Thursday, 16 February 2012

What is the message from Glo in Ghana?

While the expansion of mobile markets in many countries across Africa is an undeniable opportunity, both private and public sectors are still looking for the magic formula to make it work for the benefit of all parties.
Ghana is a case in point. Although Glo Mobile (Globacom of Nigeria) is stating that its network is ready and has a number reservation campaign started since late January, this is not what was promised last year. So why is the reality not meeting expectations?
As has been seen elsewhere on the continent, progressive privatisation is not a simple process, especially when the present market has been effectively saturated with major incumbents. This was – and still is – an issue for Cell C in South Africa, going up against Vodacom and MTN. In Ghana, the major players are multiple, including MTN (Scancom), Millicom, Airtel and Vodafone.
Although Globacom seems like a good fit for the market in Ghana, being also Anglophone and from near-neighbour Nigeria, the launch of its services is not happening at quite the pace expected.
This is not because it lacks infrastructure. The company claims an investment of some USD 750 million in 1,600 base stations; has landed the Glo 1 cable that links to Europe and, by dedicated extension, to the US in Ghana; and potential capacity for 10 million lines.
Parallels with Globacom’s home territory in Nigeria abound. There are similar issues with logistics and geography and a similarity of focus between the two regulatory authorities, NCA of Ghana and the NCC of Nigeria.
So the cautious approach of Globacom in Ghana – whether made by choice or not – raises some questions as to why apparently expanding markets are not providing all the potential for new MNOs and increased competition.
To use South Africa as a comparison, it has to be pointed out that private and public sector interests are not as smoothly aligned as they might seem.
The step-by-step process of privatising telecoms in South Africa, often delayed and significantly behind its original schedule, was referred to as “managed privatisation”. It was also based on some assumptions regarding consumer choice and market growth that might now be seen as perhaps over-optimistic. This regulatory approach falls between two chairs: it may not allow the freedom that the private sector wants and it certainly will not happen at a pace driven by consumer demand. As it evolves with the goal of creating a market fair for all competitors it will, again, not move at a private-sector pace.
There is then a problem at both ends of the equation when calculating risks in new mobile projects. Despite the miracle of widespread adoption of mobile technology in Africa, the political realities run counter to the more fluid privatisation seen previously in the UK or Australia, to name two textbook examples. At the other end, the actual number of users is hard to establish and predictions based on any such assumptions can have major error margins.
In general, governments are not rapidly or heedlessly going to relinquish control of cash-cow telecoms. Hence, the concept of “managed privatisation” which, cynics might say, really isn’t a free-market process.
As for market size, potential growth and defining saturation in any one country, the real figures are opaque at best. For example, South Africa has a population of about 50 million – twice that of Ghana or one third that of Nigeria. Current, reasonable figures suggest that about 84 percent of South Africans have a mobile phone or access to one. Figures for South Africa based on different criteria indicate over 100 percent market penetration but let’s stay with the most conservative numbers. Ghana’s mobile penetration is estimated at some 81 percent while Nigeria’s is around 55 percent. Now look at per capita GDP. South Africa leads with over USD 10,000 per annum. Nigeria is at about USD 2,500 and Ghana about USD 3,300.
The one thing that drives consumer choices in mobile telecoms is novelty and the inevitable disaffection with existing operators. After that come the more mundane choices based on coverage, QoS, service offerings and, of course, price. It is certainly a risk, however calculated, for a new MNO to move into a nearly saturated market and hope to win over customers. Ghana is not as affluent as South Africa and Cell C has battled to gain market share even there. It is tempting to predict the same future for Globacom in Ghana.
No doubt, there is also an exit strategy. Assets can be sold off to other companies if the project fails. A quick look at a flurry of recent deals to unbundle and sell infrastructure in various parts of Africa shows that there is always such potential.
Despite the doubts, Globacom’s decision to launch in Ghana seems practical in terms of its regional presence, infrastructure and past experience. It was rated as the best network in Nigeria a few years ago, although recent figures would tell a different story.
However, a very simplistic calculation based on stated figures gives this result: USD 750 million invested for a maximum consumer base of 10 million translates to an ARPU of USD 75 to break even. That seems achievable, until you factor in the likely slow adoption curve, based on Globacom’s reliance on disaffected customers migrating from the dominant two operators. If only one million migrate, the break-even is USD 750 or a fifth of the annual per-capita GDP. That looks less achievable.
Realistically, if Globacom can win five million customers within five years, its Ghana operation starts to look doable.
Whether it can do that remains a question that only time can answer.
The other question that cannot be answered without the test of time is just how much impact data services will have.
The pattern elsewhere in Africa is still for voice and text to dominate. Mobile-targeted services like Twitter have lower usage than in other parts of the world. A current survey shows South Africa has the highest Twitter usage, followed by Kenya and Nigeria. Ghana ranked 20 out of the 20 countries in the study.
But one key point in that study is that young people (21 to 29) are driving mobile Twitter usage. Another is that, based on Opera usage, Nigeria is the fifth-largest mobile internet user in the world.
That bodes well for MNOs throughout Africa, as the market moves to data services. Whether that could save Globacom’s Ghana initiative remains to be seen.
This article has been contributed by Roy Johnson, a writer specialising in IT and business topics, who has regularly contributed to PC Magazine, as well as editing TechNet Magazine for Microsoft. Roy was formerly editor of CommsAfrica and contributing editor for Intelligence magazine.

Mobile wars in Africa: is Airtel winning?

Competition in African markets is fierce. It really is a war zone. And, as with any conflict, the outcome hinges on decisions regarding strategy – and the available weaponry.

Bharti Airtel has a history of making first moves and emerging as the winner just because of that. This is what built the company’s success in India, where it remains the top MNO and second-largest fixed-line operator. In fact, thanks to the massive market it serves at home, at the time it acquired the Zain portfolio in March 2010 Airtel was reckoned to be the fifth largest mobile operator in the world on a proportional subscriber basis, putting it behind the likes of China Mobile, Vodafone Group, American Movil and Telefonica, but ahead of China Unicom.

As has been widely covered for over a year now, Airtel has been looking at Africa as a new growth market. While it has a deal with Vodafone for the Channel Islands, Africa is the only other territory outside the Indian subcontinent (including Bangladesh and Sri Lanka) that the company has entered.

The commonalities are compelling: similar markets, needs and infrastructure. The realities on the ground are somewhat more challenging: logistics, legislative compliance and serious local competition being foremost.

The logistics of infrastructure in Africa are an equal challenge for all MNOs. That is a given. Where Airtel might have been overly optimistic is in hoping its Africa model would run similarly to its success in India, based on a first-to-market approach and having some leverage to overcome legislative obstacles. Unfortunately, while Airtel has a 30-year history of being first in India (with pushbutton phones, cordless phones and then mobile), they were not first in Africa. There were major EU, Middle East and South African players there ahead of them.

In fact, Airtel’s African expansion is largely thanks to its takeover of Kuwait’s Zain mobile operations in 15 countries. This was a beachhead, not a conquest. Zain only held dominant market share in a few countries.

Going up against market leaders such as MTN of South Africa, Airtel applied a strategy of extensive cost cutting. This followed on what it achieved in India, cutting a deal with Ericsson for per-minute fees (rather than upfront payment) that enabled very low-cost call rates from the outset. Airtel has an all-Africa, five-year deal in place with Ericsson for network management that offers similar advantages. Elsewhere, Airtel is engaged with Nokia Siemens Networks and Huawei, not keeping all its eggs in one basket, of course.

As a Plan B, possibly following on the indecisive outcome of Airtel’s low-cost invasion, the company has previously been negotiating a takeover of or (maybe) a joint venture with MTN itself. How this putative deal is described depends on which company is talking. This has been going on for some four years without a definitive ending. Even if it never happens, it is a signpost of just what Airtel would consider to get its Africa operations truly established.

But let’s look at realities.

Taking Nigeria as a bellwether example, Airtel’s charges are low, around 20 kobo (about GBP 0.08) per minute, but three times that for the first minute. That is up against MTN charges of 50 kobo, although MTN offers a cheaper peak rate (15 kobo) and more expensive off-peak rate.

As always, comparisons are tricky, given the different pricing regimes on offer.

Also difficult is working out which company is really winning. Airtel claims either number-one or number-two positions in many of its Africa operations (11 out of 17 countries). Tellingly, no claims are made for Nigeria. Airtel is not just being coy. There is an ongoing dispute over branding in that country and the latest development is that Airtel has been court ordered to rebrand as Econet (EWN). Airtel will appeal that ruling, while complying in the interim. This dispute goes back as far as 2003 and is not yet over. It is, however, a good example of the challenges Airtel faces in African settings and, while it continues, the real winner is MTN, holding on to its own leading position in Nigeria as well as its brand.

To come back to what we said at the start of this article, winning wars is not just a matter of having the best weaponry, although that helps. Without a strategy, chaotic retreat is the order of the day.

Airtel’s strategy bears comparison with the different approaches of two European operators who have been busy in Africa, Vodafone and Orange. Vodafone’s approach has been targeted, achieving a small number of high-value operations. Orange went large, seizing opportunities wherever they appeared. The final result is that Vodafone has good revenue and lower costs, whereas Orange has higher costs and less revenue.

What Airtel needs to prove is that its broad approach with low fee rates can win against competitors who have a head start and better targeting. Current usage, market share and consumer approval figures – where independently available – do not support a claim that Airtel is winning, despite the impressive growth that was claimed after the launch in 2010.

This is, to a large extent, an inevitable result of the original acquisition by Airtel of Zain’s operations. Among the 15 countries involved, not every one was clearly a winning proposition.

Nevertheless, do not underestimate Bharti Airtel. The company has deep resources, including enough to offer anything between USD 13 and USD 45 billion (as reported) to buy out its main competitor, MTN. It is also licensed to roll out 3G in 12 countries, clearly focused on the expected maturity of African markets finally proceeding to data services instead of the fundamental voice and text services that fuelled the original mobile boom on the continent.

On a side issue that might well have bottom-line impact in the medium term, Airtel is pushing ahead with its Green Towers programme to upgrade 22,000 of its sites in India to solar power over three years. The company won the MWC Green Mobile Award for that in 2011. Apart from the marketing boost, there are practical and financial advantages to such technology, especially in Africa. Other MNOs are also exploring this option but Airtel is not just experimenting. It has about 6,000 towers already running solar.

While Nigeria is obviously the jewel in the crown, Airtel will continue to be an influence in other countries, driving down rates and forcing technology upgrades.

This has advantages for consumers but is a problem for operators as growth in Africa’s markets has currently reached a plateau. Big as Africa is, there might not be enough room for all the players who are there at present.

This article has been contributed by Roy Johnson, a writer specialising in IT and business topics, who has regularly contributed to PC Magazine, as well as editing TechNet Magazine for Microsoft. Roy was formerly editor of CommsAfrica and contributing editor for Intelligence magazine.

Basic challenges for infrastructure in Africa

The obvious notes about remote locations, difficult transport routes and unreliable electricity are just the tip of the iceberg. MNOs in many parts of Africa face other problems.
Broadly speaking, the problems that operators face in Africa are well documented: large distances to be covered, unreliable road and rail transport, low per-capita policing ratios, occasionally extreme weather conditions and socio-economic factors that drive high crime rates.
Whereas this looks like a toxic cocktail for high-tech operations, it can be – and has been – dealt with in very practical ways by all MNOs across the region. Beyond that, however, it raises a question regarding what was previously called “appropriate technology” for Africa and the answer to that question might well be a signpost for the future.
Setting up a network of towers in remote areas of Africa is more daunting than in developed countries. Maintaining those towers then proves an even greater challenge. Even in urban areas, there are issues that are proportionally heavier overhead than elsewhere in the world: electricity, fuel, weather damage and theft.
On a simple business level, this means the costings and risk analysis for projects in Africa are more carefully considered. Startup costs remain higher, despite possibly lower costs for labour and basic materials.
Maintenance costs are the devil in the detail. MTN, the South African operator that holds significant slices of the market in many countries on the continent – 21 in all, including Middle East operations – reports that a generator is stolen every day, on average. That does not even include other damage such as cable theft or weather events. Nor does this cover the high costs of diesel fuel supplies and the negative environmental impact.
While the inflated maintenance costs can be dealt with on paper by adjusting the ratio of capex to opex, the fact remains that increased costs anywhere in the books run counter to providing low-cost, mass-market GSM access for Africa’s huge and often widely distributed population.
This has driven innovative approaches that are in the nice-to-have category in other parts of the world but practically a priority in Africa.
Taking MTN as one example, that company has been running pilot projects to power base stations in remote parts of South Africa using both solar and wind power. Building on that experience, MTN Cameroon has a project running to equip its towers with solar panels provided by ZTE. Typical of Chinese leadership in green technologies and a cautious approach, these installations are mounted with “theft-proof” screws on frames that are 3.5 metres high. It’s not just generators that get stolen. There is a market somewhere for practically anything.
Cynics will note that even such provisions might not be enough. But the present reports indicate that there have not been any problems thus far and MTN’s operating expenses are reduced.
By comparison, Airtel has also been active in exploring solar power, being currently engaged in a project to provide over 20,000 towers in India with panels. There is a reasonable expectation that this will be expanded to Airtel’s operations in other locations as it proves its value.
The advantages are not quite as prosaic as they might seem. There are few studies yet available for the solar initiatives in Africa but we can look at figures from India as a guideline. Greenpeace India reports that some 60 percent of power used by GSM towers in that country is actually provided by diesel generators. That is, as with Africa, thanks to remote locations and unreliable grid supply. Greenpeace claims a potential cost saving of 300 percent for operators over a 10-year time frame if they convert to solar.
Even without that saving being a proven figure, what we do know is that Indian MNOs are using something like three billion litres of diesel a year, producing some five million tons of carbon dioxide. And, of course, that is a huge fuel bill compared to grid power and “free” solar power, quite apart from the environmental impact.
While wind power might be an option in some specific locations, the advantage to solar is that Africa is generally well supplied with enough sunshine to avoid the power interruptions experienced with such installations in countries outside the tropics. The same applies to other less consistent renewables, such as wave or hydro-electric power sources. Solar still works better.
Looking ahead, it seems inevitable that MNOs across Africa will turn to solar. This is driven not just by green concerns and the need for being responsible corporate citizens but also by significant savings in running costs, including reduced risk of equipment theft.
A further predication that seems high-probability is that it will often be companies from Shenzen providing the necessary technology. China’s forward-looking approach on all things green and its own interests in Africa’s resources and developing markets practically guarantee that.
There is another aspect to operations in Africa worth noting. The same challenges that face operators also affect their customers. Obviously, if customers face problems with electricity, that is not good for business.
This issue is not yet being addressed with the same urgency as is seen with power supplies for base stations but there are signs that point to increased interest in this area.
There have been pilot projects across Africa for many years to provide rural communities with domestic solar power and ICT equipment and radios that work from manually wound generators. These have mainly been the province of charities and NGOs.
More recently, Nokia has gone ahead with its bicycle power charger. That product has been a success in developed countries where it has been adopted for reasons of convenience and green awareness. In Africa, it is even more useful, as so many people use bicycles but do not have access to grid power. It has been welcomed in the Great Lakes countries already, where it sells for more affordable prices than in the EU. Even for the lowest-income communities, the advantages are compelling. It provides power for handsets on the spot, eliminating the need to travel to find electricity.
Finally, while it would be no surprise that companies from India, China and South Africa are leading the charge, it is Africa that might well be the proof of concept for much wider adoption of renewable energy for mobile services at both a corporate and consumer level.
This article has been contributed by Roy Johnson, a writer specialising in IT and business topics, who has regularly contributed to PC Magazine, as well as editing TechNet Magazine for Microsoft. Roy was formerly editor of CommsAfrica and contributing editor for Intelligence magazine.

Legal tenders invited (Mauritius)

The Information and Communication Technologies Authority (ICTA) has invited Expressions of Interest (EOI) from ‘well established’ and ‘suitably experienced’ law firms to act as Legal Advisor to ICTA. The winner will be required to provide advice to the ICTA legal assistants on a contract basis for a year, and may be extended with revised terms and conditions subject to satisfactory performance.

Interested parties may submit their EOI to the Chairman Tender Committee at the ICT Authority in Port Louis by 15.00 hrs, Monday 27 February 2012. Full details are at http://www.icta.mu/mediaoffice/2012/EOI_legalAdvisor.html

Newsy Nawras (Oman)

Nawras has launched two new SMS services. Reuters Breaking News service will provide international news, whilst the Asia News will deliver news from India, Pakistan and Sri Lanka. The services are being offered on a monthly subscription basis to both pre- and post-paid subscribers. Reuters News is available in either English or Arabic at a monthly fee of OMR 1.500 (USD 3.88). The Asian service is in English for any of the three countries featured for OMR 0.700 per month, per country. Nawras already offers feeds from CNN, BBC, Koora Mobile, Al Jazeera and Al Arabiya.