The Vital Role of Satellite in Growing the Hybrid African Network
Africa has been one of the fastest growing regions for fixed satellite services in recent years, fuelled by demand for critical infrastructure from communications providers and television programmers. Satellite provides the ability to reach almost anywhere, linking the most remote parts of the continent to major centres where fibre may be available, via an affordable and reliable communication infrastructure that is easy to install and maintain. Considering Africa’s size and population, opportunities to expand mobile, data and DTH services are enormous. The tremendous growth rate of telecommunications across Africa means that the complementarity of satellite and fibre connectivity is essential to meet the existing demand and ensure greater reach, diverse routing and continuity of service. Satellites can do anything that fibre can, with the ability to provide it anywhere on a reliable basis. Satellite networks are extremely predictable, allowing constant and uniform quality of service to thousands of locations, regardless of geography. Unlike most terrestrial alternatives, satellite networks can be rolled out quickly to multiple locations, connecting cities with remote areas across a large landmass where terrestrial fibre is insufficient or non-existent. Intelsat was the first to introduce satellite-enabled services to Africa in 1965. As demand for data and voice services grew, Intelsat also was the first to provide satellite-enabled, panregional broadband networks, and to offer wireless operators a backhaul solution to extend their cellular networks. Meeting Africa’s demand for advanced connectivity and a reliable, high-quality service will require satellite and fibre providers to work together and offer hybrid service delivery models that ensure continuity of service during fibre service interruptions. Reliable, redundant and diverse routing options to terrestrial services is essential for critical business operations, and the combination of satellite and fibre offers users the ultimate redundant solution. Satellite is immune to natural disasters and accidents such as the cutting of in-ground cables that can interrupt service. This makes satellite service a perfect backup solution for networks that demand uninterrupted, quality service. A great example of satellite’s strength to provide critical backup was witnessed in Nigeria, when Nigeria’s SAT3 submarine cable system suffered a cut on one of its landing cables which connects the interior grid with the international undersea line. One of Nigeria’s primary Internet Service Providers immediately switched operations to its backup satellite service, ensuring uninterrupted connectivity for customers. Recent examples of satellite’s critical role in business continuity also can be found in Japan and Haiti. After devastating earthquakes struck these countries, telecommunication companies were able to restore and connect voice and video services within 24 hours thanks to their use of satellite communications for redundancy. Overall, mobile penetration in Africa is still less than 55% and fibre connectivity is limited to the urban population areas. That translates into huge business opportunities for both network operators and backhaul connectivity providers. Limited access to financial services also provides creative growth opportunities to use mobile handsets in non-traditional ways. Because of its design and functionality, satellite-based connectivity is a viable economic solution for extending and adding diverse reliability to any connection. Although the cost of satellite backhaul rises when bandwidth is increased, satellite remains a cost-effective solution when properly engineered to transmit voice and broadband data. Intelsat is uniquely positioned to form alliances with the fibre operators to deliver satellite hybrid services to this demanding and growing marketplace. Intelsat delivers services to nearly 60 mobile telecom operators in more than 40 countries; representing 64% of the region’s subscribers. Working together, satellite and fibre operators will play a pivotal role in answering the continent’s demand for reliable data services that will fuel economic and societal growth in homes, offices and schools.
For the purposes of this article, West and Central Africa refers to Nigeria, Côte d'Ivoire and Cameroon. West and Central Africa is one of the richest regions in sub-Saharan Africa, with most of the countries being oil, mining and agricultural exporters.
• Nigeria, Côte d'Ivoire, and Cameroon are oil exporters and home to dozens of mining companies.
• Nigeria is the third largest African economy in terms of GDP after South Africa and Egypt.
The three countries had GDP per capita (PPP) of more than $1,500 in 2010, higher than the average of $1,000 in sub-Saharan Africa. Moreover, all three countries have outstanding literacy rates, more than 60 percent in 2010. This, coupled with high GDP per capita, is an indication that higher end-services, other than voice, can easily be adopted by the population. That said, these countries still face high levels of corruption and regulatory challenges that hamper market growth in terms of telecommunications services. Unlike Cameroon, Côte d'Ivoire and Nigeria are connected to three undersea cables: Main One, SAT-3 and Glo-1. These countries also expect the landings of other undersea cables such as the West Africa Cable System (WACS) and Africa Coast to Europe (ACE) in 2011 and 2012, respectively. The landings of these undersea cables have started to have a positive impact on the telecoms sector, with the reduction of wholesale bandwidth costs. This situation has led to the introduction of advanced applications such as unified communications and IPTV. Moreover, the landings of these cables have triggered the deployments of terrestrial fibre-optic backbones by mobile operators in Nigeria and Côte d'Ivoire. For example, MTN Nigeria and Globacom have rolled out nationwide fibre-optic cable backbone in Nigeria. In 2009, there were approximately 92.6 million mobile subscribers in the three countries, representing a mobile penetration rate of 40 percent. This indicates that there are still growth opportunities in the region, especially in rural areas. MTN and Globacom remain the largest mobile operators in the MTN - 44.4% Globacom - 18.9% OTHERS - 21.1% ZAIN - 15.6% Mobile Penetration Rate (%) 0.0 5,000.0 HIGH 0.5 LOW GDP Per Capita ($) Cote d'Ivoire Cameroon Nigeria three countries, with 44.4 percent and 18.9 percent market share, respectively. However, with the acquisition of Zain by Bharti Airtel, the competitive landscape is expected to change in Nigeria. Frost & Sullivan expects that Airtel is likely to increase its market share in Nigeria in the next five years, thanks to the implementation of its Indian model. This model of Airtel's has started to bear fruit in Kenya where the company has managed to chip away at its competitors' market share. Moreover, CDMA operators have been losing market share to GSM operators in Nigeria. This is mainly due to the lack of economies of scale. In response to this downward trend, CDMA operators should focus on mobile broadband services and complement their product offerings with GSM services. The mobile market generated US$8.6 billion and is expected to reach US$12.6 billion, growing at a CAGR of 5.6 percent from 2009 to 2016. The healthy growth rates can be attributed to an increase in mobile data and subscriber acquisition revenues as mobile operators initiate several new data tariff plans to boost their overall revenues.
Regulatory and infrastructure overview
The level of telecoms deregulation varies among the three countries, with Nigeria being the most liberalised. Other factors include:
• Nigeria has introduced a unified licensing regime.
• No monopoly on intercity fibre-optic deployments is present. • Nigeria is on the threshold of implementing mobile number portability.
• Unlike Cameroon, mobile operators are allowed to deploy intercity fibre-optic backbone in Côte d'Ivoire and Nigeria.
• In Cameroon, mobile operators are only allowed to roll out metro fibre-optic backbone. • Only the incumbent Cameroon Telecommunications (Camtel) is allowed to build nationwide fibre-optic backbone.
However, in Cameroon, the regulator has drafted a new ICT bill that will put an end to this situation. This bill is expected to come into force before the end of 2011. Only the Nigerian Communications Commission (NCC) has a clear policy on mobile number portability (MNP) in the region. The NCC is expected to implement MNP before the end of 2011. This implementation is likely to boost competition in Nigeria's telecoms sector and subsequently mobile operators are expected to provide enhanced services to their customers. Similar to other sub-Saharan African countries, there remain little or no competition laws and this lack of regulations has led to anti-competitive behaviour among the telecoms operators. Currently, competition-related issues are handled by telecoms regulators. There are interconnection regulations in these countries. NCC has recently introduced asymmetric interconnection rates, while regulators enforce symmetric interconnect rates in Cameroon and Côte d'Ivoire. Small market participants and new entrants are expected to benefit from this new interconnection regime in Nigeria. Mobile operators have deployed nationwide 2G/2.5G networks in these countries, whereas 3G/3.5G and WiMAx networks are still limited to major urban cities.
West and Central African market development and trends
To mitigate decline in revenues from voice revenues, mobile operators have started to provide mobile money services to consumers in Côte d'Ivoire and Cameroon. These offerings are expected to help mobile retain customers and sustain profit margins. This is likely to remain the trend in the next five years in these countries as Nigeria's Central Bank has issued licences for mobile money services to mobile operators. Another key trend is the moving of mobile operators in the broadband space in these countries. Unlike in other sub-Saharan African countries, mobile operators in these 3 countries have started to play aggressively in the broadband market. To this effect, these mobile operators have acquired ISPs and built data centres to cater to the lucrative corporate customers. Moreover, mobile operators have been outsourcing the management and maintenance of their networks to third parties. This is mainly observed in Côte d'Ivoire and Nigeria, where mobile incumbents closed outsourcing deals with vendors such as Nokia Siemens Networks and Helios Towers Africa Limited. Due to the lack of xDSL infrastructure and other alternatives, 3G and 3.5G networks are expected to become primary access technology for the Internet. Mobile operators are expected to deploy 3G and 3.5G networks in Cameroon and Côte d'Ivoire by 2012, due to high demand for mobile broadband services.