8 Jul 2009

Outsourcing and investment strategies of MEA operators

It’s been a while since I last wrote, longer than I intended to, but forgive me as I’ve been out of the office for some time – partly holiday, partly attending the West & Central Africa Com event in Abuja, Nigeria.
What a conference that was! The CEOs from the major players in the region’s market (MTN, Zain, Etisalat, Moov and more) were more candid than usual in their talks on their strategies in a turbulent economy. Christian de Faria, VP for the West & Central region at MTN group, summed up the economic situation: “we have seen a slowdown in the minutes of use; access to finance has become more difficult, particularly where currency movements are adverse, but the banking system has resisted better than in other parts of the world”. The consensus among operators was that they need to be cleverer about their costs, and outsourcing was a major point of discussion. The message was: let’s focus on what we do best (i.e. selling services to customers), and leave the logistics to specialists. This sounds like great news for the equipment vendors who are pushing managed services or outsourcing of CRM activities. Operators are increasingly moving towards infrastructure sharing too, not only to reduce network deployment costs but also to respond to growing environmental and health concerns. Another key point of discussion was regulation, with Bayo Ligali of Zain Nigeria calling for an adjustment of regulatory requirements by decreasing or deferring regulatory fees and relaxing licence obligations. As access technologies are developing and capacity is increasing (thanks to new satellite and submarine cable link projects), the region’s burgeoning broadband market is creating great opportunities. Most operators are now focusing on data services as a major source of revenues to counter the decline of their ARPU.
Although the debates touched upon some difficult issues, there was a major elephant in the room: Nigeria’s suspended licensing process for spectrum in the 2.3GHz frequency band, to be used for mobile WiMAX services. The licensing process has caused a huge rift between the Nigerian Communications Commission (NCC) and the Ministry of Information & Communications (see my previous blog entry for more details). Representatives of both bodies (Ernest Ndukwe, Chief Executive of the NCC, and Onuoha Nnachi, Technical Adviser representing the Hon. Minister Prof Dora Nkem Akunyili) were present at the event and declined to comment, only saying it should be sorted by August. There seems to be renewed interest in WiMAX on the continent, so this issue will be one to follow.
In other news, I can’t really finish this piece without mentioning (again) Zain Group’s much talked-about plan for its African operations. Zain, whose strategy is to be a top 10 global group by 2011, has almost confirmed that it is considering selling some of its African assets to concentrate on its more profitable Middle East operations, and possibly divert its new investments to Asia. Last week the firm appointed Swiss bank UBS to help assess its operations.
So who would benefit from the sale? Vivendi, the French group which had been linked to Zain when the first rumours of a sale were brought out, declined to comment on the issue at an economic summit in Southern French town Aix-en-Provence last week. The group has confirmed its participation to the next AfricaCom congress in Cape Town, where it will be represented by Régis Turrini (Senior Vice President for Strategy and Development). This makes me think that they may have interesting comments to make on their African strategy later in the year. Rival group France Telecom, also present at last week’s meeting, denied they were interested in Zain’s operations.
That’s it for today about this summer’s soap opera but as they say, to be continued…