. A total
of $ 6.5 billion in transactions since 2007
• M-shopping, M-learning, but also M-voting, Mstatistics/information
• New sub-marine cable systems will revolutionize
Africa’s access to bandwidth
Cheetah generation
• More than 40% of Africa’s population is younger
than 14
• George Ayittey , author of Africa Unchained
coined the term “Cheetah generation”
• Young people: dynamic, pragmatic, intellectually
agile, urban and restless and Africa’s new hope.
• See business opportunities and are
entrepreneurial rather than government and
NGOs as a career path!
Young people are changing the
game
“Young people are energetic and easily
learn new things. In ICT things keep
changing and we need innovative young
people with fresh ideas, who take on new
ideas with optimism, unwavering
determination and energy.” Ken Njoroge,
CEO Cellulant, started as entrepreneur at
age 23; now preparing a listing at local
stock exchange
Conclusion
• Sub Sahara Africa still an underserved market.
• 300 million people still have no mobile phone,
making Africa the fastest growing market in the
world
• Still major investment by large operators
• However, gold rush is over; cautios view still
leaves upside potential
• Growing population 40% under age14
• Cheetah generation will embrace and expand
ICT technology to help close the Digital Divide