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.

As global economies continue to recover from the worldwide recession of 2008 and 2009, with a number of developed economies still struggling, the emerging economies of the world have shown the strongest growth, especially in Africa. One area where this is most evident is the information and communication technologies (ICT) sector. This sector is a key socio-economic driver, as it has a huge beneficial impact on social and economic development and contributes significantly to GDP growth. The vast investment going into fixed-line and wireless communication technologies in Africa, South America and parts of Asia is helping to open up these economies and accelerate growth and development more rapidly than in developed nations. These trends are clearly illustrated in the annual Connectivity Scorecard study commissioned by Nokia Siemens Networks and conducted by Professor Leonard Waverman, Dean of the Haskayne School of Business, University of Calgary in Canada, in conjunction with the economic consulting group LECG. The Connectivity Scorecard is the first study to rank 50 countries around the world in terms of useful connectivity: that is, the extent to which governments, businesses and consumers make use of ICT to enhance a country's social and economic prosperity. The study groups economies into two separate indexes, to account for differences in the level of their development. The indexes rank economies according to the World Economic Forum's definition of innovation, resource and efficiencydriven economies. Developed economies, which are driven largely by the intersection of technological innovation, globalisation and deregulation, fall into the innovation-driven economy index; developing and emerging economies are classified as resource and efficiencydriven economies, and are grouped together for the purpose of the study. The scores are determined by the measurement of a series of indicators for each country in two areas –infrastructure and usage, plus skills – in the categories of business, government and consumer markets. Individual weightings are allocated to each sub-category of the country, with a larger weighting applied to business, since it is a key contributor to productivity growth. The Connectivity Scorecard therefore measures countries on a relative basis rather than on an absolute basis, with low scores reflecting gaps in a country's infrastructure and/or usage. Historically, African countries have done well in the study, with South Africa leading the pack in 2009 and 2010. Other key African nations that feature prominently in the study include Nigeria, Egypt, Tunisia, Kenya and Botswana. This is mainly due to the large scale investment going into fixed-line and wireless connectivity infrastructure, as service providers look to expand reach and market share in these burgeoning markets. South Africa has done particularly well in the study, placing fourth in 2009 and second in 2010, due largely to the robust spending and investments being made into ICT by the business and public sector, as well as the high level of business usage and ICT skills in the market. This reflects the fact that the larger South African corporations are sophisticated IT users, especially compared with other resource and efficiency-driven economies. However, there is room for improvement in the consumer segment, as the country displays low Internet subscription levels, as well as usage. The case is different in the mobile sector as South Africa's mobile telephony penetration and coverage range from good to very good, with high level SMS usage; but it is lacking voice minute usage when compared with other resource and efficiency-driven economies. This robust investment is being driven mainly by large-scale fibre infrastructure projects aimed at harnessing the massive amounts of international bandwidth available from a number of undersea fibre optic cable systems that have come online in recent years. The SEACOM and Eastern Africa Submarine Cable System (EASSy) along the East coast of Africa, along with the West African Cable System (WACS) and the incumbent SAT-3 cable system along the West coast, has increased international broadband capacity exponentially, to the point where it is now cheaper than local bandwidth capacity. The major hurdle in the advancement of the local connectivity market has been the widespread inability of service providers to access the incumbent operator's local loop, as well as a lack of suitable infrastructure to deliver all this capacity to the door of businesses and consumers. This has resulted in some level of fixed-mobile substitution, where home users adopt mobile data as their primary source of connectivity. However, Nokia Siemens Networks (NSN) has experienced a great deal of demand for our 40G technology on fibre, and there are a number of new fibre infrastructure projects rolling out in South Africa, driven either by government or consortiums of service providers and network operators. Due to the restraints of the local loop in the country, NSN also expects that the broadband access market for home use will be dominated by wireless and DSL services for some time to come. From a satellite perspective, large bluechip corporates – for whom connectivity is mission critical – still rely on satellite services to provide an essential level of redundancy. A number of projects aimed at providing connectivity services to rural and remote areas are also using a combination of satellite services and next generation wireless networks to reach these untapped markets. Satellite projects such as the Google-backed O3b and Intelsat SA's New Dawn satellite will benefit both South Africa and Africa, as more high capacity broadband services will be provisioned to the African continent in the near future. Despite these factors, South Africa dropped down the Connectivity Scorecard rankings in 2011, but this was mainly due to the more robust data and methodology used – specifically, a re-weighting that affected the business components of the scorecard; and also the use of new data and indicators, such as usage, that adversely affected South Africa. In 2011 South Africa fell seven places to rank ninth among the resource and efficiency-driven economies. However, when these fibre and satellite services come online we can expect a marked increase in the connectivity capabilities of a number of African countries, including South Africa, as they will bypass the barriers currently in place around the provisioning of ICT services, specifically high speed connectivity. This will make the Internet a part of everyone's life and will increase capacity from Kbits per second to Mbits per seconds. The key element, relating to the Connectivity Scorecard, is a country's ability to utilise these services to improve its level of socio-economic growth. Taking a closer look at the scorecard, a similar pattern can be seen in the performance of all the other African nations discussed, with the exception of South Africa. They display a satisfactory performance in the consumer segment, driven by adequate mobile network penetration. However, focused development in areas such as human capital and regulatory frameworks needs the most work, as these areas will enable the countries to look beyond the mobile sector for growth. The challenges and potential are evenly matched, thereby calling for sustained efforts across all segments to harness existing potential, with fixed-line fibre infrastructure playing the primary role in provisioning affordable high speed connectivity services. More specifically, Botswana has moderate consumer and weak business infrastructure, yet it has strong business usage of ICT. The country needs to further develop ICT infrastructure, especially fibre infrastructure, to improve measures like broadband penetration and Internet connectivity. Despite its high mobile penetration, Kenya's low ICT investments by businesses and the government affect its overall ICT development. However, the telecommunications sector is progressive and increased investment into fibre and satellite capacity can greatly enhance its capabilities. Tunisia has a strong consumer segment as a result of heavy investments in the telecom sector since the mid-1990s, which has created one of the most developed telecommunications infrastructures in Northern Africa. A high penetration rate driven by nearly 100% mobile network coverage is the country's biggest advantage. However, the country is held back by mediocre to low performances across the business and government segments and will do well to focus on a supportive regulatory framework, while developing basic human capital to boost overall ICT development. Supported by a strong showing in mobile telephony, Nigeria's relative strengths lie in the consumer segment. Poor performance across business and government is holding back its overall ICT development. Lastly, Egypt remains at the lower end of Africa's resource and efficiency-driven economies due to its weak business and consumer categories. Its relative strength lies in the government segment, but it needs sustained growth across all sectors to see real advancement. It is clear that significant investment into the provisioning of fibre infrastructure will greatly assist the majority of Africa's strongest resource and efficiency-driven economies in the Connectivity Scorecard study. This should see them improve their rankings in years to come, especially as it will allow them to tap into the wealth of international bandwidth capacity running up and down the African coastline. For land-locked nations, satellite services will greatly boost ICT capabilities in the short term; as they build out more sustainable, lower cost connectivity capabilities, such as fibre and next generation wireless networks.

Market introduction

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.