Telecoms investors ‘keen on African market'

Far from being discouraged by the collapse of the US$24bn MTN Bharti deal over regulatory concerns and the decision by France's Vivendi to walk away from a deal to buy the African assets of Kuwait-based Zain, Informa said investors were planning either to fly their flags on the continent for the first time or to expand existing businesses.

Cash-flush operators such as China Mobile, the world's largest based on subscriber numbers, could not be ruled out from making a big acquisition, said Informa principal analyst Nick Jotischky.

He said Africa was attractive for bigger companies, particularly those trying to escape competition and saturated home markets where average revenue per user from voice calls was falling.

Africa's telecoms market is dominated by MTN, Zain, France's Orange, Egyptian group Orascom and Vodacom, but large swathes remain largely untapped mainly because of cumbersome regulatory and licensing obstacles and lack of investment in telecoms by some of the poorer countries.

MTN has brushed aside the collapse of the Bharti talks and continues to scout for new markets in Africa and other emerging markets, and is reportedly eyeing networks and licences in countries such as Zimbabwe and Angola.

The UK's Vodafone, the world's largest cellphone group by revenue and the majority owner of Vodacom, paid US$900m for Ghana Telecom last year. Zain seems to have ditched plans to sell its African assets and wants to invest more. Telkom continues to search for new investments and was recently said to be eyeing a stake in Zimbabwe's fixed-line operator.

“It will come as no surprise to see Bharti Airtel revive its interest in the region before long and export its low-cost model, which has helped it to operate profitably in India from an average (of) US$56 average revenue per user,” Jotischky said.

“Both Bharti and its domestic competitor Reliance Communications are straining every sinew to enter the market. Orascom, which originally quit sub-Saharan Africa, has recently made a series of acquisitions across the region; Sudatel continues to make waves throughout the continent; and France Telecom continues to be attracted to north Africa (and) recently acquired a fixed and mobile licence in Tunisia.”

Operators that had never considered Africa, like China Mobile, had the financial muscle to “make a grand entrance” through a major acquisition, he said. China Mobile could be encouraged by the success of equipment manufacturers ZTE and Huawei.

Jotischky estimated Africa's penetration rate at less than 45% as of September and said it was expected to remain below 70% until the end of 2014. “Given the trend of multi-SIM ownership … unique subscriber penetration is likely to be significantly less than 50% by end-2014. This shows the extent of the opportunity for operators to reach new users.”

Source: Business Day