Telecoms, Mobile and Broadband in Africa - 2005

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Telecoms, Mobile and Broadband in Africa - 2005 - Geographic

Paul Budde Communication Pty Ltd.
Management Report February 2005

With over 700 pages of research, BuddeComm's 2005 Telecoms, Mobile & Broadband in Africa - Geographic series contains a comprehensive analysis of the telecoms industry and the companies involved in it. This research is divided into the following volumes: · Volume 1 - Central and East Africa (Botswana, Cameroon, Democratic Republic Congo, Ethiopia, Kenya, Tanzania, Uganda). · Volume 2 - North Africa (Algeria, Chad, Egypt, Libya, Morocco, Sudan, Tunisia). · Volume 3 - Southern Africa and Indian Ocean Islands (Angola, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland, Zambia, Zimbabwe). · Volume 4 - West Africa (Benin, Burkina Faso, Cote d’Ivoire, Gambia, Ghana, Nigeria, Senegal). · Volume 5 - Overviews and Telecommunications Companies in Africa

Executive Summary Northern Africa Northern Africa is home to some of the most developed telecom markets on the continent and features the world’s fastest growing fixed-line market in Sudan. All countries in this group except for landlocked Chad have well developed fixed-line infrastructures and direct access to international submarine fibre optic cables, and all but Chad and Libya are among the relatively few African countries offering commercial Asymmetrical Digital Subscriber Line (ADSL) services. Morocco has the highest overall teledensity in the region thanks to its booming mobile market. Maroc Telecom’s highly successful Initial Public Offering (IPO) in November 2004 was 50 times over-subscribed. Privatisation of the PTOs is on the near-term agenda in Chad and Egypt. Algeria’s liberalisation efforts have resulted in the PTO being converted into a joint stock company in preparation for privatisation, the establishment of an independent regulator and the licensing of three GSM networks. Despite being one of the wealthiest nations on the continent, its telecom network still requires extension and modernisation to keep up with demand as the country is slowly emerging from economic and political problems that made it difficult to finance these needed improvements. While the fixed-line network is expanding slowly, the mobile sector has enjoyed extraordinary growth since liberalisation in 2002. 2003 also saw the introduction of ADSL broadband services and the temporary legalisation of Voice over Internet Protocol (VoIP) telephony, a move from which the government retreated in 2004. Full liberalisation of the telecommunications market is now planned for 2005. Against a backdrop of poverty and years of civil war, drought and famine, Chad lags behind neighbouring countries on almost all communications-related indicators and despite support from the World Bank, private sector investment is urgently needed. Despite impressive growth, one of the country’s two mobile networks ceased operations in mid-2004 due to an unresolved dispute with the government, but a third licence was awarded in November of the same year. Other expected developments moving into 2005 include the partial privatisation of the national operator, Sotel Tchad. Although Egypt has suffered an economic slowdown since 2000, the telecom sector has continued to perform consistently well. Data traffic is growing strongly and demand for both fixed-line and mobile communications is huge. The privatisation of Telecom Egypt is at an advanced stage of planning. Egypt has become the largest Internet market and the third largest mobile market in Africa (after South Africa and Morocco). Extraordinary growth in both the mobile and Internet sectors has been achieved on the basis of privatisation, infrastructure-based competition and the successful implementation of a ‘free Internet’ strategy. A broadband initiative launched by the government in 2003 aims to increase the number of broadband connections ten-fold within three years and will bring 24Mb/s access to residential households in 2005. Libya is emerging from almost two decades of economic isolation, which contributed to the stagnation of its oil industry and invariably its telecoms sector. It is now taking steps to introduce more relaxed market policies with a view to attracting foreign participation in key sectors including telecommunications. Despite having an old style monopoly player for the provision of posts and telecommunications services, its fixed-line network is superior to those in many other African countries. In sharp contrast, the mobile sub-sector remains underdeveloped with a penetration of around 3% in 2004, but growth has been accelerating in recent years. Third generation (3G) mobile technology is being installed, and the launch of a second mobile network in September 2004 may bring further stimulus to the market moving into 2005. Morocco’s telecom network is among the largest in Africa with top class facilities and services. Driven by exceptional growth of the Internet sector since 2003, demand for fixed lines has started to rise again after falling steadily since 2000 when competition was introduced to the mobile market, driving mobile penetration towards the 30% mark at the end of 2004. Incumbent operator Maroc Telecom was partially privatised in 2001 and highly successfully floated on the Paris and Casablanca stock exchanges in November 2004, being 50 times oversubscribed. There are plans to auction the country’s second fixed-line concession in 2005, possibly bundled with a third mobile licence. Full competition exists in the provision of VSATs, data and Internet services, cybercafes, and telecentres. With a Compound Annual Growth Rate (CAGR) of more than 40% over the past five years, Sudan by far represents the fastest consistently growing fixed telephony market not only in Africa but worldwide, spurred by the discovery of oil in 1997. Internet usage grew by 250% in 2003 and mobile telephony by a staggering 210% in the first nine months of 2004 alone. Annual telecommunications investment has skyrocketed from only US$500,000 in 1994 to over US$100 million. Key developments are the awards of a second mobile licence in October 2003 and a second fixed-line licence in November 2004. Enormous further potential exists, as market penetration in all segments is still low. Under a recent peace agreement, the oil-rich south of the country which has been beyond the central government’s control and deprived of development for decades, is now set to establish its own independent telecommunications regime, creating huge new opportunities for service providers and equipment suppliers. Tunisia has one of the most developed telecommunications infrastructures in Northern Africa. The mobile sector has experienced exceptional growth, especially since a second operator was licensed in 2002. Third generation (3G) trial systems have been installed and as one of the first countries in Africa, Tunisia saw its first 3G call made in September 2004. Internet access is available country-wide with a fibre optic backbone and international access via submarine cables, terrestrial and satellite links. In 2005 the focus will be on expanding broadband services throughout the country. Central and Eastern Africa Low fixed-line teledensity and Internet penetration and the explosive growth of mobile telephony (particularly prepaid) are the chief characteristics of the telecom markets in the Central and Eastern region of Africa. Every country in this group now has an independent telecom regulator overseeing the further development of the sector. The incumbent PTOs in several of the countries have been partially privatised with others to follow in the near future, including major markets such as Kenya. Following in its footsteps, neighbouring Tanzania and Uganda will also introduce new competition frameworks in 2005, deregulating among other things the use of Voice over Internet Protocol (VoIP) telephony. The telecommunications sector in Cameroon has in the past few years undergone considerable transformations following the privatisation of the mobile subsidiary of the PTO, the award of a second mobile licence and the preparation for privatisation of Camtel. While the fixed-line network is at a very low level of development with long waiting lists for connections, the country’s two mobile networks have experienced phenomenal growth since the introduction of competition in 2000. Mobile subscribers now constitute more than 90% of all telephone lines in the country. Despite full competition in the Internet sub-sector, it is still under-developed with penetration of less than 1%. With the participation of foreign investors in the national operator after privatisation, network expansion and introduction of new services can be expected. The Democratic Republic of Congo, formerly Zaire, is a mineral-rich country that is recovering from civil strife and many years of pillage by its former leaders which has accounted for the low level of development of its telecommunications and other infrastructure. While the traditional fixed-line network has deteriorated to almost non-existence, mobile telephony has experienced triple-digit growth figures almost every year since 2000. There is also strong demand for Internet service which is hampered by the underdeveloped telecoms infrastructure. Even though wireless technologies also serve as a fast replacement of the obsolete fixed network, national teledensity remains low and vast areas of this large country devoid of any telecommunications infrastructure. Ethiopia is one of the few African countries still practising a monopoly in its telecoms sector though with an independent regulator. Total telephone line penetration remains very low. However, the government is intent on privatising the national operator, ETC, and introducing competition in mobile and Internet services. The mobile sector has been growing by 100% or more per annum in recent years, resulting in major infrastructure expansion efforts. Several broadband initiatives launched during 2004 promise to bring the country closer to the information society. ETC has budgeted a record amount for the financial year 2004/2005 for infrastructure improvements.𘹴 was a big year for Kenya’s telecom sector with Telkom’s monopoly in the fixed-line and international bandwidth sectors coming to an end, the licensing of a regional carrier, a third mobile operator and several new international data carriers. The licensing of a Second National Operator (SNO) was aborted and may have to be repeated, but in the meantime a new competition framework has been introduced involving, among other things, the liberalisation of VoIP telephony. These steps, along with the planned sale of a majority stake in the PTO in 2005 will change the telecoms landscape in Kenya dramatically. Kenya has one of the largest Internet communities in Africa and is also among the fastest growing mobile markets in the region. Yet, enormous further potential remains, with mobile and fixed-line penetration only at around 10% and 1%, respectively. Tanzania has a fully competitive mobile sector comprising four mobile operators while two fixed-line operators separately cover the mainland and the semi-autonomous island of Zanzibar. Major advances occurred after 2000 when competition in the mobile sector was introduced and the incumbent PTO was partially privatised. Mobile subscribers now outnumber fixed-lines by more than 11:1. The country’s Internet market remains largely untapped owing to limited and poor fixed-line infrastructure. However, following the end of the PTO’s monopoly on the mainland in 2005, more pervasive fixed-line services and data networks can be expected. VoIP telephony will also be liberalised under the new competition framework in 2005, following in the footsteps of neighbouring Kenya. Once referred to as the Pearl of Africa, then devastated by civil war, peace and radical economic reforms have transformed Uganda into one of the fastest-growing economies on the continent. The telecommunications sector has undergone major transformations after the entry of a SNO and the launch of a third mobile network in 2001. Uganda was the first country on the continent where the number of mobile subscribers passed the number of fixed-line users, now at a ratio of more than 14:1. Major initiatives have been launched to bring telecommunication services and the Internet to rural areas of the country, partly funded by the highly successful operators through a Universal Service Fund (USF). A new competition framework is to be introduced in mid-2005 which will include the licensing of a third national operator and the liberalisation of VoIP telephony. Southern Africa The diversity among the countries in this group is immense, ranging from South Africa which has the continent’s most advanced telecommunications networks and markets, to countries which have only recently emerged from civil war like Angola and Mozambique and which are consequently at a very low level of development, even though their mobile markets are growing very rapidly. In between are relatively wealthy nations like Botswana and Namibia which benefit from their close ties with South Africa, and the island nation of Mauritius, sporting some of the best telecoms indicators of the continent. A return to peace in mineral-rich Angola in 2002 has led to a triplication of foreign investment during 2003. The licensing of four new fixed-network operators has introduced competition to this sector, but still less than 1% of the population have access to a fixed-line. The mobile sector has been competitive since 2001, and despite spectacular growth especially during 2004, market penetration is still low at under 4%. The government has, however, achieved its goal of raising the number of fixed-line and mobile phone subscribers to over 500,000 by 2005 ahead of time. Botswana is one of the continent’s wealthiest nations with a thriving economy that rests on diamond exploitation and tourism. Its telecommunications sector features a modern network and advanced services. Two mobile operators serve the country’s 1.8 million citizens with penetration exceeding 30% while the government-owned national operator BTC has seen a decline in the number of connections due to the success of the mobile networks. Enormous potential exists in Internet service provision where access is disparately low compared with fixed-line penetration. Telecommunications in the Kingdom of Lesotho has undergone gradual transformation from a state-owned monopoly to a privately majority-owned national operator in 2000 with competition in the mobile sub-sector since 2002. Mobile penetration exceeded 8% in 2004 compared with a fixed-line teledensity of under 2%. The use of Wireless Local Loop (WLL) technology has led to an accelerated increase of teledensity. This in turn will foster growth in Internet penetration. After the end of Telecom Lesotho’s exclusivity period in February 2006, more competition may be introduced in the fixed-line, international gateway and satellite services markets. Madagascar’s telecom sector is based on modern structures with an independent regulator and full competition in mobile telephony. During 2004, the transfer of a majority stake in the national operator Telma to a strategic investor was completed. Despite this, national teledensity remains extremely low. The bulk of telephone connections are provided by the country’s mobile networks. Internet penetration is impeded by the low number of fixed-line connections, high Internet tariffs and limited number of PCs available in the market. Aggressive attempts by the government to curb corruption and kick-start economic development have begun to bear fruit after a political crisis in 2002 threatened to undo many of the economic gains made in recent years. Malawi’s telecommunications sector is among the least developed in Africa with a fixed-line penetration rate below 1%, despite more than doubling the number of fixed-line connections from 1999 to 2004. The mobile sector has grown more than seven-fold during the same period, but market penetration is equally low at just over 1%. With the establishment of an independent regulator to oversee the transformation of the sector, major developments have occurred including the partial privatisation of Malawi Telecom in 2004. Increased infrastructure investment in the incumbent’s network is expected to occur after privatisation, giving impetus to Internet penetration. 2005 may see the licensing of a third mobile operator, and a second national operator is planned in the medium term. The island nation of Mauritius is actively pursuing a policy to make telecommunications the fifth pillar of its economy and to become a regional telecom hub with Singapore as a role model. In 2003, the telecom market was opened to full competition, one year ahead of plan. A second national operator was fitted out with the country’s second fixed-line, third mobile and seventh international gateway licence in early-2004. At the same time, eight companies were licensed for the newly legalised provision of Voice over Internet Protocol (VoIP) telephony to retail customers. Mauritius was the first country in Africa to launch commercial Third generation (3G) mobile services in November 2004. The key focus in the Mauritian telecommunications sector leading into 2005 is on deployment of new technologies and applications, e-commerce and development of the island as a free port for technology companies. Mozambique remains one of the least developed markets in Africa, but peace in recent years and radical reforms have transformed the country into one of the fastest-growing economies on the continent. The telecoms sector is independently regulated and a second mobile licence was awarded to Vodacom in mid-2002. The mobile sub-sector has experienced triple-digit growth rates almost every year since 1997. In a bid to encourage competition, the state-owned telco TDM was converted into a limited company in 2003 and its mobile subsidiary mCel was spun-off into a stand-alone company. The sale of a majority stake in TDM to a strategic investor is being planned and a second fixed-line operator is to be licensed before the end of 2007. Namibia’s fully digital telecom network has one of the most modern backbone infrastructures in Africa, with fibre optic links connecting the length and breadth of the country which has helped to drive growth in the Internet and mobile telephony sectors. While mobile and fixed services are still a monopoly, plans are underway to introduce competition and further privatisation. Teledensities are above the regional average with 6% for fixed lines and close to 20% for mobile. The award of a second mobile licence is expected to lead to an improved standard of service as well as boosting the development of communications in rural and remote areas. A second fixed-line operator is also planned. South Africa’s telecom sector boasts the continent’s most advanced network in terms of services provided and technology deployed. The much delayed and controversial process of awarding a Second Network Operator (SNO) licence had still not come to fruition at the end of 2004, but in June of that year, four companies were licensed to provide services in under-serviced areas, heralding the introduction of competition in the fixed-line market for the first time. Sweeping liberalisation measures announced in September 2004, including the legalisation of VoIP telephony, are set to change the country’s telecoms landscape fundamentally. Market penetration of the three mobile networks passed the 50% mark during 2004, compared with around 10% for fixed lines. Third generation (3G) mobile services were introduced in December 2004. The telecoms sector in the small kingdom of Swaziland features an old-style posts and telecom monopoly operator for fixed services but with private participation in mobile and Internet services. Nevertheless, fixed and mobile penetration is relatively high compared with other countries in the region. While Internet usage is growing reasonably fast, the level of penetration is still well below international standards, but about average in the region. The government is considering unbundling the national operator to create discrete telecom and regulatory entities and later privatise them. Zambia has an independently regulated sector with three competing mobile networks and a monopoly fixed-line operator, Zamtel. Efforts to privatise Zamtel initially failed, but in a new round of bidding in 2004 a Chinese investor emerged as the preferred bidder for a 20% stake. The fixed telephone network is still at a very low level of development with fewer than 90,000 connected main lines for a population of almost 11 million. This in turn has impeded growth in the Internet sector. The mobile sector has consequently experienced strong growth, and plans to license a fourth mobile operator may be revisited in the near future. Despite Zimbabwe’s deep economic crisis, now in its sixth year, the country’s telecom industry has been relatively healthy over the past few years, with reasonable growth occurring in the mobile and Internet sectors and a limited but slowly improving telephone network. Attempts to privatise the national telco during this time have failed, as has a second national operator, unable to raise the necessary funding, but with economic indicators slightly improving towards the end of 2004, a potential third carrier recently established may be more successful in the future. Growth of the country’s three mobile networks has been slowed down by the crisis, but an immense pent-up demand is now being addressed following major infrastructure upgrades in 2004. Western Africa The countries in this group include some of Africa’s most liberalised telecommunications markets. Ghana led the way when it privatised its national operator as early as 1995, with Côte d’Ivoire and Senegal following in 1997 where France Telecom acquired stakes. With hundreds of service providers, Nigeria is one of the continent’s largest and fastest growing markets and plans to sell a majority stake in its incumbent telco, Nitel, in 2005. Overall, penetration rates in all sub-sectors are still very low. All countries in this group have access to high-speed transmission capacity on fibre optic submarine cable networks linking them with each other and the rest of the world. Despite having an old style posts and telecommunications entity and no independent regulator, Benin has four private mobile networks whose combined connections exceed fixed lines by more than 5:1. While the country’s fixed-line infrastructure is completely digital, it serves less than 1% of the population which severely hinders adoption of the Internet. Envisaged sector changes include the unbundling of the national operator and privatisation of the resultant entity charged with provision of basic telecom services. Burkina Faso ranks among the poorest countries in the world, but its telecom operator has a track record of re-investing in the network and has registered steady growth in its teledensity. Despite being landlocked, the country is linked to the SAT-3 submarine cable system via interconnections with four neighbouring countries. Mobile telephony has experienced very healthy growth since the introduction of competition in 2000, with subscribers to the three digital networks now outnumbering fixed lines by more than 5:1. The incumbent telco’s monopoly will come to an end in 2005 and the government plans to privatise it and licence several new international gateway operators, rural operators and possibly a Voice over Internet Protocol (VoIP) operator. A political crisis in Côte d’Ivoire that turned into a civil war in 2002 has disrupted the country’s economy, but most segments of the telecommunications market continued to flourish. Three mobile operators were licensed in 1996, and despite the fact that one of them ceased operations in early-2004, growth continued and there are now more than four times as many mobile subscribers than fixed lines. Internet usage has experienced a major upswing, but owing to the high cost of access and poor availability of fixed-line infrastructure, Internet penetration remains low. The semi-privatised incumbent telco’s monopoly ended with the close of 2004, opening the way for new players moving into 2005. Although Gambia has had a 100% digital network since 1995 and teledensity has steadily risen in recent years, fixed-line penetration in this small country remains relatively low with about 25% of demand unmet. Gamtel, the incumbent operator, is still government-owned and provides virtually all telecom services. The company has ambitious plans to multiply teledensity by 2008. The country’s two mobile networks together had more than 170,000 subscribers by September 2004, representing a relatively high penetration rate by African standards of more than 11%. Ghana is one of only a few African countries with a vastly liberalised telecom market. Now with two national operators, a third regional operator and four mobile networks, annual growth has been significant, notably in the mobile sector where the number of lines exceeds fixed lines by more than 4:1. The two national operators held a duopoly on international service until February 2002. The expiry of the duopoly has paved the way for the licensing of more operators, promotion of competition and improved efficiency. Ghana was amongst the first countries in Africa to achieve connection to the Internet. The rapid growth in this sector in recent years is set to continue in 2005. Ongoing liberalisation of Nigeria’s telecom sector has led to a multi-operator environment and skyrocketing investment. The independent regulator has been strengthened and is effectively monitoring and protecting the interests of service providers and consumers. A Second National Operator (SNO) licence was awarded in 2002. In addition, over 200 companies have secured licences to provide national and regional telecommunications and value-added services. With four GSM networks, Nigeria is now the fourth largest mobile market in Africa and has experienced triple-digit growth rates every single year since 2000, while fixed-line and Internet penetration are still extremely low. An IPO and the sale of a majority stake in Nitel to a strategic investor is planned for 2005 and receiving strong interest from major foreign telecoms players. Senegal has developed one of Africa’s most extensive and modern telecommunications infrastructures. The monopoly of the partially privatised national operator, Sonatel, ended in 2004, and 2005 may see the formation of new players in various market segments. The number of mobile subscribers has grown dramatically since competition was introduced in that sub-sector in 1999, with cellular lines now representing more than 80% of all telephone lines. Internet usage has experienced a major boost since Asymmetrical Digital Subscriber Line (ADSL) services were introduced in 2003, but overall market penetration is still low. Sonatel’s response to the VoIP grey market has been remarkably different from that of many other African telcos and has led to a relatively peaceful coexistence.

Number of pages - 735

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