VYING FOR TOP SPOT
Acquisitions have become the order of the day, with network operators paying above the odds for companies with licences in markets that are expected to grow fast. There have been a number of blockbuster deals in the past year. The biggest was MTN’s acquisition of Investcom for R33,5bn.
The deal, which is still subject to approvals, will make MTN, which is led by CEO Phuthuma Nhleko, the market leader in the Middle East and Africa, with networks in 21 countries and serving almost 30m subscribers. Egypt’s Orascom Telecom has a slightly larger subscriber base but MTN is much more profitable.
And China Mobile, the world’s largest mobile operator by subscriber numbers, is understood to be on the verge of announcing that it is buying Luxembourg-based Millicom International Cellular, which operates networks in 16 emerging markets. The deal would be valued at about US5,3bn. Millicom has 8,9m subscribers.
There are a number of reasons for the surge in activity. Firstly, cellular teledensity in many parts of the developed world has already exceeded 100%, whereas, in some developing markets, fewer than one in 10 people has a cellphone. Developing economies are still regarded as having strong growth potential. Secondly, most developing markets are not well served by fixed line infrastructure. This means that cellphones are often the only means that people in these countries have to communicate with one another.
Half a dozen operators are emerging as the key players as the market consolidates. The FM has put together a comprehensive map (see pages 40 and 41) to illustrate how the race for Africa and the Middle East is going. Let’s look at the major players in turn.
MTN: Some commentators balked at the price MTN paid for Investcom, but the deal gives it a commanding lead in telecoms in the region. Investcom gives MTN licences in Ghana, Syria, Yemen and elsewhere. Subscriber growth in SA has faltered in the face of intense competition from Vodacom, but MTN’s Nigerian subsidiary continues to grow fast. And its Iranian business — it holds 49% of IranCell — is due to start operating soon.
Vodacom/Vodafone: Vodacom’s growth in SA has been spectacular — it now has more than 19m customers in its home market — but its offshore expansion has stalled. This is due to an agreement with 50% shareholder Vodafone that it will not expand in Africa north of the equator. Vodacom negotiated a special dispensation to enter the Nigerian market but talks to buy a stake in Vmobile, Nigeria’s third-largest cellphone operator, broke down. Vodafone has a direct interest in two African operators, Kenya’s Safaricom (it holds 40%) and Egypt’s Vodafone (51%).
MTC/Celtel: Celtel, which was acquired last year by Kuwait’s MTC for $3,4bn, operates networks in a broad swathe across the African continent. Last week, the company announced it had bought 65% of Vmobile, Nigeria’s third-largest operator. The deal, though, is in dispute. SA-based Econet Wireless, which also wanted to buy the company, will mount a court challenge this week to have the deal reversed.
Millicom: China Mobile’s planned acquisition of Millicom signals its intention to become a serious player in emerging markets. Sources say that China Mobile, which has more than 200m subscribers in its home market, held talks with MTN last year about a possible deal. It’s not known why those talks didn’t lead anywhere.
Orascom Telecom: Orascom operates networks in relatively few countries but some of these markets are enormous. In Algeria, it has 8m subscribers; in Pakistan it has 14,1m. Orascom, though, is focusing its expansion efforts in Europe, not in Africa and the Middle East.
Econet Wireless: Econet operates networks in Zimbabwe and Botswana. It also has licences in a number of other African territories. It holds 5% of Nigeria’s Vmobile. If it fails in its effort to fend off Celtel in its bid for Vmobile, Econet could quickly be marginalised as the race for Africa hots up.
There are other operators that bear watching. One of these is Atlantique Telecom — recently acquired by Dubai’s Etisalat — which owns a number of smallish operators in West Africa. And then there’s Globacom, Nigeria’s second network operator and the second-largest phone company after MTN Nigeria, which has also been making noises about expanding into other markets. Another company worth keeping an eye on is France Telecom and its mobile arm Orange, which recently snapped up some assets in Francophone Africa.
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