Thursday, 26 September 2013

Mobile market opportunities highlighted in new wallchart

Back in the 1950s there was a men's hair styling product sold in Britain under the name 'Brylcreem', a precursor to hair gel. It was a fashion item, and by the 1980s when I worked for the then manufacturer, Beecham, sales in the home market were in decline.

But an article on the product in the company house magazine of the time explained that there were still some sixty or so countries where Brylcreem had still to be launched in, and so production was expected to be maintained at existing levels for many years to come.

I was reminded of this 'phased rollout' the other day when I saw the recently updated EMEA Mobile Market Opportunities Wall Chart, which maps mobile penetration graphically from South Africa through to Scandinavia, as well as providing supporting mobile subscriber numbers by operator across the region.

What the chart highlights are the markets in which the mobile phone has yet to triumph. Countries that have a coast line are clearly benefiting from the submarine cables that now pass down the east and west coasts of the continent. Countries with a coastal landing station are fostering burgeoning mobile markets, whilst the landlocked nations in the centre of Africa have still to feel the benefits of the mobile revolution. There are some exceptions to this: there's a small group of countries made up of Guinea-Bissau, Guinea, Sierra Leone and Liberia on the western tip of Africa that are still low in the mobile penetration stakes.

EMEA Mobile Market Opportunities Wall Chart

Niger and Chad suffer from their geographies on two counts: their northern territories take in the Sahara, and are reliant on neighbouring nations for terrestrial fibre optic cable connectivity. The Central Africa Republic is both remote from the sea, and has also recently suffered a regime change, which is never good for long-term development of strategic infrastructure.

The Democratic Republic of the Congo (DRC) does have a sea coast. It also has - belatedly - an operational landing station. But this highlights a problem with 'national' mobile penetration data, in that it does not reflect the concentration of both population and resources. In reality areas with 'good' mobile coverage are between the coast and the capital, 93 miles up the Congo River, and in the southern areas where the mining communities have encouraged network providers to expand.

But the eastern tracts of the country feature broken roads, docks and railways abandoned when Belgium opted out of being a colonial power.

Somalia - as the Kenyans know only too well - is a country of great untapped potential, as it has a long coast, which should be facilitating something of a broadband revolution. Instead the country is rocked by another kind of revolution, although their are now grounds for optimism. The spilt of South Sudan from Sudan has left the northern area with a strong mobile market but no oil, and related forex issues, whilst South Sudan has the oil but lacks infrastructure. This includes the obvious ones of road, rail and telecom links, as well as the essential outbound pipeline. However these matters are being addressed.

The Middle East (the chart includes Turkey in the region) again shows hotspots, although here oil has greased the telecom wheels so to speak. Yemen, Syria and Afghanistan stand out as markets where penetration has yet to match that of their neighbours. Iran - despite trade restrictions - is already a large mobile market, as is Turkey.

Some years ago someone said to me that after Africa, it would be the 'Stans' that would be the true 'last market' for the mobile phone to conquer. And EMEA Mobile Market Opportunities Wall Chart does indeed confirm that in 2013 Azerbaijan, Krygystan, Tajikistan and Turkmenistan are still awaiting their Prince Charming to wake them from their low penetration slumber.

Details of the EMEA Mobile Market Opportunities Wall Chart are here.


John Summers
Africa & Middle East Telecom-Week

Thursday, 19 September 2013

Is Glo right to be chasing Comium Cote d'Ivoire?

Globacom is reported to be eyeing Comium Cote d’Ivoire as a possible acquisition target, Agence Ecofin reported last week.

As with all these things, there are two sides to the balance sheet. In the deficit column Comium is reported to have debts of some XOF 60 billion (USD120.7 million). If Glo was the only interested party, then that would be a positive, but Airtel is also reportedly in talks with Nizar Dalloul, the Lebanese founder of the Comium Group, so it could still be a two-horse - or more - race.

However, on the asset side in mid-2013 it was estimated to have some 1.5 million mobile subscribers representing a market share of 8 percent. At the end of 2012 it was reported to have just 270 post-paid subscribers, the remainder being pre-paid.

It also has established network infrastructure, so Glo is spared the long delays associated with a new licence - something it will want to avoid given its experience in Ghana, where its network launch was much delayed. Having launched with a modern network and direct access to its submarine cable, it has still failed to dent the share of the major players. At the turn of the year Glo was blaming its resellers for its failure - a clear case of shooting the messenger if there ever was one.

MTN is the largest mobile operator in Cote d'Ivoire with 36 percent of the market, closely followed by Orange with 30 percent. Mobile penetration at the end of June was 79 percent.

The other potential target might have been the Libyan-owned LAP GreenN. In June its CEO Wafik Shater Khalifa was saying it had faced a difficult period due to crises in both Côte d'Ivoire and Libya.

He claimed that sanctions imposed on Libya by the United Nations had increased the Group's debt as it had to pay the government for its licence, its suppliers (Huawei) and its staff.

However the CEO was claiming it had cleared half of its total debt, and Libya had provided funding of some USD 20 million, which it turn has allowed it to pay the government XAF 15 billion (USD 29.7 million) for its licence. LAP's operations in Cote d'Ivoire remain relatively low-key, being ranked fifth by subscriber numbers at the end of 2012, with only the recently launched Cafe having a smaller subscriber base.

This is, of course, not the first time that Glo has looked at Cote d'Ivoire as back in 2009 it was looking at Aircom. Aircom had been granted a licence in August 2000, and went on to launch in January 2012. Meanwhile, in November 2009 Globacom obtained a licence allowing it to provide international carrier services for local operators into and out of the country.

Meanwhile politics is never far from the surface, and in September the Minister of Post and ICT (MPTCI), Bruno Koné was busy justifying his decision to award a 3G licence to Etisalat's Moov unit, having overridden a decision made by the industry regulator.

Of the five mobile operators, only three (Orange, MTN and Moov) applied for a 3G licence. Having considered the tenders, ATCI chose Orange and MTN, claiming that Moov had not fulfilled the required conditions. Moov however is willing to pay the XOF 6 billion (USD 12.1 million) licence fee, which Koné reckons trumps whether they can actually provide a service to the desired standard.

Nonetheless, should Glo proceed with an acquisition, it still leaves ranked fourth in a market with six players. This will be at a time when the perceived wisdom is that there are too many players in many markets, with three looking like the optimum number. Being fourth does not sound like a particularly clever place to buy in to, particularly if there is another market not too far away where any lessons learnt have yet to be applied.

John Summers
Africa & Middle East Telecom-Week

Monday, 2 September 2013

Kenya sees mobile money transfers thriving

The Central Bank of Kenya (CBK) has reported that mobile money transactions reached USD 10.02 billion in the first half of 2013. BusinessGhana noted that this was up some USD 1.67 billion on the same period in 2012, from USD 8.35 billion dollars.

Kenya Mobile money transactions by US$ 1H 2013

Source: BusinessGhana/Central Bank of Kenya

Safaricom accounted for 90 percent of the transactions, with over 17 million subscribers to its M-PESA service. M-PESA charges increased by 10 percent in February following a rise in excise duty. The number of mobile money subscribers rose to 23.8 million at the end of June, up from 22.3 million in March.


John Summers
for 'Africa & Middle East Telecom-Week'

Thursday, 29 August 2013

Has Tigo lost its way in Africa?

Has Tigo lost its way in Africa? I only pose the question because in its second quarter report for 2013, its subscribers numbers by African operation appear flat or in decline (see figure 1).

Even in Tanzania - its biggest market by some margin with 5.97 million subscribers - the subscriber base appears to max out at some 6.7 million at the turn of the year, and then falls to 5.97 million at the end of 2Q 2013.

Or take Ghana. This is a highly competitive market, which last year saw the arrival of Nigeria's Glomobile. Yet despite Glo's poor early uptake, Tigo ended 2Q13 with 3.3 million subscribers, down from the 3.63 million, which it had at the end of 3Q11.

In Senegal it has effectively flat lined since the end of 2Q 2012, when it had 2.64 million, and ending 2Q 2013 with 2.68 million, a gain of only 40,000 in 12 months. The Democratic Republic of the Congo again saw a flat profile in the last three quarters.

In fact, the only market in which Tigo has reported a rising subscriber base is Rwanda, which has risen from 1.22 million at the end of 2Q 2012 to 1.61 million a year later.

Tigo African Operations by Mobile Subscribers 3Q 2011 - 2Q 2013

Source: Millicom c. Blycroft 2013

Now it could be that these particular markets are currently experiencing low growth, and that Tigo is performing well against its competitors. But remarkably all the major markets - Ghana, Tanzania, DRC, Senegal and Rwanda - have all shown healthy growth during the period. The table below shows the performance of Tigo competitor's in its African markets.

The other operators in Ghana (so now excluding Tigo's subscribers) have added some 5.3 million mobile subscribers in the eight quarters examined; Tanzania's non-Tigo subscriber base flattened recently but nonetheless has added around 5 million. The DRC's other operators has recorded just under 5 million net additions, and Senegal added 2.5 million. Even Rwanda chalked up 2 million.

African Markets where Tigo is active showing subscribers  for other operators 3Q 2011 - 2Q 2013

In its 2Q 2013 report Millicom noted that it is now reinvested in Africa, where it said 'the business needed support for its networks and brand'. Some of the problem may well be that it has other investment priorities, as in the second quarter it invested some USD 154 million in capex, including USD 15 million in spectrum, in South America. The spend will return to Africa in 2013, with the capex to revenue ratio peaking at around 20%, excluding spectrum acquisition. This, Millicom notes, will be driven by continued investments in 3G 'capacity and coverage, notably as we roll out further countries in Africa'. Welcome news indeed.


John Summers
Africa & Middle East Telecom-Week

Thursday, 22 August 2013

Airtel in Nigeria 2013 - why it really does have to succeed in Nigeria

In August 2013 Bharti Airtel raised its stake in Airtel Nigeria by 13.36 percent. BusinessDayOnline quoted a note to stakeholders as saying that the stakes had been acquired from 'certain existing shareholders although the financial details not disclosed.

Looking at Airtel's African subscriber base, Nigeria is its biggest market, with some 21.59 million subscribers at the end of June 2013. It represents 30 percent of Airtel's African base. This is a market in which Airtel has to perform well in if it is to justify to its shareholders that it has made the right call in acquiring Zain's African assets in April 2010.

But it is also a market that it cannot afford to fail in. Should Nigeria fail, the profile of its African market changes dramatically. Tanzania is its second largest market, but representing only 12 percent of the Airtel total, with some 8.6 million mobile subscribers.

Airtel’s hold on Nigeria is now the subject of a serious legal challenge. Econet Wireless, with its 5 percent stake, is looking for USD 3.1 billion in damages after it opposed the sale of the Nigerian business to Airtel.

But - as in Kenya - Airtel still has to make its mark. As the African market enters a period of consolidation, there will room for up to three players in major markets, and being fourth is not a good place to be.

For a detailed appraisal of this key Airtel market, download a free whitepaper detailing some of the major issues now facing Airtel, and illustrated with four charts showing Airtel Africa Mobile Subscribers & Group Share by Country 2Q 2013; Nigeria GSM Operator Market Share 1Q10 - 2Q13; Nigeria Ported Mobile Subscribers end-June 2013 and Airtel Africa Mobile Subscriber Base 4Q09 - 1Q13.


John Summers
for 'Africa & Middle East Telecom-Week'

Further reading: Airtel in Nigeria 2013 - everything to play for

Friday, 26 July 2013

Data centres in a box provide speedy solution

Its been a month of data centre developments, with Venema Advies, the Netherlands-based IT solutions company and data centre operator, saying it is building the first carrier-neutral data centre in Nigeria; which follows the news that Globacom opened a new data centre in June. 

David King, CEO, Flexenclosure has written:
"The penetration of data in African markets is still low, even in South Africa, and prices are still high. And even if everybody agrees that data will take off in a big way, it is difficult to predict when it will happen and how fast. There are of course going to be a number of challenges to overcome. How can you best prepare to quickly respond to the anticipated demand without investing too much too early?
The biggest challenge is infrastructure. High quality, efficient data centres are essential. They house and power all the equipment needed for transmission of data and are both the heart and brain of any network. But traditional builds for data centres take a lot of time to plan, co-ordinate (with different suppliers) and construct. 
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Furthermore, challenging environments add a lot of risk to a data centre project, often resulting in delays and budget over-runs. Buildings for data centres are often not purpose built to be used as technical facilities, often with water leaks and other problems, as well as being over-dimensioned since they cannot be expanded quickly and easily. 
The solution is pre-fabricated modular data centres. They are quicker to deploy and will in most cases save considerable time and money compared to traditional brick and mortar buildings. The facility will always be the 'right' size since its modular structure makes it easy to quickly expand in response to changing needs.
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More efficient power and cooling will make a pre-fabricated data centre more cost effective to run. And quality, budget and the time plan can more easily be ensured for pre-fabricated purpose built facilities, bringing predictability to the project.
A pre-fabricated solution also makes it much easier to customise the data centre for specific needs and it can be deployed anywhere. Let us take a look at a live example: Vodacom in Mozambique (a subsidiary of Vodafone) recently decided to deploy a modular data centre (the eCentre) on top of a six-storey parking garage next to its corporate headquarters in central Maputo.
The roof top turn-key deployment is a 126 square meter open space data centre. Vodacom needed to put the facility in place quickly, efficiently, and on time. The pre-fabricated build reduced the project risk significantly because the construction work was all done in ten weeks in a clean environment (in Sweden) and the installation work needed on site was completed in only eight days, in total a fraction of what a similar local brick and mortar project would have taken.
Speed and predictability in challenging environments are critical issues in Africa considering it is the fastest growing mobile market in the world and the take off for data could be right around the corner. Pre-fabricated, modular and custom-designed data centres that can be deployed very quickly, and easily re-deployed if needed, is yet another innovative solution to an African problem (or rather African situation, since there is nothing problematic with fast growth). 
It is a solution that will allow data centre owners – internet service providers, hosting companies, mobile operators and banks – in Africa to act quickly and confidently towards a demand for data that might be stronger than any of us expect."
David King, CEO, Flexenclosure 

Wednesday, 24 July 2013

Etisalat starts to make plans for when it becomes the third largest African telco..

As the sale of Maroc Telecom to Etisalat slowly inches forward, with Vivendi finally getting round to saying it had entered into exclusive talks with Etisalat to sell its 53 percent, Etisalat has started to consider what this might mean.

It has already met with analysts and shared its plans to create a French-speaking telecom cluster of about 42 million subscribers across 10 countries in West Africa. Etisalat is already present in Benin, Cote d'Ivoire, Gabon, Niger, Central African Republic and Togo with its Alantique (Moov) subsidiary. Maroc Telecom will be contributing units in Morocco (of course), Mauritania, Burkina Faso, Mali and also Gabon. 

Etisalat share of African mobile subscription market before and after Maroc Telecom acquisition as at Q1 2013

Source: industry sources, company reports, Blycroft estimates c. Blycroft 2013

The deal would see Etisalat's share of the African mobile subscription market move from 7 percent with some 50.78 million subscribers to 11 percent with around 82.7 million.
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Gabon - even with the combined subscriber base - will still only be the third smallest Etisalat market in Africa. Past experience suggests that the merger of networks can be a protracted affair: the UK's EE network still reflects the original T-Mobile and Orange architecture some three years after the two announced the merger. And as with the UK's EE, the combined subscriber base will ultimately lose members, as subscribers with duplicate subscriptions  cancel. 

The Moov network in Gabon has some 410,000 subscribers, and Maroc's 820,000. AMETW is forecasting a combined total of around 1.24 million, with the smaller Moov network being absorbed by the larger Gabon Telecom operation.

Etisalat African properties post-Maroc Telecom acquisition Q1 2013

Source: industry sources, company reports, Blycroft estimates c. Blycroft 2013

Etisalat says economies of scale, reduced capital expenditure costs, potential mobile data revenues and new digital services are all strategic reasons to merge the operations in Africa. 

However, the Moroccan government, which has a blocking 30 percent stake in Maroc Telecom, still has to decide whether to allow the deal.

In April 2013 Vivendi had two bids for its stake from Etisalat and Ooredoo, formerly Qatar Telecom (Qtel). In June the latter withdrew, saying the negotiations were taking too long, and it had other bids in play. It subsequently won a licence in Myanmar.

Etisalat would move from fifth place to a comfortable third in the African Major Telcos league table - ahead of the likes of Orange and Airtel - and leaving it with just MTN and Vodafone/com stopping it from being Number 1 on the continent. To take top spot it just needs to double in size again...  


John Summers

Editor,   Africa & Middle East Telecom-Week Africa & Middle East Telecom Weekly News Briefing (free distribution)


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Monday, 15 July 2013

BlackBerry most used smartphone in Africa according to Facebook

Smartphone usage in Africa is not always easy to determine, particularly as there is multiple SIM ownership (subscribers have more than one subscription). Although many networks now provide 3G, and 4G is live in a small number of markets, the distribution of broadband - an essential element for the effective operation of a smartphone - is still a very long way from being universal.

When a smartphone is acquired, it needs to be used for something, and the social networking site Facebook is generally regarded as one of the more popular Web destinations in Africa, and it provides some very useful data relating to device usage, which can be extracted country-by-country.

Making allowance for multiple SIM ownership, and assuming around 491.7 million subscribers (so roughly two-thirds of all active subscriptions), then Facebook membership in Africa represents 10 percent of the active mobile subscriber base, and about 6.5 percent of the active subscription base.
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It follows that the Facebook membership will be atypical in that as a group, its members posses a mobile device capable of supporting access to Facebook. In this respect, smartphones are an ideal platform, although Facebook also logs access via Feature Phones. The closure last week by Standard Bank in South Africa of its WAP banking portal comes as no surprise, and it has to be said that Web access via WAP was a curiously frustrating experience.

It can be expected that Facebook users represent a significant proportion of the cohort able to access the Web and therefore the Facebook data is likely to mirror the market as a whole in terms of the popular devices.

It is perhaps not surprising to see Feature Phones accounting for 46 percent of all Facebook mobile users.
Africa Mobile Device Types according to Facebook 2Q 2013; Feature Phones; Samsung; iPhone4s; iPhone5; BlackBerry, iPad3; LG, and Other Smartphones

The BlackBerry has enjoyed greater popularity in Africa than elsewhere, and the Facebook data bears this out, with it being the dominant device with some 2.91 million users. LG is placed second with some 208,000 devices. Facebook is able to differentiate between the different Apple devices used for access. Sony is ranked fourth, and Samsung seventh. HTC is in tenth slot with some 98,000 devices.
Facebook users in Africa by Device July 2013; BlackBerry; LG; iPhone5; Sony; iPhone4s; iPad3; Samsung; iPhone4; iPad1; HTC


John Summers

  Africa & Middle East Telecom-Week 
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Thursday, 11 July 2013

Has the Arab Spring killed the North African mobile market?

Somebody asked me the other day whether the Arab Spring had affected the growth in the mobile subscriber market, and which was now the fastest growing region.

The countries affected were and are major players. Markets where a regime change was engineered are Egypt (34% of the regional total); Tunisia (5%); and Libya (6%). There were major protests in Algeria (18%); Morocco (15%), and Sudan (9%) (1). The creation of a new nation in the form of South Sudan has created further problems for the Sudanese government.
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Looking at the five major African regions by mobile subscribers for the period Q1 2011 to Q1 2013, it is apparent that Northern Africa appears to have lost its shine, with a negative figure being recorded in Q1 2013, directly attributable to Tunisia and Egypt. According to data from Egypt's MCIT, Egypt lost some 2.7 million subscribers in the period January - March 2013, or a fall of 3% on the previous quarter.
Africa Regional Mobile Subscribers Quarter-on-Quarter % change Q1 2011 to Q1 2013

Source: Africa & Middle East Telecom-Week c. Blycroft 2013

Southern Africa owes its original sparkling performance to South Africa, which is home to two major regional players, Vodacom and MTN. With mobile penetration now nudging 136% in South Africa, the early growth phase is now over, and the emphasis is now on data, with the four networks busy trialling or rolling out 4G.

And, as the chart suggests, there is still a great deal of potential in Western, Central and Eastern Africa. Nigeria accounts for about half of the mobile subscribers currently in Western Africa, although the recent registration program may see this number fall whilst the market regroups. However penetration in Nigeria stands at 73% prior to the registration deadline, and so it can be expected it will resume its upward trajectory in the latter part of 2013.

In parallel with SIM-registration, the Nigerian authorities have also introduced Mobile Number Portability, and it was rather telling last week that an official was attempting to tell users they would be better porting their numbers rather than buying phones capable of holding multiple SIM cards. 
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This neatly illustrates another dynamic of the African market, namely that there is a significant difference between subscribers and subscriptions, with many subscribers having more than one subscription.

Nonetheless, there is still remains considerable potential along the North African coast. Egypt had a mobile penetration of 111% before the current troubles erupted; Libya has a relatively high penetration at around 120%, but there are structural issues with its network following the civil war. However Sudan is recording high subscriber uptake, and has a relative low penetration of 68%. The snag in Sudan is the collapse of the currency, its oil being in the newly formed South Sudan. 

So Northern Africa is down, but certainly not out.


John Summers
Editor, Africa & Middle East Telecom-Week and Africa & Middle East Telecom Weekly News Briefing (free distribution)

1. Wikipaedia Arab Spring
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Friday, 5 July 2013

How far has the Saudi mobile market fallen, and will a trio of MVNOs be enough to restore it?

How many mobile subscribers are there in Saudi Arabia? I pose the question after I saw a conference brochure doing the rounds promoting Middle East Com, in which the organisers have kindly provided a table of mobile subscribers for the Middle East by country for the period 2007 - 2012.

This shows the number of mobile subscribers in Saudi Arabia as standing at 43.7 million at the end of 2012. This is down from a peak of 45.11 million at the end of 2011.

But a check on the Website of the Saudi Arabian telecom regulator, the Communications and Information Technology Commission (CITC), shows a similar pattern but with a differing order of magnitude. CITC reports there were some 53.0 million mobile subscribers at the end of 2012; down from 53.7 million at the end of 2011.

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This is a significant variation - either CITC is overstating the market by 120% or Middle East Com are understating it.

Back in 2008 the regulator rebuked mobile operators for using differing criteria when publishing their data, asking them to use the widely adopted 90-day criteria, as endorsed by the International Telecommunications Union (ITU). The end result was that Saudi Telecommunications Corporation and Mobily, a unit of the UAE's Etisalat, simply stopped publishing their subscriber numbers.

The ITU in its annual data round-up, however, has echoed CITC, so suggesting that CITC is is the data source.

The mobile operators should know what their competitors are doing, particularly in those markets, which have an established interconnect, which Saudi Arabia certainly is. Zain has laudably reported on the market since its launch in August 2008.

The Zain data plots a middle road, following the CITC data plot for the first few years, and then falling towards the Middle East Com totals in the later periods.

Saudi Arabia Comparative Mobile Subscriber Data 2007-2012
Source: Middle East Com; CITC, Zain

Whatever, the Saudi Arabian market remains a major market, and one that is shortly to be exposed to a multitude of MVNOs. CITC confirmed at the end of June the winners as Virgin Mobile Middle East & Africa (VMMEA) (hosted on Saudi Telecom Corporation's network); Jawraa Lebara (Etihad Etisalat- Mobily) network; and Dubai-based retailer Axiom Telecom (Zain Saudi). The MVNO Directory provides a list of current MVNOs operating in the Middle East.

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Local companies FastNet and Safari were the losing bidders. CITC said in a statement it is looking to improve the level of telecom services and information technology, whilst seeking lower prices and improved customer care, and stimulating competition. The three now have till the end of September to provide the documents to move to the next phase of obtaining a licence.

Attempts to increase competition in Israel has taken a similar path, with both new MNOs and MVNOs entering the market, but right now the impression is that the incumbents are struggling to justify network investment whilst they see their subscriber bases are being cannibalised.

Whilst the three data sets cannot agree the size of the Saudi market, the one thing they are agreed on is that subscriber numbers peaked at the end of 2011. It will be very interesting to see how the market now responds with the new players going forward, although one cannot help but think there will be a increased number of players chasing an ever decreasing number of prospects.


John Summers
Editor, Africa & Middle East Telecom-Week and Africa & Middle East Telecom Weekly News Briefing (free distribution)

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Thursday, 27 June 2013

Data uptake in Nigeria shows that its not what you do, but how that you do it that counts

Given the capital-intensive nature of the business, mobile operators need a payback. And that's the balancing act all operators have to perform; investing enough to remain competitive; ensuring that the basic service levels are maintained to stay the right side of the regulator, whilst also ensuring that offerings remain sufficiently 'must have' to win and retain custom. Showing a profit also needs to be on the list.
In the compelling offers stakes, in the beginning it was voice. And then it was texting (SMS). There has been a huge shift in mobile messaging, to the point that the booming rise of Over-the-Top (OTT) messaging apps (or ‘next generation’ messaging services) could herald ‘the end of SMS’. Last year Portio Research provided five-year OTT messaging forecasts which projected OTT traffic would exceed 20 trillion P2P (Peer-to-Peer) messages in 2016.

The contribution messaging makes to total MNO data revenues is actually set to grow over the next few, from 65.6 percent in 2011 to 66.4 percent in 2016, as other services suffer greater marginalisation. In its ‘Mobile Messaging Futures 2012-2016’ report, Portio reckoned that SMS yielded the greatest revenue for operators in 2011 and mobile IM gathered the lowest. In 2012, the global mobile messaging market was worth USD 231 billion.

Informa Telecoms & Media has more recently estimated that at the current rate at which OTT messaging is growing, the volume of global daily OTT-messaging traffic is set to be twice that of Peer-to-peer SMS messaging by the end of 2013. Daily OTT-messaging traffic has already overtaken daily P2P SMS traffic, according to newly collected data, with OTT messaging totalling an average of 19.1 billion messages a day in 2012, compared with an average of 17.6 billion P2P SMS messages a day.

But crucially, these new generation services need broadband, and what is apparent that not all MNOs are equal in this respect. Nigeria is now Africa's biggest mobile market by subscriber numbers, and the Nigerian Communications Commission has recently noted that nearly 30 percent of the country's 114.172 million active GSM subscribers now have access to data services.

Nigeria GSM mobile subscribers by operator and by technology Q1 2013
Source: NCC c. Blycroft 2013

However, this 30 percent is not evenly applied to all operators, and it is apparent that users have voted with their feet. Not only is MTN the largest player in the Nigerian mobile space, it is also the biggest 3G player, with some 44 percent of its mobile subscribers signed-up. Glomobile is the second largest GSM operator, but despite having its own submarine cable reaching back to Europe - which should be a major Unique Selling Proposition if there ever was one - has only signed 3 percent of its users for 3G.

Airtel Nigeria - who acquired the Zain/Econet operation in April 2010 - is ranked second with 26 percent of its subscribers now using 3G, whilst Etisalat has smaller numbers but has persuaded a third of its subscribers to take up 3G.

Despite its obvious success, the local regulator has continued to eye MTN, claiming that it is not meeting its Quality of Service KPIs, and threatening it with penalties for poor performance. At the other end of the spectrum Etisalat reckons that half the people who have ported their number since the introduction of Mobile Number Portability in Nigeria have joined its network.

The conclusion has to be that MTN appears to be the network of choice for people wanting broadband access, with Etisalat probably benefiting from recent investment and ironically having a smaller customer base, so having less congestion at in-town locations during the peaks.

However, perhaps the oddest thing about this data (see chart above) is not that MTN is under the cosh from the NCC, or that Etisalat is currently the biggest destination for ported numbers. Rather, it is that Glo appears to have completely failed to leverage the considerable advantage it has with its Glo-1 submarine cable, and yet the NCC, for whatever reason, has largely left it alone. May be being the local kid does have some advantages after all.

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Monday, 17 June 2013

The Airtel minutes factory in Africa 3 years on: is it the promised market slayer?

Once upon a time the name was Zain; and then Zain stood up to allow India's Bharti Airtel to have a seat at the African mobile table. It is now three years since Airtel entered the market, with something of a fanfare, promising to fully maximise revenues with its minute factory model imported following its success in India.

This all came to mind again when a bevy of Airtel heavyweights jetted into Gabon last week headed by Manoj Kholi, Airtel's Managing Director & CEO International, with Tiemoko Coulibaly, CEO Africa Francophone and accompanied by Antoine Pamboro, the Managing Director for Airtel Gabon. They met the Minister for Telecommunications and the President of regulator ARCEP, and during the course of their discussions, said that they were working with the Government to achieve its ICT goals, with the aim of making Gabon the ‘Singapore of Africa’.

So has Airtel changed the African market? Is it now a force to be reckoned with?

At the takeover, Airtel announced in one of its early analyst briefings that it would not be providing individual country counts for mobile subscribers, and better, henceforth it would be using a 30-day measure of activity (Zain had provided country counts and used the ITU recommended 90-day count).

This ensured that historical comparisons would be difficult and so saved Bharti from having to justify lower numbers in the event that its relaunch failed to achieve the expected numbers.

On entry in Spring 2010, Airtel slashed rates in a move designed to win significant market share quickly, and so get its fleet of base stations humming. However, it justified the move by claiming that existing operators were overcharging.

This saw revenues across the board drop for all operators affected, leading to calls that such a drop would impact of future network investment.
Interestingly, the strategy appeared to fail, Airtel subsequently admitting it has failed to understand its market, as users - having obtained the cheaper calls - used the savings to buy essentials such as food and energy, rather, as Airtel had expected, using them to make longer calls.

One is reminded of the old line about 'Lies, damned lies, and statistics', and so to ensure a reasonable level playing field, we have looked at the seven markets in which Airtel operates and in which regulators provide data for all operators, so at least ensuring that any distortions are equally applied to all operators. The nations selected were Congo Brazzaville; Ghana; Kenya; Malawi; Nigeria; Rwanda and Tanzania. Nigeria is the largest African market that Airtel operates in with 112.8 million subscribers; Kenya is the second largest with 30.6 million; Tanzania third with 26.2 million and Ghana fourth with 25.6 million.

Airtel was compared in each market with a basket of 'other operators'. Looking at the period 1Q 2008 through to 4Q 2012, and remembering that the sale was agreed in Spring 2010, Zain marked the market prettyy well in the seven selected markets from the end of 2006 to mid-2008. Then, from mid-2008 till Airtel stepped in in mid-2010, Zain's quarter-on-quarter % change fell significantly below that of its competitors. There is a clear growth spurt at takeover, but this soon turns into a dip at the start of 2011, before Airtel showed an improved performance in four of the last six quarters.

Airtel Africia Mobile Subscribers Quarter-on-Quarter % change v competitors 1Q06 - 4Q12
Source: industry sources, Blycroft estimates c. Blycroft 2013

But the real challenge is in markets like Nigeria or Kenya; in Nigeria because it is the largest African mobile market; and Kenya because it is the second, with a dominant incumbent in the form of Vodafone-sponsored Safaricom. In Nigeria Zain clearly enters a period of decline, before Airtel is able to work its magic throughout 2011 and 2012, outperforming the market as a whole, although it should be noted that the cdma operators were in steady decline during this period.  
Source: industry sources, Blycroft estimates c. Blycroft 2013

In Kenya, Zain again failed to obtain the traction it needed against a strong incumbent, and at the time of the sale Airtel was able to show significant growth in the first six months of its stewardship. However in 2011 and 2012 it has continued to show a slightly better rate of growth than the market as a whole, but not as such a rate as to touch Safaricom's market dominance.
Source: industry sources, Blycroft estimates c. Blycroft 2013

Finally, if the market share at the end of 2010 in the seven Airtel markets studied is compared to the position at the end of 2012, Airtel has raised its market share from 19 percent to 21 percent, and its subscriber base (in the 7 markets studied) from 26.22 million to 43.88 million.
Airtel Africa market share in 7 key markets 4Q 2010 v 4Q 2012
Source: industry sources, Blycroft estimates c. Blycroft 2013

Whilst Airtel made some bold claims when it entered Africa, which have still to be achieved, it would appear from this market analysis that Airtel is making real progress, even if it has found its original minute factory model wanting in the very different climate of Sub-Saharan Africa.

For more on Airtel in Africa, check out the free whitepaper 'Airtel in Africa 2012: Key factors & SWOT analysis', and also the free resources available, including a library of Mobile Factbooks and Weekly News Briefings here.

Friday, 14 June 2013

Mediatek mobile phones a good fit for Africa: study

A new report looking at Affordable Handsets from Informa Telecoms & Media recently hit the shelf in the library. The last major developing telecoms market is Africa, and one of the problems with that market us that it consists of some very low income groups.

If there was every a long-game to be played, this is it. The International Telecommunications Union and the GSMA have variously shown that there is a direct correlation between mobile phone ownership and GDP. The more people who use mobile phones, the higher the GDP growth.

It therefore follows that supplying devices to a classic low ARPU market now will help prime a future high ARPU market of the future. One of the problems for vendors in Africa is the illusory mobile penetration, as many of the existing phone users have multiple SIM-cards. At the end of 1Q13 'Africa & Middle East Telecom-Week' put the mobile subscriptions per head of population at 69 percent, with the suggestion that the mobile subscriber per head of population is closer to 45 percent.

Ericsson in its 'Mobility Report' for the first quarter noted that the regional differences are large. It reckons that in 2018 almost all handsets in Western Europe and North America will be smartphones, compared to 40-50 percent of handset subscriptions in the Middle East and Africa and Asia Pacific regions.

The report suggests that less mature regions are dominated by 2G technologies, like GSM/EDGE, while more mature regions like Western Europe are dominated by HSPA. LTE is growing very strongly, particularly in North America. In all regions, 2G networks (GSM/EDGE, CDMA 1X) remain as fallback networks for 3G and 4G subscriptions when coverage is missing.

Ericsson notes that in 2012 the Middle East and Africa were dominated by GSM/EDGE, and that by 2018 it will have the largest share of GSM/EDGE, driven by demand for low-cost phones. The region is hugely diverse, so there are, and will be, large differences between developed and less developed areas.

This suggests that there is still a huge potential market for affordable (or low-cost) phones, rather than smart phones.

The 'Affordable Handsets: From Imitation to Innovation' study defines three strategies for affordable phones, namely Mobile phone centric; Integrated; and Computing centric. The study defines three approaches, with Mediatek leading the Mobile phone centric sector; Qualcomm heading up the Integrated approach whilst Intel and Nvidia are driving Computing centric designs.

From an African perspective, Mediatek's mobile phone centric approach means that their phones can be targeted mainly at the low-cost segment with competitive pricing. Perhaps, crucially, there is a fast time to market which the study suggests could be 20 weeks or less. There is a downside, namely that there is late adoption of innovation, with design based on thin modems. Informa also notes that there's also a weak software-hardware integration with little flexibility for differentiation/local variations, and no 'go-to-market' support.

The Integrated approach offers greater opportunity for up-scaling, and is being led by Qualcomm. The advantage is that there's something for all segments from high-performance to low-cost, and design is based on fully-integrated media/communications processing. There's also deep software hardware integration. This results in flexibility for differentiation/ local variations coupled with strong 'go-to-market' support. And for a market like Africa, there's the bonus of strong ties with the developer community, but the phones are ecosystem-centric.

Finally, there is the Computing centric approach being progressed by Intel and Nvidia. They are currently targeting value high-performance segments, and there are longer time-to-market issues (typically 45 weeks plus). There's differentiation on performance, with early adoption of innovation, and design based primarily on media processing.

On balance, the mobile phone centric approach is the right one now for Africa as a whole, although there are the well-known Asia smartphone heavyweights sizing up the high net-worth individuals located in markets such Nigeria and Kenya, where submarine cables are already glowing, and 3G and 4G networks are deployed or planned.