{"id":550640,"date":"2006-10-26T07:16:46","date_gmt":"2006-10-26T07:16:46","guid":{"rendered":"http:\/\/localhost:8888\/wordpress\/technology\/550640-no-cheap-call-for-cellular-network-acquisitions.html"},"modified":"2006-10-26T07:16:46","modified_gmt":"2006-10-26T07:16:46","slug":"no-cheap-call-for-cellular-network-acquisitions","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/technology\/550640-no-cheap-call-for-cellular-network-acquisitions.html","title":{"rendered":"No cheap call for cellular network acquisitions"},"content":{"rendered":"

Yet there are still 115 operators on the continent, providing plenty of fuel for the acquisition frenzy. The largest operators are MTN, Vodacom and the Middle East\u2019s MTC and Orascom. <\/font><\/p>\n

But the price tag for acquisitions is reaching a point where even the richest Africans may have to bow out and let the oil rich Arabs muscle in instead. <\/font><\/p>\n

Recent takeovers have cost more than $1000 for each subscriber \u2014 an anomaly when Africans are among the poorest, lowest-spending users in the world. Africa has 165-million users and an average penetration of 18%. That means the potential for growth is still there, analysts agreed at the GSM Africa forum in Cape Town last week. <\/font><\/p>\n

Of 472-million new users expected to join networks around the world this year, 48-million would be in Africa, said Devine Kofiloto, a principal analyst for Informa Telecoms. Yet the growth potential cannot be gauged purely by Africa\u2019s population, as the majority are too poor to afford cellphone services and penetration would stabilise at about 32%, he said. The payback for acquisitions is also taking longer, as the average revenue per user is plunging as cellphones reach the poorer echelons of society. <\/font><\/p>\n

Nigeria, with 140-million people, is the one country where growth appears almost limitless. Nigeria will surpass SA as Africa\u2019s largest cellular market by next year with 43-million users, compared with an expected 39-million in SA. Even then only 32% of Nigerians would have a cellphone, said Kofiloto. <\/font><\/p>\n

MTN is enjoying enormous success in Nigeria, and its rival, Celtel, hopes to emulate that after acquiring 65% of V-Mobile for $1,2bn. Celtel CEO Marten Pieters said Celtel was pumping in cash to upgrade V-Mobile\u2019s network, which had stagnated during a legal battle by V-Mobile\u2019s 5% shareholder, Econet, to scupper its sale. \u201cWe will pump in at least $700m in the next two years. We need at least that much investment to catch up,\u201d he said. <\/font><\/p>\n

Nigeria has 30-million subscribers and Pieters believes that will rapidly touch 50-million. \u201cIn 2011 there will be at least 50 million customers and I think that\u2019s understated. I think customers will at least double in the next three to five years.\u201d <\/font><\/p>\n

Celtel itself was bought by the Kuwaiti operator MTC for $3,3bn last year, and its oil-rich parent is willing to fund Celtel\u2019s expansion across Africa. Middle Eastern players may be the only ones with the money to continue the merger splurge, Pieters said. <\/font><\/p>\n

Not only did they have the cash, they also took a longer view on the return on investment, unlike European or African investors that sought a payback in a handful of years. <\/font><\/p>\n

Even so, the deals were getting crazy, Pieters said, with Etisalat of the United Arab Emirates paying $2,91bn for Egypt\u2019s third cellular licence. \u201cA third licence to operate cost more than the market capitalisation of the number-one player there, so you have to ask if that was reasonable,\u201d Pieters said. <\/font><\/p>\n

Etisalat bid almost 20% more than the next best offer, prompting MTN to say it would not be goaded into overpaying. Vodacom beat MTN to that conclusion months ago, saying the price of new licences or takeovers was increasingly unrealistic. <\/font><\/p>\n

Vodacom may soon be allowed to bid for licences or acquisitions north of the equator, as its 50% stakeholder Vodafone is scrapping a restriction that has stymied Vodacom\u2019s expansion. However, its freedom may be too late, given the inflated prices. <\/font><\/p>\n

Opportunities are bubbling up in Ghana, which may offer a new cellular licence and privatise the state-owned operator. Senegal is issuing a third licence and Angola is also expected to open up to new players. <\/font><\/p>\n

Meanwhile, delegates to the telecoms conference debated how operators can make more money in poverty-struck markets. <\/font><\/p>\n

Although watching TV and accessing the internet on a cellphone will gradually become more popular, income from those services will merely offset the declining profits from voice calls. <\/font><\/p>\n

\u201cOperators need to look for revenue from data but let\u2019s not deceive ourselves into thinking data will generate incremental revenue. It will merely offset declining revenue,\u201d Kofiloto said. He believes most Africans will get their first taste of the internet through mobile handsets. \u201cThe future of internet access in Africa is definitely wireless,\u201d he said. <\/font><\/p>\n

The operators agreed African governments were doing little to help the industry or their people. Rural Africa was not an attractive area to tackle, said Vitalis Olunga, chairman of the GSM Africa interest group. Rolling out services to remote areas needed government participation and regulatory approval to use a mixture of wireless, terrestrial technologies and satellites. <\/font><\/p>\n

Africa\u2019s cellular networks cover 350-million people who cannot afford to use them, and that would only change when governments removed tax and sales duties on handsets and mobile services, Olunga said. <\/font><\/p>\n

Increasing the coverage also needed co-operation between rival players, said Gateway Communications CEO Peter Gbedemah. By 2008, calls from one African country to another could be routed directly and not via Europe \u2014 as they are now under a legacy of colonial telecoms systems.<\/font> <\/p>\n

Discuss this article<\/a> <\/p>\n

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RAMPANT acquisitions in the cellular network industry have seen four players grow to dominate Africa by serving 40% of all subscribers.<\/p>\n","protected":false},"author":23,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"idle","_sma_x_autopost_error":"","_sma_x_post_id":"","_sma_facebook_post_id":"","_sma_instagram_post_id":"","_sma_threads_post_id":"","_sma_x_attempts":0,"footnotes":""},"categories":[17],"tags":[],"class_list":["post-550640","post","type-post","status-publish","format-standard","hentry","category-technology"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/550640"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/23"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=550640"}],"version-history":[{"count":0,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/550640\/revisions"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=550640"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=550640"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=550640"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}