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With 2G growth slowing down in Africa, 3G network rollout is starting to pick up pace in many urban areas across the continent

Mobile growth in Africa has been spectacular during the last decade. From pretty much a standing start, the continent now boasts an average mobile penetration of over 40%. In some countries, such as Ghana, Egypt, Nigeria and South Africa, mobile penetration is much higher. Yet the overall pace of annual African mobile growth is on the decline, and has been for a few years. Informa Telecoms & Media, a research firm, calculates that annual mobile subscriber growth in Africa was 26% during 2009, compared to a 35% growth rate in 2008 and a 42% jump in 2007. With 2G growth weaker than before, 3G is creeping up the agenda of many African operators as a potential way to bolster revenue growth through mobile data and internet access services, particularly in urban areas where fixed-line broadband is patchy and expensive. But it is still early days for African 3G. According to Informa, GSM represented 93% of the continent’s mobile subscriptions as of Q1 2010, with 3G/WCDMA and 3G/EV-DO accounting for market shares of only around 3.4% and 0.5% respectively. Moreover, of the 3.4% of WCDMA users (which represent 16 million subscriptions), Informa calculates that fewer than five million actively use the 3G data services. The remaining WCDMA subscribers in Africa use their 3G service only for voice. Despite the low 3G subscriber take-up so far, figures supplied by both the GSA (Global mobile Suppliers Association) and the CDG (CDMA Development Group) indicate that 3G network rollouts for both WCDMA and EV-DO are gathering pace in many parts of Africa, and not just in the comparatively more developed economies, such as Egypt and South Africa (see ‘HSPA brings faster 3G to Africa’ and ‘CDMA growth in Africa’). “In many African markets, the main revenue driver for 3G is still internet access rather than internet-enabled applications,” adds Said Irfan, a research manager at IDC who covers the African markets. “In Africa, there is a clear opportunity to give people their first experience of accessing the internet over a mobile network rather than through fixed, given the lack of a proper fixed infrastructure in many parts of the continent.” Irfan highlights the rapid headway that mobile broadband is making in Morocco, where the total number of mobile broadband subscribers has surpassed the number signed up to fixed broadband services. “Mobile broadband in Morocco has even caused a significant drop in fixed broadband growth,” adds Irfan. Greater enthusiasm for 3G in Africa cannot only be explained as a response to lower growth prospects from 2G. “Some regulators are only getting around to releasing 3G spectrum now,” says Robert Schumann, a lead consultant at Analysys Mason. “The prices for 3G equipment are also coming down, which, in some cases, means that 3G can be added at little extra cost in the course of normal equipment replacement cycles.”

THE BHARTI FACTOR

The arrival of India’s Bharti on the African continent, following its US$10.7 billion purchase of the majority of Zain Africa's mobile assets in March 2010, may well drive down 3G kit prices even further. Deep-pocketed Bharti, which is eyeing up large-scale 3G rollout in India, would have the purchasing muscle to drive better deals with 3G suppliers through greater economies of scale. “Although Bharti’s strategy has mainly been about keeping a low cost operation, I don't think they would be averse towards rolling out 3G in the continent, judging from their current bid for an Indian 3G licence,” says Irfan. “Nonetheless, the pace of the rollout depends on how high the license prices are initially set. Given that 3G spectrum is considered a scarce resource, governments in Africa tend to set a price that in the end could prove harmful for operators' business case in a low- ARPU market.” Thecla Mbongue, a senior research analyst and African markets specialist at Informa, points out that Bharti runs 3G networks in all of its other international operations: Guernsey, Jersey, Sri Lanka and Seychelles. But out of the 15 Zain operations sold to Bharti, 3G is only available in Ghana, Nigeria and Tanzania. So, one might reasonably conclude that 3G expansion in Africa is on Bharti’s agenda. “Bharti’s focus does lie in running more efficient networks, but we don’t think that it will refrain from following 3G opportunities if the market environment is favourable,” says Mbongue. But Schumann warns that 3G is unlikely to revolutionise mobile operations in Africa in the near to mid-term, and that some markets will have a much better chance of 3G success than others. “Mobile data still accounts for a small part of mobile revenue, and rollouts are concentrated in urban areas,” he says. “A key success factor for any mobile data proposition is revenue density, which makes Egypt [due to population concentration] and South Africa [due to urban income levels] more likely markets for 3G success, and, indeed, they are at the front of the pack now.” In Egypt, observes Schumann, Vodafone is already the leading broadband provider (ahead of Telecom Egypt in terms of subscriber numbers). In South Africa, Vodacom took the broadband subscriber lead from Telkom, the country’s fixed-line incumbent, in Q2 2009.

CABLING UP THE 3G BUSINESS CASE

Although licence terms and conditions, as well as the high-value contract wins for suppliers, invariably grab all the 3G headlines, there is a less glamorous but equally important side to the 3G business case. The ability to reduce network operating costs, particularly in highly competitive markets, will be necessary if operators are to provide attractively-priced retail mobile data packages without wreaking havoc on their profit margins. And for many mobile operators in Africa, particular in East Africa, the availability of more international and national bandwidth capacity – at cheaper prices – should increase their chances of achieving that. In July 2009, a second submarine fibre-optic cable connecting South Africa to the rest of the world went live. The 17,000- km cable, built by Seacom—a Mauritius-based private-sector vehicle—at a cost of US$600 million, runs from Mtunzini in KwaZulu-Natal to India and Europe, via landing stations in Madagascar, Tanzania and Kenya (and so connects East Africa to the global fibre-optic cable network for the first time). With a capacity of 1,280Gbps, Seacom is far larger than the existing SAT3 cable (120Gbps) that runs up the west coast of Africa, which is operated by South Africa’s state-owned Telkom. EASSY, another privately-held international submarine cable connecting East Africa, is due to be completed in June 2010, and will bring an additional 1,400Gbps capacity. Despite the availability of cheaper wholesale submarine cable prices, which reportedly undercut pre-Seacom prices by ten times or more, Schumann is cautious they will have a dramatic and positive impact on every mobile operator – and not simply because some operators are still tied into paying pre-Seacom prices on long-term contracts. “This is partly because there remain constraints on the radio capacity, on the backhaul from base stations to a switching centre, and on end-user devices that remain limited in their ability to consume large amounts of data,” he says. “Laptops also remain stubbornly above US$200, compared with US$20 for a 2G handset and approximately US$40-50 for a 3G handset. Inelasticity of customers’ demand, and marginal utility they derive from new technologies, will limit the uptake of mobile data.” Even so, some mobile operators, such as South Africa’s MTN, are making concerted efforts to boost network capacity by investing in terrestrial fibre-optical cables, which will also connect to the undersea cable systems. By investing heavily now in network capacity, MTN hopes to reduce operating costs in the long term. In partnership with Neotel, South Africa's second national operator – and Seacom's main anchor tenant – MTN is rolling out a 5,000-km internal fibre-optic cable network. During 2009, MTN reports that 245km of the fibre-optic cable was completed along the Gauteng-Durban route. The southern and northern rings of the Gauteng fibre projects are expected to be completed by July 2010. “We have been fairly active in the submarine cable area, not as a speculator but primarily to provide capacity for our own operations and hopefully, in the process, reduce the costs,” said Phuthuma Nhleko, president and CEO of the MTN Group, in a March 2010 analyst conference call to present the group’s 2009 financial results. “To date [we have invested] almost $85m and we've most probably got commitments close to $200m over the next few years.” MTN fibre-optic investment is running in parallel with 3G network rollout in Ghana, Nigeria and South Africa. In South Africa, MTN’s 3G capacity increased 22% during 2009 compared with a 12% increase in 2G capacity. Moreover, MTN’s 3G population coverage increased in South Africa from 35% in December 2008 to 48% in December 2009. “Operators that have a stake in cross-continent data networks, such as MTN's UUNet and Vodacom's Gateway, would certainly benefit in more ways from the availability of extra capacity than pure mobile operators by way of their ability to offer more services to clients,” adds IDC’s Irfan. “Also to benefit early are mobile operators with IRUs [indefeasible rights of use] on the subsea cables, as they would be able to gain a first advantage in accessing the extra capacity.”

FUTURE TRENDS

Moving forward, Schumann expects more 2.6GHz spectrum to become available in Africa in the near future, which fits well with 802.16e mobile standards). It is likely, however, that 802.16e – due to considerations of cost and regulatory restrictions – will be used more for fixed and nomadic broadband services rather than as a true mobile service (and a direct competitor to cellular 3G). UHF (TV) spectrum will also become available on the continent once the digital switchover gets moving – there is a regional deadline of 2015 for Africa to complete the transition from analogue to digital TV. Again, that should provide more opportunity for 3G growth across the continent. The availability of more spectrum does, of course, throw the spotlight on regulators as to how they allocate it. As in other regions of the world, Africa has not been immune to spectrum disputes. In Kenya, for example, operators aiming to break the 3G monopoly held by Safaricom have complained to the regulator that the US$25 million licence fee is too high and will jeopardise the 3G business case. “Some governments do indeed auction 2.1GHz spectrum at a high price, since it is a sought after spectrum band by GSM operators in need of upgrading to WCDMA,” says Informa’s Mbongue. “So far, the most expensive 3G spectrum fees [in the 2.1GHz band] were recorded in Egypt where the frequencies were sold for over US$700 million to Vodafone and Mobinil in 2002. Nigeria has recorded the second highest fees as four operators each paid US$165 million for 10MHz in the 2.1GHz band in 2007. Usually the price per population has been around US$1 [US$1.24 in Nigeria], but in Egypt it was around US$9.” Yet Africa, on the whole, appears to have learned some 3G licensing lessons from developed economies – at least according to Schumann. “Many regulators are now avoiding the temptation to consider 3G to be a cash cow,” says Schumann. “Mozambique and Botswana, for example, have not attached large price tags to 3G or WiMAX spectrum. This is both for pragmatic reasons. Governments recognise that the hype around Europe’s 3G licence awards was not replicable and because, in simple terms, the spectrum is only valuable when it is being used productively. Demanding exorbitant fees simply leads to delays, court battles, investor uncertainty and substantial fees paid to banks and financial advisors who help to raise new capital.” If governments can refrain from charging exorbitant licence fees, and mobile operators can reduce their network operational costs – and the price of devices continues to fall – 3G has every chance of success in Africa.

Sidebar 1: 3G TECHNOLOGY SNAPSHOT HSPA AND HSPA+

Suppliers of 3G equipment, based on WCDMA technology, talk enthusiastically about software upgrades that will allow operators to achieve peak downlink speeds of up to 14.4Mbps. The technology, known as HSPA (high-speed packet access), is available in three flavours: peak downlink speeds of 3.6Mbps, 7.2MBps or 14.4Mbps. The first two are becoming more and more popular in Africa, but no mobile operator on the continent has yet to adopt the 14.4Mbps version (see HSPA brings faster 3G to Africa). Beyond HSPA there is HSPA+, which uses higher order modulation schemes (from 16QAM up to 64QAM) and more advanced antenna technology (known as MIMO). The first HSPA+ step is to deliver peak downlink speeds of 21Mbps, but Germany, Italy, Singapore and Switzerland – according to survey information published by the Global mobile Suppliers Association (GSA) in April 2010 – already boast commercial HSPA+ networks that deliver up to 28Mbps on the downlink. Orange, which has invested heavily in HSPA networks in Africa, has gone one better. In Austria, Orange now offers a commercial 42Mbps peak downlink service in the town of Weiner Neustadt. Ericsson, the world’s largest supplier of mobile equipment in terms of sales, anticipates that the combination of multicarrier MIMO and 64QAM modulation will enable peak HSPA+ bit-rates of 84Mbps and, eventually, 168Mbps.

Sidebar 2: HSPA BRINGS FASTER 3G TO AFRICA

The overwhelming majority of WCDMA-based 3G operators are turning to HSPA (high-speed packet access) to boost downlink and uplink speeds. Africa is no exception. According to data supplied by the GSA (Global mobile Suppliers Association), 38 countries in the Middle East and Africa (MEA) had either commercial HSPA networks up and running by April 2010, or had operator commitments to do so. MEA, according to the GSA, accounts for 25% of countries in the world who either have HSPA commercial services or network rollout commitment. Europe (36%), Americas (20%) and APAC (19%) account for the remaining distribution of countries around the world that have commercial HSPA. The list of commercial HSPA rollouts in Africa is growing fast. According to the GSA, there are commercial HSPA operators in Angola, Botswana, Egypt, Ethiopia, Ghana, Kenya, Lesotho, Libya, Madagascar, Malawi, Mauritania, Mauritius, Morocco, Mozambique, Namibia, Nigeria, Reunion, Rwanda, Senegal, Seychelles, South Africa, Sudan, Tanzania, Uganda and Zimbabwe. Of the 186 commercial HSPA networks around the world, just over half (54.5%) support a peak downlink of 7.2Mbps or above, says the GSA. The majority of HSPA operators in Africa, however, only deliver peak rates of 3.6Mbps or under. Even so, there is a growing list of HSPA operators on the continent that go beyond 3.6Mbps. Mobinil and Vodafone (Egypt); Safaricom (Kenya); Orange (Mauritius, Réunion and Senegal); Méditel (Morocco); MTC (Namibia); Vodacom and Telkom (South Africa); Sudatel, Zain and MTN (Sudan); and Vodacom and Zain (Tanzania) each offer peak downlink rates of 7.2Mbps. There are no African mobile operators, however, that offer HSPA at peak rates of 14.4Mbps, or any that has opted for HSPA+ that can reach to 21Mps, 28Mbps or 42Mbps. Of the 341 commercial HSPA operators around the world, GSA says that 52 have launched HSPA+ (across 32 countries). Although the majority of HSPA+ launches are in developed economies, there are exceptions: Bulgaria, Croatia, Greece and Turkey each have HSPA+ operators, which might suggest that HSPA+ will also have a place in some of Africa’s markets. CDMA GRO WTH IN AFRIC A Africa accounted for only 5.4% of all CDMA subscribers in the world as of December 2009, which translates into nearly 30 million, according to figures provided by the CDG (CDMA Development Group). However, the rate of CDMA subscriber growth in Africa between December 1997 and December 2009, at 31%, is faster than any other geographical region in the world. Although the CDMA subscriber statistics provided by the CDG include 2G CDMA2000, CDMA WLL (wireless local loop) systems – as well as 3G – it shows that Africa has a fairly large and strongly growing base from which to evolve CDMA networks to their faster and higher-capacity 3G versions, such as 1xEV-DO Rel. 0 (peak downlink speeds of 2.4Mbps) and 1xEV-DO Rev. A (3.1Mbps peak downlink rates). Yet of the EV-DO subscriber total worldwide as of December 2009 (142.1 million), Africa still only accounts for 3% (4.2 million). North America and the Asia-Pacific make up the bulk of the world’s 1xEV-DO subscribers with 54.3% and 34.3% market shares respectively. With nearly a doubling of 1xEV-DO subscribers during 2009, however, Africa is showing stronger CDMA-based 3G momentum than other regions in the world. According to the CDG database (as of April 2010), commercial 1xEV-DO Rel. 0 cellular networks are up and running in Angola, Cameroon, Lesotho, Liberia, Malawi, Mauritania, Mauritius, Morocco and Namibia. Commercial 1xEV-DO Rev. A cellular networks are available in the Democratic Republic of Congo, Morocco, Senegal, Sierra Leone, Sudan and Tanzania. The CDG also reports that Wana, a privately-held telco in Morocco – and which already operates commercial Rev. A and Rel. A networks – is planning to launch a 1xEV-DO Rev. B network. Rev. B networks can offer peak downlink speeds of up to 9.3Mbps (or up to 14.7Mbps with a hardware upgrade). A key driver for CDMA growth in Africa is Huawei and ZTE. Both Chinese vendors have invested heavily on the continent and have historically managed to undercut many of their western supplier counterparts on price. Again, referring to the CDG database, Huawei accounted for 64 of the publicallydisclosed CDMA contracts (2G, 3G and WLL) in Africa as of April 2010, while ZTE accounted for 37. Motorola, Nortel and Star Solutions are the only publicly-disclosed western suppliers with a CDMA presence in Africa, but they can only claim a handful of African CDMA contracts in total among them.

Published in May 2010

Smart phone outlook in Sub Saharan Africa: 2010 marked the beginning of change

Broadband penetration remains dismally low in Sub Saharan Africa. According to Frost & Sullivan, broadband penetration in Sub Saharan Africa was less than 4%. DSL access stalled before it could actually accelerate and while fibre deployment is growing, albeit slowly, widespread access is not expected to take off for another 10 years. In comes wireless access. Most countries in Africa have mobile network geographic coverage of over 70% and licences for alternative technologies such as CDMA and WiMAX have become more affordable and readily available in the region. Major mobile operators in the region such as MTN, Safaricom and Orange have invested in WiMAX as an alternative to drive wireless broadband access, while fixed line operators are using CDMA to expand their existing copper infrastructure. Wireless access is therefore well positioned to be the next growth driver for broadband access in Sub Saharan Africa. However, despite expansive wireless network deployments in the region, the cost of devices, especially smart phones, to facilitate access to broadband services has been prohibitively expensive. Until recently, the average selling price for a smart phone – or high tier phone – was on average US$250- US$350. This created high cost barriers for African users – both consumer and business including the middle and high end users. Of the 168 million mobile handsets shipped to Sub Saharan Africa in 2009, only 9% (15.1 million) were smart phones. In August 2010, Chinese manufacturer ZTE released its Racer model smart phone which began retailing at US$100. In the US, Dell released a US$99 smart phone. Huawei also launched its Ideos smart phone in South Africa – its point of entry into the rest of Africa – at US$100-US$150. This is a welcome development for the Sub Saharan African market in addressing price issues. In addition to facilitating affordable internet access, cheaper smart phones will be critical to grow services such as m-commerce, m-health, m-education and even m-governance. Other major vendors such as Samsung, Nokia, Motorola and LG are expected to follow suit with low cost smart handsets targeted at emerging markets. This would be in line with these vendors’ strategies to drive penetration into Africa – their main frontier for growth. It is therefore a matter of time before we see smart phones in the sub US$50 range in Sub Saharan Africa. With the issues of access and devices well on their way to being addressed in Africa, the main question is: What should be done next to ensure that these developments amount to sound wireless broadband access across the region? The deployment of 3G networks will need to gain momentum, in order to support some of the advanced functionality on these low cost smart devices, including in rural areas. This is likely to happen as more devices find their way into the underserved or rural population; operators will have no choice but to start expanding coverage into those areas. Furthermore, relevant local content will be critical in generating interest in use of the devices and broadband access in general. Operators should also consider handset distribution as part of their strategies in order to synchronise network deployment and usage.

Published in February 2011
Friday, 04 February 2011 00:00

2010 a year in review by lesley stones

The past 12 months can be written off as a dull kind of year for the telecoms industry, with economic turbulence making many players happy to survive rather than thrive. The chief development for Africa was undoubtedly the belated entry of the Indians, as Bharti Airtel took over the bulk of Zain’s African activities. Other than that there were a few price skirmishes, the axing of the telecoms minister in South Africa and the surprisingly low-key landing of the Eassy cable. Here’s a brief reminder of a few or the more interesting moments in a year that most of us have probably forgotten already. Let’s hope the industry regains its usual energy and joie de vivre in 2011.

January

The year began badly for Vodacom’s subsidiary in the Democratic Republic of Congo (DRC). A bitter clash with its 49% shareholder Congolese Wireless Network (CWN) saw CWN file papers in a Kinshasa court accusing Vodacom of “plundering” the company. CWN claims Vodacom illegally took up to US$180 million out of the DRC and repatriated the profits instead of reinvesting in the operations. Vodacom denied the allegations and initiated arbitration through the International Chamber of Commerce, which could take years to be resolved. Both parties agreed to keep discussions open to keep Vodacom DRC running, although Vodacom may decide to pull out of the country if arbitration looks likely to take too long, or if the relationship deteriorates further. South Africa’s third cellular operator Cell C had a better start to the year and awarded a US$378m contract to China’s ZTE Corporation to supply equipment and managed services to roll out a national 3G network. While ZTE was welcoming more open communications with the west, the Chinese government was less keen to embrace decadent western ways. Cyber attacks on Google and other companies led to escalated tensions between the US and China, although the government claimed it wasn’t to blame. US secretary of state Hillary Clinton called on the communist country to end online censorship, but Chinese officials said they would not tone down the way they censor the internet. The internet also went down for parts of Africa, although by error rather than design. A planned interruption on the Sat-3 cable connecting South Africa to Europe caused chaos with users unable to access international websites. Traffic was routed over a different cable to Asia, emphasising the need for multiple cables.

February

Nigeria’s government made yet another attempt to sell off its ailing incumbent operator Nitel. MTN Nigeria and Globacom were among six shortlisted bidders for a 75% stake, or to bid for stakes in some of its subsidiaries, including mobile arm M-Tel and its international gateway. The government went on to approve a US$2.5bn bid for Nitel, which was five times the US$500m that industry experts considered its maximum value. The deal went to the New Generation Telecommunications, a consortium of local and foreign investors including a Dubai investment house, Minerva Group. But by November, sources were saying some of the backers were getting cold feet and wanted an extension on the payment deadline. GiCell, a Nigerian company in the consortium, blamed the government for taking almost eight months to give final approval, making the foreign investors jittery about what exactly they were getting into. Further afield, the first images were transmitted back to Earth from South Africa’s Sumbandila satellite, a project that cost more than ZAR20 million to build and ZAR12 million to launch. The satellite is designed to strengthen the country’s technological capabilities, space resources and satellite engineering skills. Sumbandila can also collect imaging data during a national emergency such as floods. While the government can organise a presence in space, it’s struggling with the more mundane concept of TV. Plans to migrate from analogue to digital transmissions were delayed until April 2013 at the earliest, at least 18 months later than originally envisaged. The regulatory authority partly blamed anticipated delays in the availability of the set-top boxes needed to receive the new digital signals. It forgot to say that the delays were being caused by the government prevaricating over which technology standard to adopt.

March

After two aborted efforts to merge with MTN, the Indian operator Bharti Airtel finally began its African adventure by acquiring Zain’s African activities. The US$10.7 billion deals saw Bharti take over operations in 15 countries, and excluded Zain’s operations in Morocco and Sudan. Bharti is handing over a tidy sum of US$9 billion in cash and discounting US$1.7 billion of debt. Hopefully it still likes what it got, because the remaining US$700 million is due this March. Zain had been trying to sell its African networks for more than a year, despite initially denying that any such plans were afoot. Bharti now has 163 million subscribers, with Zain Africa’s 41.9 million looking rather paltry compared to Bharti’s home-grown user base of 121 million. So at least the feisty Indians should teach Zain a thing or two about economies of scale and serving low-income consumers. Bharti is expected to be a more formidable operator than Zain was, and is now a rival to MTN instead of the potential partner it tried to be. Yet MTN CEO Phuthuma Nhleko described suggestions that Bharti posed a serious threat and could trigger potential price wars as “exaggeration and oversimplification.” His comments were based on the opinion that a business model that works in India may not transport easily to a totally different environment. How well Bharti will manage to replicate its operations is still playing out, with a business model designed to serve millions of people in densely crowded areas now having to adapt to sparsely populated regions lacking basic facilities. Zain has rebranded as Airtel and has already slashed prices in Kenya to steal market share from Safaricom, Kenya’s dominant player.

April

After two aborted efforts to merge with MTN, the Indian operator Bharti Airtel finally began its African adventure by acquiring Zain’s African activities. The US$10.7 billion deals saw Bharti take over operations in 15 countries, and excluded Zain’s operations in Morocco and Sudan. Bharti is handing over a tidy sum of US$9 billion in cash and discounting US$1.7 billion of debt. Hopefully it still likes what it got, because the remaining US$700 million is due this March. Plans for Egypt’s Orascom Telecom to sell all or some of its African assets suffered a setback when the Algerian government said it would block the sale of Orascom’s subsidiary in that country. Orascom is the majority owner of Algeria’s Djezzy network, which is a key part of its operations and contributes 47% of its revenue. Algeria’s government would rather buy Djezzy using its pre-emptive rights as a minority shareholder than see it sold to a foreign entity. Analysts warned that the inability to sell Djezzy could scupper the sale of Orascom’s assets to potential buyers including MTN. That proved true, with MTN walking away from the deal. By November Russia’s Vimpelcom had agreed to buy a controlling stake in Orascom for US$6.6 billion. But as the year drew to a close those plans began to look increasingly shaky as Algeria remained a hurdle and regulatory issues also emerged in other countries. Orascom operates GSM networks in Algeria, Tunisia, North Korea, Canada, Pakistan, Bangladesh, the Central African Republic, Zimbabwe, Burundi and Namibia. As usual, Africa’s elite got looked after a whole lot better than its poor, when wellheeled consumers welcomed Apple’s new iPad device. The first models arrived via the grey market without the official support of Apple. The tablet computer is a multifunctional device with a 9.7-inch high-resolution screen, making it perfect for watching podcasts, videos, browsing the web, checking e-mail, reading magazines, watching movies and listening to music. It also runs close to 200,000 applications.

May

Network operator MTN said it had invested nearly ZAR450 million specifically for the 2010 Soccer World Cup in South Africa. It rolled out infrastructure to all the stadiums so fans could make calls and connect to the internet without sucking up all the bandwidth from businesses and consumers in the neighbourhood. At Soccer City in Soweto alone it erected 22 base stations. May also saw two of those occasions where something we already know is finally admitted in public. Firstly, the outgoing chairman of the Independent Communications Authority of South Africa (Icasa) admitted that the regulatory authority had failed the sector. “I concede we have failed you,” Paris Mashile told his stakeholders. In reply to complaints about how long Icasa took to deal with industry issues, Mashile said its performance had been “inexcusable and unacceptable” and had affected the telecoms companies in very serious ways. Mashile complained that the industry poached Icasa’s best staff and that it was beholden to the government for its budget. “We are not serving the sector well and it requires a turnaround strategy,” he said. The mea culpa was welcome, but there was little clue as to when or how a turnaround strategy may begin. The second “yes, we already knew that” came when a study by Ookla confirmed that Africa is poorly served for broadband. Ookla’s Net Index, based on millions of tests, ranks South Africa 93rd in the world for broadband download speeds. Uganda fares just a fraction better in 92nd place. The index found the average global consumer download speed is 7.7MB per second. The average in South Africa is 2.2Mbps. The worst countries in which to attempt a data download include Mali and Sudan.

June 

June was a month in which plans went awry for several companies. MTN formally ended negotiations to buy the African assets of Orascom Telecom. The deal probably fell through because the Algerian government blocked the sale of the Djezzy network, which was perhaps the asset MTN most wanted to get its hands on. MTN instantly bounced back by declaring that growth in Nigeria is far from over, and announcing that it had raised another ZAR16 billion to expand its network there. The new infrastructure investment follows heavy investments in 2008 and 2009, which now lets MTN cover 83% of Nigeria’s land and 84% of its people. While MTN was raising money, Neotel was losing it in vast amounts. The operator licensed to rival Telkom in South Africa suffered a net loss of nearly ZAR1.6 billion in the 2010 financial year. It was the first time its majority stakeholder, India’s Tata Communications, had revealed the extent of the losses being clocked up by its subsidiary. Neotel was initially seen as a much-needed, much-delayed alternative to Telkom, so businesses and consumers had high hopes of enjoying decent competition at last. But Neotel has failed to set the market alight. Plans at Telkom also went wonky when the company announced that CEO Reuben September was resigning – in other words, his contract wasn’t renewed. Politics turned out to be the chief reason, with September and his chairman:

– government appointed Jeff Molobela

– repeatedly clashing.

He was replaced by Jeffrey Hedberg as acting CEO, with no news yet of who will become the permanent head.

July

The East African Submarine System (Eassy) undersea cable started commercial operations on July 30, remarkably ahead of schedule and about 10% below its US$300- million budget. Not bad for a project that’s literally been in the pipeline for seven years. The 10,000km fibre optic cable on Africa’s east coast links South Africa, Mozambique, Madagascar, Tanzania, Kenya, Somalia, Djibouti and Sudan with other submarine cables from Europe, Asia, the Middle East and the US. One change of plan was unexpectedly caused by pirates, as the consortium has chosen not to build a landing point in Mogadishu in Somalia yet because of pirate activities. About 25 telecoms operators are buying its bandwidth so far, and its investors include international bandwidth prices, as Eassy, Seacom and Sat-3 cables all charge roughly the same. Hay said Eassy simply wasn’t big enough to make a large impact, but it was a valuable redundancy option for telecoms operators and internet service providers, which still have vivid memories of the lengthy breakdown of Seacom. South Africa’s MTN, Vodacom, Telkom and Neotel, as well as Dalkom Somalia, Comoros Telecom and Mauritius Telecom. Chairman Trevor Martins said the cable had been launched with an initial 60Gb per second of capacity, which would be increased as demand grew. He expects to see a broadband capacity explosion in Africa between 2012 and 2014. Although Martins said the cable would provoke another sharp reduction in wholesale international bandwidth prices and cheaper broadband for consumers, that hasn’t been particularly noticeable. South African internet service providers say the cable has had little impact on the price of bandwidth so far. Neotel’s Angus Hay agreed that Eassy’s arrival hadn’t had a big impact on international bandwidth prices, as Eassy, Seacom and Sat-3 cables all charge roughly the same. Hay said Eassy simply wasn’t big enough to make a large impact, but it was a valuable redundancy option for telecoms operators and internet service providers, which still have vivid memories of the lengthy breakdown of Seacom.

August

South Africa’s largest cellular network Vodacom teamed up with Nedbank to launch the M-Pesa money transfer service. M-Pesa is already enormously popular in Kenya, where it’s operated by Safaricom and used by 10 million people. It’s also available from Vodacom in Tanzania. The technology was developed by the Vodafone Group to let cellphone users transfer money quickly, easily and securely from person to person. Vodacom CEO Pieter Uys said: “The beauty of this service is the ease and speed with which people can send money to each other anywhere in the country. As anyone can receive M-Pesa without having to be an M-Pesa customer or even a Vodacom subscriber, it has the power to reach all cellphone users.” Only Vodacom customers can send M-Pesa, but anyone on any cellphone network can receive it. Nedbank chief executive Mike Brown said cellphone penetration was extremely high in South Africa, but banking was far less widespread, with more than 13 million economically active South Africans not having a bank account. M-Pesa would make basic financial services accessible to all and help bring marginalised individuals into the economic mainstream, he said. Customers can register for the service and deposit money into their M-Pesa account at outlets including shops, spazas and all Nedbank branches. Once they have money in their account, they can send it to any other cellphone user in South Africa, and the receiver can collect the cash at any M-Pesa outlet or a Nedbank ATM. Customers access their accounts using a four-digit PIN code and as long as that PIN remains secret their transactions are secure.

September

Price war skirmishes have become a regular feature in East Africa, and bubbled up again as Kenya made some drastic cuts in mobile call fees. Analysts said that posed a huge competitiveness challenge to its regional counterparts following the launch of the East African Common Market. High cross-network call rates force many subscribers to buy multiple Sim cards to call cheaply on one network then swap cards to call another network. Kenyans had been making crossnetwork calls at the equivalent of Ushs 300 a minute, with Uganda charging Ushs 340. But the price difference changed dramatically after the Communications "South Africa’s largest cellular network Vodacom teamed up with Nedbank to launch the M-Pesa money transfer service." Commission of Kenya halved the interconnection rate. Kenyans now call for an equivalent of Ushs 75 a minute across all networks. In Rwanda, the rate is about Ushs 270 a minute, while Tanzanians pay about Ushs 7.5 per second, and MTN Uganda charges Ushs 9 per second. When the Uganda Communications Commission tried to force down interconnection rates from USh180 to Ushs 131 last year it was immediately sued by MTN, which claimed that was well below the actual cost of the service and the fee should not drop below Ushs 151. Then Warid Telecom instigated a price war by slashing cross-network calls to Ushs 5 per second, making it the cheapest in the market. Warid said the new rate was half its previous fee, and was designed to make cellphone services affordable to more people. Next Bharti Airtel led a price war in Kenya by cutting call rates by up to 45%. Bharti said usage soared by 50% after the cuts, and within eight weeks its revenue was back to normal as higher usage offset the lower call fees.

October

Few tears were shed when a shake-up in South Africa’s cabinet saw Communications Minister Siphiwe Nyanda unceremoniously axed. Nyanda was replaced by the former deputy communications minister Roy Padayachie, seeing the return of a man who once showed far greater promise than the late minister he served under, Ivy Matsepe-Casaburri. Nyanda had allowed the department to totter from crisis to crisis. First he bought two extravagant BMWs then racked up massive hotel bills at the taxpayer’s expense. He never shook off allegations that he benefited from dodgy tenders. Then a spectacular clash saw him fire director-general Mamodupi Mohlala, who wanted to change the tendering processes. As internal wrangling absorbed much of the minister’s time, the state-owned signal distributor Sentech and the SABC were allowed to keep spiralling downwards through mismanagement, corruption, boardroom spats and failure to deliver on business plans. Analysts agree that Padayachie is a great choice, but given the department’s appalling track record for more than a decade, anyone with a touch of common sense and motivation ought to be an improvement. October also saw South Africa’s fixed line monopoly Telkom launch its new mobile services. The mobile offerings, dubbed 8ta, include a full range of prepaid and contract packages for consumers and corporate customers. Its “ultra-competitive contract offers” starting at R90 a month were designed to encourage more usage of mobile voice and data services, said 8ta’s Managing Executive Amith Maharaj. “We will provide more minutes for your money than any other network.” Telkom has erected 800 base stations of its own and has a roaming agreement with MTN to cover areas it has not yet reached. The initiative has already cost ZAR205m in operating expenditure and a further 3,200 of its own base stations are planned.

November

The long-awaited switch from analogue to digital broadcasting in SADC countries by 2015 looked set to be delayed by another five years as countries argued over which technology to adopt. The prediction of long delays came from Mgqibelo Gasela, head of regulatory affairs for MultiChoice Africa. He advised SADC leaders not to bow to pressure from Japan and Brazil to adopt a technology that is cheaper but less robust than the one they initially supported. Engineers in the Southern African Digital Broadcasting Association strongly recommend the adoption of DVB-T over the Brazilian and Japanese ISDB system, but politicians were being swayed by political pressure from those countries. “SADC should choose a standard that is the best standard worldwide and the latest,” Gasela said. And that meant DVB-T. He urged ministers to vote in the best interests of the region and not for political expediency. In January 2011, everyone breathed a sign of relief when South Africa’s Communications Ministry announced that SA would adopt DVB-T2, the latest version of the European standard. The Southern African Digital Broadcasting Association called the decision “visionary. Meanwhile, research by Informa Telecom declared that Africa now has 506 million active cellphone subscribers. Africa accounts for 10% of the world’s mobile subscriptions as user numbers in the continent rose 18% from last year due to demand for new services such as mobile internet access. In Ghana, a change of ownership took place as Kasapa Network was sold to Dubaibased Expresso Telecom. Kasapa serves 400,000 customers as the fourth operator behind MTN, Tigo and Vodafone. Expresso operates the Intercellular network in Nigeria and holds new licences in Mauritania and Senegal. CEO Isham Ayub said his company would upgrade the network across Ghana to enhance coverage, attract more users and offer a more customer-oriented service.

December

As the year limped to a close, MTN finally declared that outgoing CEO Phuthuma Nhleko would be replaced by Sifiso Dabengwa on Apri 1. Nhleko will stay on as non-executive deputy chairman. Dabengwa is currently the chief operating officer (COO) and was seen as the obvious choice, since he worked closely with Nhleko in driving MTN’s growth strategy. The COO position will be scrapped and a new position, CEO of MTN International, will be created to focus intensely on opportunities abroad. No candidate has been name for that yet. Christmas was grim for employees at South Africa’s fixed and mobile operator Neotel with retrenchments looming. Neotel has more than 1,000 staff, which cynics would say almost outnumbers its customers. The company’s debt providers have apparently brought in independent management consultants to assess the situation. Neotel will consult staff in January and February, with retrenchments expected in April. Neotel says it is evaluating its business strategy, operational performance, efficiency and competitiveness with a view to achieving long-term sustainability. Staying in South Africa, the government pledged to build 18 information and communications technology centres in 2011 to take technology to the rural poor. The ZAR180 million scheme will provide broadband internet access and computing resources in underserviced areas to help raise the country’s appalling low broadband penetration rate of 4% to double digits. Bringing us full circle, we end back in the Democratic Republic of Congo (DRC), where Vodacom and its minority shareholder Congolese Wireless Network (CWN) have agreed to appoint investment bank NM Rothschild & Sons to explore options to settle their acrimonious dispute and keep their network viable.

And a quick look at what's brewing for 2011:

Bharti should make a big impact in the countries where it aquired the networks of Zain. Expect more price wars, more innovative offerings and a general slashing of any flabby bits in the operating expenses. In South Africa the mobile interconnection fees finally fell, but the Independent Communications Authority of SA (Icasa) didn’t really get its way against wily operators Vodacom and MTN. It will try again in 2011 with plans to cut call termination rates in March. Consumers are advised not to hold their breath.

 

Published in February 2011

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