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Africa: New ICT Developments
AfricaFocus Bulletin
Oct 8, 2007 (071008)
(Reposted from sources cited below)
Editor's Note
"Africa's incumbent telcos have for so long dominated the
discussion about where the market's going that it's hard to spot
the moment when their ability to dominate slipped below the water
line. The mobile operators are now the incumbents and as contenders
for the title are seeking to secure their new-found position on the
top of the heap." Balancing Act News Update
As Russell Southwood notes in the latest issue of Balancing Act
News Update, the pace of change in African telecommunications and
internet markets continues to accelerate, with intense competition
in many countries among local, South African, and international
firms. This AfricaFocus Bulletin provides excerpts from Southwood's
authoritative weekly newsletter on the industry, including his
analysis of development in the continent's mobile telephone
industry and shorter reports on Kenya, Uganda, Nigeria, and Ghana.
Another AfricaFocus Bulletin sent out today reports on initiatives
by the Mo Ibrahim Foundation, a non-profit venture aimed at
improving African governance to which African mobile phone
billionaire Mo Ibrahim is now turning his attention.
For previous AfricaFocus Bulletins on developments in information
and communication technology in Africa, and a custom search of
Balancing Act Africa and other key sites, see
http://www.africafocus.org/ictexp.php .
"No Easy Victories: African Liberation and American Activists over
a Half Century, 1950-2000" is now shipping, and still available for
ordering on-line at a 20% discount until the end of October. The
book will also be on sale at the African Studies Association 50th
anniversary meeting in New York City, October 18-21.
The editors, along with Africa World Press, the Association of
Concerned Africa Scholars, and AfricaFocus Bulletin invite New
York activists, attendees at the African Studies Association, and
others who are interested to join them for a celebration of the
book's release on October 20, 2007.
For more information: http://www.noeasyvictories.org
++++++++++++++++++++++end editor's note+++++++++++++++++++++++
Balancing Act News Update
Issue no 374
5th October 2007
http://www.balancingact-africa.com
[Excerpts reproduced by permission of the publisher.]
Just as the power of the incumbent fades, the vertical integrators
are on the march again
Africa's incumbent telcos have for so long dominated the discussion
about where the market's going that it's hard to spot the moment
when their ability to dominate slipped below the water line. The
mobile operators are now the incumbents and as contenders for the
title are seeking to secure their new-found position on the top of
the heap. Not surprisingly, they are exhibiting many of the old
incumbents' tendencies towards vertical integration in the search
for long-term security. Russell Southwood tries to make sense of
what's happening as they remake themselves.
Recently a regulator from one of East Africa's more competitive
countries pointed out to me that his country's incumbent - which
has no mobile operation - now has only 10% of the customers in the
market and 20% of the revenues. It was, in his words 'largely
irrelevant'.
Even where the incumbent has a mobile operation, the story is not
much better. For example, in an analysis prepared for Balancing
Act's forthcoming report African Telecoms and Internet Markets '
Part 1: West Africa, it identifies that in 10 out of the sixteen
countries under review, just three companies are emerge as market
leaders in each: Celtel, MTN and Orange. Where Government-owned
mobile operations (of which there are 11 out of a total of 52
operators) are market leaders, it tends to be because full
competition has not been introduced: for example, Cape Verde (CV
Movel), Guinea Bissau (Guinetel) and Togo (Togo Cellulaire).
The incumbents have also been hit by the collapse in international
calling rates. In an analysis carried out last year for our African
VoIP Markets report, it identified a clear trend: rates to main
international destinations were coming down to US20-25 cents a
minute and were likely to go lower in the next two years. The
incumbents may have won a few local battles with the grey market
but show little sign of winning the war. In the more competitive
markets, mobile rates have followed fixed rates down or have become
part of wider country roaming schemes at local rates.
It used to be that policy-makers and incumbents talked earnestly
about the need to rebalance rates. But domestic rates cannot
realistically be adjusted upwards enough to compensate for these
international losses. For what we are seeing are competitive
pressures finally sinking their teeth into the over-fed body of the
incumbent. The young mobile operators have started from scratch
with new networks and workforce levels that are considerably
smaller than the elderly incumbents.
Workforce levels in the old incumbents are a political 'hot-potato'
so no matter how bold the Government would like to be when making
cuts, the decisions always are taken with a glance over the
shoulder to the electorate. Management in incumbents is
increasingly political with a small 'p'. For how do you make
substantial changes whilst dealing with a workforce accustomed to
historic privileges? Talking to disenchanted Nitel managers last
year gave us some sense of the mountain that has to be climbed. All
of which distracts from doing business effectively.
The only pool of light in this growing gloom has been the success
the old incumbents have had with DSL broadband. Here their
advantageous access to copper and infrastructure network has
completely reversed the balance of power in their struggle with the
troublesome independent African ISP. So much so that it has
literally sucked the oxygen out of the market and led to mergers
and closures. The Kenya story in Internet News below, the Cote
d'Ivoire item in In Brief in the same section and our recent visit
to Mali all confirm this picture.
Being a national operator is now a distinct disadvantage in a world
dominated by regional operators. There are no savings of scale at
the national level: when buying network equipment and when buying
bandwidth or minutes. So the only wealthy incumbent not in
multinational hands - South Africa's Telkom SA - is trying to buy
itself a regional position and get into content production through
pay-for IP-TV.
The new incumbents have arrived in the lighted uplands with strong
revenues and good margins made on mobile voice. Now able from this
position higher up the feeding chain to survey the valleys below,
they are thinking about how they can protect their market position.
Understandably, they want to be able to create a position from
which they cannot be dislodged by controlling access to the
strategic parts of the layered market. Like Microsoft with Windows
or Apple with iPod, you want to be able to get such a jump on the
market so that everything competitors do subsequently is either a
pale reflection of your activity or just eats away at the edge of
what you're doing. If you take the content analogy, this is the
'walled garden' approach compared to more open forms of access.
Orange is the brand offspring of former monopolist France Telecom.
It has thought hard about the emerging competitive market and has
decided that the formula pioneered in France, suitably reversioned
for local African realities, is the way to go. Customers are not
interested in the technology: you could be delivering voice and
data using gas-filled balloons for all they care. They just want it
to be cheap and for it to work. Their strategy draws on the ideas
of the brand's originator Hans Snook: customers don't want to know
what the kilobyte wibbly-wooper does. They want it to work out of
the box. They want to feel good about your service and the nice
things you sell them.
So Orange in Africa at the retail level is introducing its Livebox
product that it uses in France to sell 'triple play': the
combination of VoIP voice, Internet and TV. It also can offer
wireless access in the home. Because of legal restrictions, it is
unable to offer the VoIP part of triple play and is struggling to
get much purchase on rights to show compelling TV content. However,
its main strategy is that if it's about communications, Orange
supplies it. Whether you want a fixed or mobile phone doesn't
bother them because they can supply either or both and know that
one day the difference will be irrelevant. In this world, emerging
disruptive technologies like mobile VoIP become just another
product line.
In most but not all countries it is adopting a 'low-price,
high-volume strategy' both at the retail and wholesale levels. For
example, at US$1,600 per mbps, its prices are the lowest on the
SAT3 system in both Cote d'Ivoire and Senegal. At a national level,
the strategy is underpinned by building IP-based networks to main
markets and beyond. It is ambitious to take this formula outside of
the francophone countries and will emerge as a bidder for
Anglophone former incumbents in the coming months.
The home-grown continental version of this type of strategy is
being pioneered by MTN and it only emerged after a fierce
discussion at Board level. The company wants to be able to offer
both voice and data in whatever form, particularly to its
high-value customers. In order to do this effectively, it needs to
build itself an infrastructure (with key elements in fibre) that
will support its ability to dominate both corporate and high-value
individual markets. It has decided to build some of its own fibre
routes in South Africa. It has been trialling Wi-MAX in Cameroon,
Rwanda and Uganda. It already has experience of running fixed
operations through its SNO in Uganda. It has quietly bought ISPs in
Cameroon and Nigeria and has plans to link up its mobile operations
with a local roaming scheme as Celtel did before it.
The announcement that it was in talks with Telkom South Africa
brings its 'softly, softly' approach into sharp public focus. A
merged company or a strategic partnership is unlikely to fly for
competition reasons in South Africa but elsewhere on the continent,
where competition authorities are weaker, this could prove a killer
combination.
Africa's mobile operators are not temperamentally 'market-makers'.
Until recently, there have been few of the kinds of competitive
pressures that create this kind of inspiration. True to form,
Vodacom appears to be following MTN into data markets. It has
bought a share in the South African proprietary Wi-Fi technology
company iBurst, although it is unclear how this will be linked into
its the core business. Also to be fair, it has emerged as the
winner in South Africa's mobile data market by progressively
dropping prices.
But Celtel has thus far steered clear of entering the data game and
product lines beyond the core mobile voice product. However, we
note that its parent MTC (now rebranded Zain) is rolling out
nationwide Wi-Max coverage in Bahrain and offering voice and
high-speed Internet access up to 2 mbps. The voice service is
nomadic so the user needs only one number for fixed or mobile
phones.
The desire by the new incumbents to go off and grab new markets
comes from probably a number of insecurities: they know that mobile
markets are likely to get more competitive as that is the steady
trend across the continent; more competition will drive prices
lower; therefore the question is: how do you continue to stand
upright on a rolling log as it goes downhill?
There are two potential obstacles to this new strategic approach,
neither of which is insuperable but both offer real challenges.
There is the real issue of what African users can actually afford.
European users spend an average of 3-5% a month on mobile
communications. The African equivalent is 10-20% on a much lower
set of incomes. This week the Ugandan Bureau of Statistics released
its Consumer Price Index and revealed that Ugandans spend more on
communications than they do on food, 27.2% of the total index.
In the almost 'arms-race' style in which operators have introduced
2.5 and 3G outside South Africa, little consideration seems to have
been given to this potential brick wall. All operators talk the
talk about 10% of revenues coming from data (including content and
SMS) but few seem to have much focus on this particular ball.
To be fair, some part of the blame for high prices can be laid at
the door of Government which seems in effect to have sub-contracted
a large part of tax collection to the mobile operators and is
loving it too much to give it up. But if the market is to grow so
that people can afford other products like mobile content services,
broadband and IP-TV then something has to give. There will be
economic growth to increase wealth levels in some markets but this
alone will not do the trick.
The second challenge is that if you wish to be a new incumbent and
control both the physical and transport layers, this is an
expensive business. MTN's fibre network in Uganda was financed when
there were only three competitors. It was, of course, the one that
brought prices down and introduced pre-paid cards but nonetheless
this was before more new operators entered the market. Whilst
mobile voice networks now cover slightly over 60% of Africa's
population, broadband data networks (depending on how compact the
geography of a country is) only cover between 10-20%. Closing even
a small part of this gap will prove to be a costly business.
And if the new incumbents build significant network infrastructure,
they will, as dominant market players, be forced to share it with
other operators. They are perhaps gambling that many of Africa's
policy-makers and regulators will be too slow to spot this or to do
anything to enforce their will. But the current networks of the new
incumbents are not really set up for sharing except with other
mobile operators.
So in the words of the Chinese curse, may you live in interesting
times.
Consolidation in Kenyan ISP sector
The Kenyan ISP sector is consolidating, with many companies buying
up their competitors and new foreign owners entering the market.
Pressure on margins from the switch to DSL broadband has been one
of the key drivers of consolidation.
Gateway Online, ISP Kenya, Nairobinet and Net2000 were a few of the
casualties of the consolidation movement taking place in the
market, with most of them either running out of steam in the
rapidly competitive market or being bought by larger Kenyan
operations.
And then, late last year, the buying started again. This time, the
bigger boys who managed to survive the rout of the earlier buying
spree were the target, and the buyers were not Kenyan. In 2006, a
South African firm acquired a controlling stake in Interconnect, a
local Internet service provider.
As part of the deal, IS injected Sh300 million in fresh capital in
to the ISP. "There was no way we could have continued on our own.
For many Kenyan grown ISPs, getting access to cheap bandwith and
financing makes it harder to survive in the market," said Tejpal
Bedi, Managing Director of IS Kenya. Much of the investment, Sh100
million, was set aside to upgrade systems.
The company planned to roll-out new technologies and services,
hoping to maintain its share of the corporate market by offering
cost effective virtual private networks to organisations. "The only
way we could maintain our market was by partnering with the South
Africans and diversifying our product line, which costs money,"
said Mr Bedi. The acquisition was touted as part of the South
African company's growth strategy to gain a footprint in the local
and the greater Eastern and Central African market.
...
A few months later, the industry was abuzz with the biggest
acquisition yet. The target was Africa Online, one of the largest
ISPs in sub-Saharan Africa - and the South Africans were after it
again. Telkom South Africa eventually won what was an acrimonious
battle for the Kenyan-born company.
"With the decline of the voice market we are extending and
defending our core profitable services. This acquisition fits that
objective," said Africa Online's new Chief Executive Officer John
Joseph.
Telkom SA has plans to invest Sh300 billion over the next five
years in projects aimed at gaining the company a foothold in key
African markets.
Formerly the giant of the Kenyan ISP industry, the South Africans
took on a company that was cash-strapped and had struggled with
periods of losses over the last few years under ownership by London
firm African Lakes.
The situation may get worse for the few small ISPs still fighting
for market share. Smaller ISPs have traditionally been dial-up
providers, an industry currently being affected by a shift in
consumer preference. Although over 50 per cent of users still use
dial-up access, use of the service is estimated to be decreasing by
30 per cent while mobile and wireless Internet access is increasing
by 40 per cent annually.
Up from just under 4,000 users in 1996, Kenya's Internet market
grew by its largest margins last year, and now includes 200,000
users. The cost of international bandwidth, still expensive and
accounting for most of ISPs' operating costs, has largely limited
more rapid growth. (source: Business Daily)
Uganda Telecom wins wireless contract for CHOGM
Uganda Telecom has won a contract to build a wireless internet
command post worth sh142m in preparation for the Commonwealth Heads
of Governments Meeting (CHOGM).
Hans Paulsen, utl's chief commercial officer, said the wireless
network will be installed and maintained basing on the Third
Generation Technology. The firm will also enhance its services with
higher quality mobile, voice and high speed broad band data
services. "The improved robust network will be able to adapt
efficiently to the growth in traffic and offer various services
which will make utl network more reliable during CHOGM and after,"
Paulsen said. (source: New Vision)
Nigeria: Country domain registrations tops 3,000
Number of Internet registration in the country grows to about
3,000, the Internet Registration Association (NiRA) has
said.Nigeria got the authority to operate its own domain
registration body early this year at a formal hand over of the
domain registration by Randy Bush former Internet registration
agent for Nigeria to the management of the Nigerian Internet
Registration Association.
Just within few days with its existence the association said the
number of domain names in the country in now over 3,000, the
chairperson of NiRA and chief executive of Amsco Telecom Limited,
Ndukwe Kalu made this disclosure in Lagos in conversation, and said
that this figure is expected to reach 1 million in the next 24
months. He noted that before the coming of NiRA management team in
May this year, the number of domain names in the country was less
than 1,000. (source: Daily Trust)
PC Shipments to Ghana and Nigeria Increase, says IDC report
The combined Personal Computer (PC) markets of the West African
countries of Nigeria and Ghana jumped nearly 14% in volume on year
to reach just under 250,000 units valued at almost US$230 million
in 2006.
According to a recent study from IDC released last Monday Monday,
falling average selling prices (ASPs) and heightened demand from
businesses to integrate IT into their operations boosted PC sales.
Nigeria, the economic giant of West Africa, was by far the larger
PC market, accounting for more than 83% of total shipments to the
two countries.
Strong GDP growth and an increase in oil and non-oil revenues
spurred economic growth in the countries, which will have a
positive impact on demand for PCs in all end-user segments in the
region, said Patrick Nzegbuna, research analyst, IDC West Africa.
"We expect the West African PC market, which is still in its
infancy, to expand by 21.5% annually on average over the next five
years, with a notable shift towards mobility," he said.
International vendors dominated the West African PC market in 2006.
Nevertheless, local assembler Zinox made it to the top-three
alongside Hewlett-Packard (HP) and Dell, mainly due to its strong
position in the public sector. The combined market share of the
top-three vendors reached nearly 48% of total shipments.
Desktop PCs, the preferred form factor for most businesses and
government agencies in the region, were the engine of growth on the
West African market in 2006, with shipments of this form factor
expanding 15.3% on year to account for almost 78% of total units.
The notebook segment grew 11.6% in volume on year in 2006, while
x86 server shipments contracted 7.8% due to consolidation in the
banking sector, which is the main consumer of x86 servers in the
region, said IDC.
Uganda: University Students, Lecturers to get Cheaper Laptops
Uganda looks set to join the growing list of countries offering PC
purchase incentive schemes with one aimed at students and
lecturers. If all goes according to plan, University students and
lecturers could soon affordably get laptop computers on hire
purchase for as low as $650 (Shs1million). According to a statement
from Godfrey Sseruwagi, an ICT consultant in the Ministry of
Education and Sports, currently in the US, there is a proposal that
students would pay up for the facility over a period of at least
one academic year.
The price will not exceed US$650 but paying in installments within
two to three semesters." Hon. Alintuma Nsambu, the ICT state
minister said American software firms, Microsoft and Intel had
joined forces to make a state-of-the-art technology specifically
for Ugandan university students and professors.
The proposed laptops will fully be installed with microsoft
educational materials and wireless internet reception. Nsambu added
that Cisco would also join by having all campuses of Ugandan
Universities fully networked with Wi Fi technology for internet.It
is projected that 100 laptops are expected to be delivered and
ready for deployment in Uganda by December. (source: The Monitor)
AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with
a particular focus on U.S. and international policies. AfricaFocus
Bulletin is edited by William Minter.
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