Africa is often touted by international equipment vendors, operators and analysts as a kind of new El Dorado for mobile telecommunications. But the continent\u2019s markets are complex and diverse, with greatly varied levels of development, and it\u2019s easy for investors to get burnt.<\/p>\n
That\u2019s the view of Julia Lamberth, sector leader for Africa telecoms at Ernst & Young, which recently published a research report, Africa Connected, that goes into detail about telecom opportunities on the continent.<\/p>\n
There are still enormous opportunities for operators to capture subscriber growth, especially in countries with low cellphone penetration levels. However, escalating competition and regulatory and political challenges mean that some operators \u2014 especially third, fourth and fifth licensees \u2014 are struggling financially.<\/p>\n
The bigger operators, such as MTN and France Telecom\u2019s mobile arm Orange, are financially sound, but smaller carriers licensed more recently have had a harder time of it, Lamberth says. \u201cThey tend to be highly leveraged, borrowing lots of money for capital expenditure,\u201d she says. \u201cIt wouldn\u2019t necessarily have been a problem if we hadn\u2019t had this economic downturn. But it\u2019s become [a matter of] survival for some of these operators \u2014 the problem is they have to keep spending.\u201d<\/p>\n
She cautions that this situation does not apply to all markets in Africa. \u201cBut we are starting to see patterns. If you are moving into a country where there is a strong incumbent and the presence of one or two larger regional players, there will always be growth, but it\u2019s not a guarantee that all operators will be successful.\u201d<\/p>\n
Lamberth says the perception, especially internationally, that Africa is waiting to be \u201cplundered\u201d by telecom operators is simply incorrect. \u201cThe idea that you can stick up a tower and make gazillions is wrong.\u201d<\/p>\n
She says international operators keen to enter African telecoms \u2014 and there are plenty of them, from the Middle East to China and the US – should examine each country individually and not regard the continent simply as a single market.<\/p>\n
There is a danger that a bubble could develop in African telecoms, Lamberth says. \u201cThe growth in telecoms has contributed so much to Africa\u2019s general economic development that we don\u2019t want it to become a bubble and then burst.\u201d<\/p>\n
She also worries that some markets are deregulating and liberalising too quickly. Botswana, she says, has thrown open its market completely. Ghana, with a population of only 23m, has six licensed mobile carriers, with pan-African operators Zain, Vodafone, MTN, Glo Mobile and Millicom all going head to head for market share.<\/p>\n
Lamberth thinks the bigger operators \u2014 particularly Zain, Vodafone and MTN \u2014 will play a consolidating role on the continent, snapping up smaller mobile operators as they seek to build bulk.<\/p>\n
Interest in Africa \u2014 in new licences, the privatisation of fixed-line assets, and acquisitions \u2014 remains red hot.<\/p>\n
Chinese operators bear watching, particularly China Mobile, which has more than 400m subscribers in its home market. It has stated that the only market outside China it\u2019s interested in is Africa.<\/p>\n
How and when it will expand is, however, hard to predict, says Lamberth. It may depend on how quickly the Chinese market reaches saturation.<\/p>\n
Because of China Mobile\u2019s low-cost approach in China, Lamberth believes the company can operate in Africa more profitably than many of the other big players. Its close relationship with Chinese equipment manufacturers, particularly ZTE and Huawei, could also help it grow.<\/p>\n
Surprisingly, Ernst & Young\u2019s report shows that some African countries\u2019 telecom industries remain almost completely undeveloped. These virgin markets are in the centre of the continent (see map). Countries with a lower than 20% penetration include Malawi, Mozambique, Rwanda, Zimbabwe, the Democratic Republic of Congo, Chad, Burundi, the Central African Republic and Niger.<\/p>\n
Telecom penetration is particularly low in north east Africa, where teledensity in countries such as Djibouti, Eritrea, Somalia and Ethiopia is around 2%. Despite the clear opportunities, Lamberth concedes only brave operators would venture into those markets because of the high political and regulatory risks.<\/p>\n
While some parts of the continent have barely got off the ground, more developed markets, such as Morocco, Tunisia and SA, are already moving to the next phase of mobile – the provision of wireless broadband Internet access.<\/p>\n
West African markets, especially Ghana, C\u00f4te d\u2019Ivoire and Nigeria, are also maturing fast. \u201cThey\u2019re still in the growth phase, but are starting to experience the characteristics of mature markets.\u201d<\/p>\n
Telecom penetration Africa-wide is 36%, according to Lamberth. She believes it could eventually reach 60% or even 70%. Because of poverty, it\u2019s unlikely that Africa will achieve the universal access seen on other continents.<\/p>\n
But the cellular market sizes always tends to surprise on the upside, she adds. \u201cWe are constantly surprised by take-up of mobile services.\u201d<\/p>\n