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…
15 Jun 2009
French groups France Telecom and Vivendi rumoured to be expanding further into emerging markets
French telecoms companies are in the news today following expansion rumours in emerging markets.
France Telecom/Orange Group has been present in Africa for a long time, and expanding recently across West Africa and further, with the acquisition of a controlling stake in Kenya's Telkom, launching the country's first triple-play operation. Until now, it seems that its emerging market strategy was strictly focused on Africa, but there are now reports that it is looking at Asia too. According to my colleagues at telecoms.com, France Telecom is reportedly in talks to take a 25% stake in Indian operator Aircel for up to US$2 billion. France Telecom should buy the stake from Malaysian investor Maxis which holds a 74% shareholding in the operator. Aircel is currently a regional operator in India (operating in 13 circles), but it is planning a nationwide launch in the coming years. India's mobile market has been suffering from a slow regulatory process, but the sheer size of its population, combined with a fast-growing middle class, makes it a prime market for operators looking at high growth opportunities.
Back to Africa, the rumour that Zain group was to sell its African operations to "a French company" raised eyebrows last week, and I wasn't the only one thinking of France Telecom as the potential buyer. However, another operator has also been looking at opportunities in Africa: Vivendi. The group was one the stars of the 1999-2000 telecoms boom, and suffered one of the most spectacular descents when the bubble burst. Since then, it's been slowly rebuilding its position, and has already invested successfully in Africa, with a 53% share in Moroccan operator Maroc Telecom, which has investments in Mauritania (Mauritel), Burkina Faso (Onatel) and Gabon (Gabon Telecom). Now Nigerian paper Business Day claims that Vivendi is the group in talks with Zain to acquire its African operations.
The move would bring a new major player to the African market, but it also raised the question of the direction of Zain's strategy in Africa. Zain's objective has been for the past two years to become a global player by 2011. Africa was one of the cornerstones of this strategy, and all operations across the continent were re-branded as Zain in a expensive campaign in 2008. Zain representatives are not commenting on the rumours, other than mentioning that the group is looking at strategic partnerships for its expansion.
The rumours should be a big discussion point at this week's West & Central Africa Com event in Nigeria, were Zain Nigeria's CEO Bayo Ligali is scheduled to give a keynote presentation. If his company is taken over by another group, he would probably not relish the thought of going through yet another rebranding exercise - it would be the 3rd in almost as many years.
France Telecom/Orange Group has been present in Africa for a long time, and expanding recently across West Africa and further, with the acquisition of a controlling stake in Kenya's Telkom, launching the country's first triple-play operation. Until now, it seems that its emerging market strategy was strictly focused on Africa, but there are now reports that it is looking at Asia too. According to my colleagues at telecoms.com, France Telecom is reportedly in talks to take a 25% stake in Indian operator Aircel for up to US$2 billion. France Telecom should buy the stake from Malaysian investor Maxis which holds a 74% shareholding in the operator. Aircel is currently a regional operator in India (operating in 13 circles), but it is planning a nationwide launch in the coming years. India's mobile market has been suffering from a slow regulatory process, but the sheer size of its population, combined with a fast-growing middle class, makes it a prime market for operators looking at high growth opportunities.
Back to Africa, the rumour that Zain group was to sell its African operations to "a French company" raised eyebrows last week, and I wasn't the only one thinking of France Telecom as the potential buyer. However, another operator has also been looking at opportunities in Africa: Vivendi. The group was one the stars of the 1999-2000 telecoms boom, and suffered one of the most spectacular descents when the bubble burst. Since then, it's been slowly rebuilding its position, and has already invested successfully in Africa, with a 53% share in Moroccan operator Maroc Telecom, which has investments in Mauritania (Mauritel), Burkina Faso (Onatel) and Gabon (Gabon Telecom). Now Nigerian paper Business Day claims that Vivendi is the group in talks with Zain to acquire its African operations.
The move would bring a new major player to the African market, but it also raised the question of the direction of Zain's strategy in Africa. Zain's objective has been for the past two years to become a global player by 2011. Africa was one of the cornerstones of this strategy, and all operations across the continent were re-branded as Zain in a expensive campaign in 2008. Zain representatives are not commenting on the rumours, other than mentioning that the group is looking at strategic partnerships for its expansion.
The rumours should be a big discussion point at this week's West & Central Africa Com event in Nigeria, were Zain Nigeria's CEO Bayo Ligali is scheduled to give a keynote presentation. If his company is taken over by another group, he would probably not relish the thought of going through yet another rebranding exercise - it would be the 3rd in almost as many years.
8 Jun 2009
Are cost effectiveness and customer-centric business models enough for Russian operators to get out of the economic downturn?
The economic downturn was on everybody's minds at the Russia & CIS Com congress in Moscow last week. Russia was already a highly competitive market, with three major operators sharing the majority of the subscriptions, while a number of regional operators battle for a space in the market. Mobile penetration passed 100% as early as 2006, ARPU levels have been declining, and the imminent entry of MVNOs should make the market even tougher. It's no wonder that operators are getting worried about the impact of the economy on the market - but some players are faring better than other in a difficult context.
As in other sectors, companies specialising on discount have a better chance of survival when consumers are tightening their belts - or "being clever with their spending", as Donna Cordner, CEO of Tele 2 Russia, put it in her presentation at the congress. Ms Cordner, speaking in the opening keynote of the event, gave a master class on the discounter model as applied by the Scandinavian-owned operator in Russia. Tele 2 operates in 17 regions, with a further 18 to be launched. Its business model is based on that of discounters across various sectors (retailers such as Ikea and Aldi and airlines such as Ryanair to name but a few). The model's main strategic points are: a low-cost operation, a small portfolio of products, efficient management of vendor relationships, and good communication with the customers. It is proving particularly popular with customers who look at managing their budgets more efficiently, not just the lower income segment.
When faced with such competition, Russia's major operators have to be more creative to keep their leadership of the market. Among them, MTS has put in place a detailed sales and marketing strategy based on customer-centricity, as was presented by Garrett Johnston (Group Director of Strategic Marketing) in a lively talk. His main message was that operators need to understand their customers in order to deliver services they need, rather than products that suit the operator. He didn't just go over classic business manual theory, but gave concrete examples of how to get to know customer behaviour, and how to apply the learnings within an operator's sales strategy.
Among the other operators present at the congress, the main focus was how to keep costs under control in order to retain heatlhy margins. Cost-effectiveness is a priority for most operators across the world, but it seemed event more of an issue in Russia. The light at the end of the tunnel for operators investing in the region should be seen in CIS countries rather than Russia: emerging Central Asian markets, with their low penetration levels and improving economies and network, offer more potential than the already developed Russia.
As in other sectors, companies specialising on discount have a better chance of survival when consumers are tightening their belts - or "being clever with their spending", as Donna Cordner, CEO of Tele 2 Russia, put it in her presentation at the congress. Ms Cordner, speaking in the opening keynote of the event, gave a master class on the discounter model as applied by the Scandinavian-owned operator in Russia. Tele 2 operates in 17 regions, with a further 18 to be launched. Its business model is based on that of discounters across various sectors (retailers such as Ikea and Aldi and airlines such as Ryanair to name but a few). The model's main strategic points are: a low-cost operation, a small portfolio of products, efficient management of vendor relationships, and good communication with the customers. It is proving particularly popular with customers who look at managing their budgets more efficiently, not just the lower income segment.
When faced with such competition, Russia's major operators have to be more creative to keep their leadership of the market. Among them, MTS has put in place a detailed sales and marketing strategy based on customer-centricity, as was presented by Garrett Johnston (Group Director of Strategic Marketing) in a lively talk. His main message was that operators need to understand their customers in order to deliver services they need, rather than products that suit the operator. He didn't just go over classic business manual theory, but gave concrete examples of how to get to know customer behaviour, and how to apply the learnings within an operator's sales strategy.
Among the other operators present at the congress, the main focus was how to keep costs under control in order to retain heatlhy margins. Cost-effectiveness is a priority for most operators across the world, but it seemed event more of an issue in Russia. The light at the end of the tunnel for operators investing in the region should be seen in CIS countries rather than Russia: emerging Central Asian markets, with their low penetration levels and improving economies and network, offer more potential than the already developed Russia.
28 May 2009
WiMAX spectrum licensing causing trouble in Nigeria
In the past couple of weeks, I’ve been debating with my colleagues about the opportunities for WiMAX in Africa. It has always been hailed as a great technology to provide wireless broadband services on the continent. Its relatively cheap deployment and flexibility made it a good business case for under-served areas. But it hasn’t taken off quite as fast as some of its most fervent supporters were hoping for, and the debate is still ongoing over what the best use is for the technology on the continent.
Over 100 WiMAX deployments are either planned or in service across Africa. Mobile WiMAX is not really an option in the foreseeable future, but fixed wireless services have good potential. Existing operators use WiMAX as a complementary technology to mobile for the provision of wireless broadband services (Orange in Mali and Botswana for instance), or as a cost-effective backhaul solution, ideal for rural coverage. Mostly, it has been seen as a good choice for Greenfield operators due to its easy deployment and favourable licence conditions. In the last few months, the global economic downturn has made it difficult for new entrants to raise the necessary funds, but this trend may change for 2010. The other potential obstacle to WiMAX’s success on the continent is the popularity of CDMA WLL for wireless broadband, supported by an active industry association, the African CDMA Forum (Bill Hearmon, the association’s chairman, is a regular at our conference and a very dynamic advocate of the technology).
As Africa’s largest telecoms market and one of the most competitive, it’s no wonder Nigeria is embracing the opportunities of WiMAX in addition to the other available technologies that are already successful in the market. But, as I’ve experience in last couple of years, things often take longer than expected to get done in Nigeria, and this particular process is being delayed in quite a spectacular fashion.
Licences have been issued for spectrum in the 2.3GHz frequency band for WiMAX services, and were allocated this month by the regulator (the Nigerian Communications Commission - NCC) to Mobitel, Spectranet and Multilinks. But almost as soon as the news was out, doubts were raised about the licensing process, and Nigeria’s Economic and Financial Crimes Commission arrested Ernest Ndukwe, head of the NCC, over the matter. According to my colleagues at Middle East & Africa Wireless Analyst, the main controversy was caused by the award of a licence to Multilinks rather than rival bidder Galaxy; Nigerian paper the Daily Trust reports an issue with winner Mobitel as well, and with contracts for the construction of community information centres across Nigeria.
Ernest Ndukwe is a major figure in Nigeria’s telecommunications as well as across Africa, and a regular speaker at international congresses. He led the NCC’s move to unified licensing in Nigeria, one of the first regulators to do it in Africa. I was surprised to hear of his arrest, but not of the fact that licensing processes are subject to controversy, particularly when matters go back and forth between different government bodies. Indeed, his arrest followed a petition filed by the Hon. Minister of Information and Communications, Professor Dora Akunyili, who has since ordered the cancellation of the whole licensing process. Professor Akunyili took office at the end of 2008, coming from a medical background - she was previously Director General of National Agency for Food and Drug Administration and Control. As new Minister for one of Nigeria’s foremost industries, it is understandable that she takes a keen interest in what is happening with new licences. She also has a strong reputation to defend as a popular public figure in the country, and probably doesn’t want to be associated with any controversy.
The NCC is currently fighting the cancellation and arguing its case with the government, so we should hear more of the story in the coming days or weeks.
Both Professor Akunyili and Ernest Ndukwe are due to give keynote presentations at the forthcoming West & Central Africa Com congress taking place in Abuja in 3 weeks. Their presence should attract a lot of attention from the local industry observers and stakeholders. Hopefully by then we’ll see more clarity in the case.
Over 100 WiMAX deployments are either planned or in service across Africa. Mobile WiMAX is not really an option in the foreseeable future, but fixed wireless services have good potential. Existing operators use WiMAX as a complementary technology to mobile for the provision of wireless broadband services (Orange in Mali and Botswana for instance), or as a cost-effective backhaul solution, ideal for rural coverage. Mostly, it has been seen as a good choice for Greenfield operators due to its easy deployment and favourable licence conditions. In the last few months, the global economic downturn has made it difficult for new entrants to raise the necessary funds, but this trend may change for 2010. The other potential obstacle to WiMAX’s success on the continent is the popularity of CDMA WLL for wireless broadband, supported by an active industry association, the African CDMA Forum (Bill Hearmon, the association’s chairman, is a regular at our conference and a very dynamic advocate of the technology).
As Africa’s largest telecoms market and one of the most competitive, it’s no wonder Nigeria is embracing the opportunities of WiMAX in addition to the other available technologies that are already successful in the market. But, as I’ve experience in last couple of years, things often take longer than expected to get done in Nigeria, and this particular process is being delayed in quite a spectacular fashion.
Licences have been issued for spectrum in the 2.3GHz frequency band for WiMAX services, and were allocated this month by the regulator (the Nigerian Communications Commission - NCC) to Mobitel, Spectranet and Multilinks. But almost as soon as the news was out, doubts were raised about the licensing process, and Nigeria’s Economic and Financial Crimes Commission arrested Ernest Ndukwe, head of the NCC, over the matter. According to my colleagues at Middle East & Africa Wireless Analyst, the main controversy was caused by the award of a licence to Multilinks rather than rival bidder Galaxy; Nigerian paper the Daily Trust reports an issue with winner Mobitel as well, and with contracts for the construction of community information centres across Nigeria.
Ernest Ndukwe is a major figure in Nigeria’s telecommunications as well as across Africa, and a regular speaker at international congresses. He led the NCC’s move to unified licensing in Nigeria, one of the first regulators to do it in Africa. I was surprised to hear of his arrest, but not of the fact that licensing processes are subject to controversy, particularly when matters go back and forth between different government bodies. Indeed, his arrest followed a petition filed by the Hon. Minister of Information and Communications, Professor Dora Akunyili, who has since ordered the cancellation of the whole licensing process. Professor Akunyili took office at the end of 2008, coming from a medical background - she was previously Director General of National Agency for Food and Drug Administration and Control. As new Minister for one of Nigeria’s foremost industries, it is understandable that she takes a keen interest in what is happening with new licences. She also has a strong reputation to defend as a popular public figure in the country, and probably doesn’t want to be associated with any controversy.
The NCC is currently fighting the cancellation and arguing its case with the government, so we should hear more of the story in the coming days or weeks.
Both Professor Akunyili and Ernest Ndukwe are due to give keynote presentations at the forthcoming West & Central Africa Com congress taking place in Abuja in 3 weeks. Their presence should attract a lot of attention from the local industry observers and stakeholders. Hopefully by then we’ll see more clarity in the case.
19 May 2009
Operators working on their network performance in South Africa
Competition is increasing in African markets, and added to the threat of lower consumer spend due to the global economic downturn, operators need to look at how they can best differentiate. In some cases, particularly for incumbents and market leaders, network capacity and high quality of service is a strong asset for both customer acquisition and retention.
That may be the reason why MTN is so strongly supporting the move of South African regulator ICASA 's decision to make operators publish quarterly reports on their performance. South Africa’s mobile operators MTN, Cell C and Vodacom met with ICASA last week to discuss the terms of the agreement. As a result, they will have to publicly report on: network performance and availability, network parameters (including reports about dropped calls and delayed text messages) and Active Subscriber Information. ICASA’s move is “part of the broader investigation about the source of dropped calls and the delayed SMSs that cell phone subscribers have been experiencing recently”. Apparently, SMS delays became a major issue during a reality TV programme involving text voting (a sign that the reality TV format is still alive and well across the globe!).
MTN was quick to turn the decision to their advantage, with representative Tim Lowry commenting publicly on it (Lowry is MD for the South Africa operation, regional VP for Southern and Eastern Africa at group level, and a regular speaker at the AfricaCom congress). According to MTN, ICASA’s decision was based on their proposal, described as similar to the way listed companies have to report on their financial performance. A great PR move for an operator which is investing heavily on its networks across Africa this year, as mentioned in a previous post. They will undoubtedly want to avoid the situation they experienced in Nigeria last year, when the local regulator threatened to block all new subscription additions until the QOS issues were sorted.
Tim Lowry’s comments also included a snap at Telkom, saying that the most consistent area of failure occurred when its network was relying on link faults by the fixed operator. His comment was quickly picked up by Telkom’s people, who released a statement saying “Telkom rejects the claims made by Lowry where he reportedly blamed the company for their own network and capacity shortcomings as an attempt to deflect attention from MTN’s own failure to adequately service its customers”.
We’ll just have to wait and see if Telkom is asked to share its network performance too to settle the debate. In the meantime, let’s hope South African viewers get to vote safely for their favourite TV show!
That may be the reason why MTN is so strongly supporting the move of South African regulator ICASA 's decision to make operators publish quarterly reports on their performance. South Africa’s mobile operators MTN, Cell C and Vodacom met with ICASA last week to discuss the terms of the agreement. As a result, they will have to publicly report on: network performance and availability, network parameters (including reports about dropped calls and delayed text messages) and Active Subscriber Information. ICASA’s move is “part of the broader investigation about the source of dropped calls and the delayed SMSs that cell phone subscribers have been experiencing recently”. Apparently, SMS delays became a major issue during a reality TV programme involving text voting (a sign that the reality TV format is still alive and well across the globe!).
MTN was quick to turn the decision to their advantage, with representative Tim Lowry commenting publicly on it (Lowry is MD for the South Africa operation, regional VP for Southern and Eastern Africa at group level, and a regular speaker at the AfricaCom congress). According to MTN, ICASA’s decision was based on their proposal, described as similar to the way listed companies have to report on their financial performance. A great PR move for an operator which is investing heavily on its networks across Africa this year, as mentioned in a previous post. They will undoubtedly want to avoid the situation they experienced in Nigeria last year, when the local regulator threatened to block all new subscription additions until the QOS issues were sorted.
Tim Lowry’s comments also included a snap at Telkom, saying that the most consistent area of failure occurred when its network was relying on link faults by the fixed operator. His comment was quickly picked up by Telkom’s people, who released a statement saying “Telkom rejects the claims made by Lowry where he reportedly blamed the company for their own network and capacity shortcomings as an attempt to deflect attention from MTN’s own failure to adequately service its customers”.
We’ll just have to wait and see if Telkom is asked to share its network performance too to settle the debate. In the meantime, let’s hope South African viewers get to vote safely for their favourite TV show!
1 May 2009
Picture of contrast in India’s telecoms market
India is a land of contrast, and it seems that its telecommunications industry reflects this. In the past week or so, news coming from India have given very different pictures of the industry: on the one hand, strong 2008 results from the market’s operators, while on the other hand, regulatory uncertainty still prevails.
The results for the last quarter of 2008 published this week show a healthy situation. Mobile subscription growth is still strong, boosted by operators expanding into new territories as well as the launch of new ones. Operators’ financial performances are healthy, with Bharti Airtel and Reliance Communications showing EBITDA growth. The market is still attracting foreign investment, as Etisalat joined in with a stake in new operator Swan Telecom. Above all, operators are still investing in their networks and services, in order to be ready for the increased competition on the market (only today, Bharti and Alcatel-Lucent announced a network management over the operator’s fixed-line and broadband business). In a context of global economic uncertainty, India seems to be a great example of the fact that emerging markets are the best places to do business at the moment.
However, the market is still experiencing drawbacks, a major one being its relative uncertain regulatory situation. New decisions take a very long time to be made, due to the constant bouncing back and forth between regulator TRAI and the government’s Department of Telecommunications. 3G licences took years to be awarded, with yet further delays earlier this year. Particularly telling was a debate among emerging market operators in February at Mobile World Congress: while all operators where discussing their great plans for mobile broadband, the Indian operator on the panel explained he had to make do with 2.5G networks while awaiting the regulator’s decision. Similarly, the situation with MVNOs took years to be sorted, with Virgin Mobile launching while arguing that it was only a branded offer, in order to bypass the regulatory uncertainty.
As reported in the last week, one of the interesting ‘up-and-coming’ new operators, Loop Telecom, may be another victim of regulatory challenges: its license may be under threat following an enquiry by the Ministry of Corporate Affairs over its indirect ownership by Essar Group. As Essar already owns a stake in mobile operator Vodafone-Essar, its link with Loop means that the new company may be in breach of its Universal Access Service License (UASL) conditions, and risk losing it altogether.
An interesting market then, that I’ll be happy to explore further at the India & South Asia Com event in Mumbai next week. A number of senior representatives of the abovementioned companies will be there, and I’ll be particularly attentive to the contributions of the Department of Telecommunications representatives. More news to come!
The results for the last quarter of 2008 published this week show a healthy situation. Mobile subscription growth is still strong, boosted by operators expanding into new territories as well as the launch of new ones. Operators’ financial performances are healthy, with Bharti Airtel and Reliance Communications showing EBITDA growth. The market is still attracting foreign investment, as Etisalat joined in with a stake in new operator Swan Telecom. Above all, operators are still investing in their networks and services, in order to be ready for the increased competition on the market (only today, Bharti and Alcatel-Lucent announced a network management over the operator’s fixed-line and broadband business). In a context of global economic uncertainty, India seems to be a great example of the fact that emerging markets are the best places to do business at the moment.
However, the market is still experiencing drawbacks, a major one being its relative uncertain regulatory situation. New decisions take a very long time to be made, due to the constant bouncing back and forth between regulator TRAI and the government’s Department of Telecommunications. 3G licences took years to be awarded, with yet further delays earlier this year. Particularly telling was a debate among emerging market operators in February at Mobile World Congress: while all operators where discussing their great plans for mobile broadband, the Indian operator on the panel explained he had to make do with 2.5G networks while awaiting the regulator’s decision. Similarly, the situation with MVNOs took years to be sorted, with Virgin Mobile launching while arguing that it was only a branded offer, in order to bypass the regulatory uncertainty.
As reported in the last week, one of the interesting ‘up-and-coming’ new operators, Loop Telecom, may be another victim of regulatory challenges: its license may be under threat following an enquiry by the Ministry of Corporate Affairs over its indirect ownership by Essar Group. As Essar already owns a stake in mobile operator Vodafone-Essar, its link with Loop means that the new company may be in breach of its Universal Access Service License (UASL) conditions, and risk losing it altogether.
An interesting market then, that I’ll be happy to explore further at the India & South Asia Com event in Mumbai next week. A number of senior representatives of the abovementioned companies will be there, and I’ll be particularly attentive to the contributions of the Department of Telecommunications representatives. More news to come!
29 Apr 2009
24 Apr 2009
Looking at new data on how the economic downturn affects emerging market operators’ spending
The question of how the global economy is affecting the telecoms sector has been in every discussion for a while, but there seems to be a consensus on the fact that emerging markets are not to be as affected by it as developed economies.
A new report released last week by global ratings agency Fitch Ratings is looking exactly at that: telecom operators’ capital expenditure plans in emerging markets. And the picture is a mixed one. Spending is expected to be stable to decreasing in most emerging markets (far from a doom-and-gloom vision of all money taps turned off), while Africa is to see a rise in operator spending in 2009.
According to the report, infrastructure investment is expected to increase by about 10% in Africa, and markets such as Nigeria will be the main beneficiaries of it. Indeed, pan-African operator MTN has announced it would follow up its record US$3 billion CapEx programme of 2008, with an even larger US$4 billion expenditure plan for its 2009 financial year. US$2.1 billion will go to MTN’s operations in West and Central Africa, and MTN Nigeria is expecting to invest at least US$1.5 billion on its network during this year to improve on the quality of service on its network. Zain group is also planning its 2009-and-beyond spending plans: having already acquired a stake in Morocco’s Wana on its shopping spree (as mentioned in a previous post), the group is now sorting out its finances by arranging a new deal to refinance a $2.5 billion Islamic loan it signed in 2007, according to Gulf Daily News.
In other parts of the world, the picture is not as positive, but still not bleak either. In India, one of Asia’s leading growth markets, operator expansion and new regulatory decisions (such as 3G and WiMAX licences and the introduction of mobile number portability) should boost operator spending. As an example, latest entrant operators Swan Telecom, Unitech Wireless, Loop Telecom, ByCell Communications and Datacom are looking at outsourcing contracts and are already in talks with various IT vendors like Tech Mahindra, IBM, Wipro and Infosys. The rest of Asia seems slightly more affected by the economic downturn, but operators are still deploying or expanding their networks, subscriptions are still growing, and broadband access is still a priority for the industry.
The report predicts a worse situation in Russia, with “sharp cuts, with many regional fixed-line incumbents expected to slash their capex by over 50% from the previous year, and mobile operators to reduce budgets by up to 25%," according to Nikolay Lukashevich, Senior Director and Fitch's Head of Russian/CIS Corporates. However, looking at Informa Telecoms & Media 's forecasts for this year and until 2012, the market still looks strong, particularly thanks to a growing broadband market, the launch if IPTV services and the emergence of MVNOs. Russia’s subscription base growth is set to continue in the coming years, despite a forecast penetration rate of 150.8% by 2012. Operators’ investment in data networks, including GPRS, EDGE and latterly WCDMA and HSPA, will help to achieve a growth in data revenues to reach 54% by 2012. This is likely to contribute to the quite unique trend observed in Russia of increasing ARPU levels: while between 2003 and 2006 ARPU levels fell rapidly from $16 per month to just over $7 per month (a trend observed in all markets as they develop), they have since rebounded, reaching $12 per month at the end of 2007. This leaves operators with great opportunities to invest in new services in order to retain customers: at the lower-end, messaging applications are a strog focus, and on the fixed-line side IPTV services are taking off and operators are investing in developing quality networks to support the demand.
In all the events I’ve attended in the past few months in emerging markets, the economy is a matter of concern, but operators are adamant that they cannot halt their expansion plans, nor stop investing in innovative services in order to differentiate from their competitors. What they are doing is looking at new ways to make their spending more cost-effective. That is why managed services are creating such a big interest in emerging markets. And for some of the groups whose strategy relies on international expansion, now is probably the best time to clinch cheaper deals. That is certainly the view of my colleague Nick Jotischky, who says: “ask Etisalat about global macroeconomic conditions, and it says the current climate is an M&A opportunity. A void has appeared, since many traditionally strong - and expansionist - mobile operating groups, such as France Telecom and Telenor, are becoming reluctant to get involved in acquisitive activity. Their reluctance has encouraged some wealthy Gulf-based incumbents, which themselves face intense competition in their domestic markets, to look for growth overseas. And they are using the low-cost business models that have been a success in their home markets to gain large numbers of customers in Asia and Africa.”
How operators adapt to new market conditions are one of the main topics discussed at events in the Com World Series this year. It will be interesting to see how the answers evolve as the year goes by. 2009 will close with our Middle East event, with a special focus on Middle Eastern operators’ international strategies, which will be a great way to update Nick’s point.
A new report released last week by global ratings agency Fitch Ratings is looking exactly at that: telecom operators’ capital expenditure plans in emerging markets. And the picture is a mixed one. Spending is expected to be stable to decreasing in most emerging markets (far from a doom-and-gloom vision of all money taps turned off), while Africa is to see a rise in operator spending in 2009.
According to the report, infrastructure investment is expected to increase by about 10% in Africa, and markets such as Nigeria will be the main beneficiaries of it. Indeed, pan-African operator MTN has announced it would follow up its record US$3 billion CapEx programme of 2008, with an even larger US$4 billion expenditure plan for its 2009 financial year. US$2.1 billion will go to MTN’s operations in West and Central Africa, and MTN Nigeria is expecting to invest at least US$1.5 billion on its network during this year to improve on the quality of service on its network. Zain group is also planning its 2009-and-beyond spending plans: having already acquired a stake in Morocco’s Wana on its shopping spree (as mentioned in a previous post), the group is now sorting out its finances by arranging a new deal to refinance a $2.5 billion Islamic loan it signed in 2007, according to Gulf Daily News.
In other parts of the world, the picture is not as positive, but still not bleak either. In India, one of Asia’s leading growth markets, operator expansion and new regulatory decisions (such as 3G and WiMAX licences and the introduction of mobile number portability) should boost operator spending. As an example, latest entrant operators Swan Telecom, Unitech Wireless, Loop Telecom, ByCell Communications and Datacom are looking at outsourcing contracts and are already in talks with various IT vendors like Tech Mahindra, IBM, Wipro and Infosys. The rest of Asia seems slightly more affected by the economic downturn, but operators are still deploying or expanding their networks, subscriptions are still growing, and broadband access is still a priority for the industry.
The report predicts a worse situation in Russia, with “sharp cuts, with many regional fixed-line incumbents expected to slash their capex by over 50% from the previous year, and mobile operators to reduce budgets by up to 25%," according to Nikolay Lukashevich, Senior Director and Fitch's Head of Russian/CIS Corporates. However, looking at Informa Telecoms & Media 's forecasts for this year and until 2012, the market still looks strong, particularly thanks to a growing broadband market, the launch if IPTV services and the emergence of MVNOs. Russia’s subscription base growth is set to continue in the coming years, despite a forecast penetration rate of 150.8% by 2012. Operators’ investment in data networks, including GPRS, EDGE and latterly WCDMA and HSPA, will help to achieve a growth in data revenues to reach 54% by 2012. This is likely to contribute to the quite unique trend observed in Russia of increasing ARPU levels: while between 2003 and 2006 ARPU levels fell rapidly from $16 per month to just over $7 per month (a trend observed in all markets as they develop), they have since rebounded, reaching $12 per month at the end of 2007. This leaves operators with great opportunities to invest in new services in order to retain customers: at the lower-end, messaging applications are a strog focus, and on the fixed-line side IPTV services are taking off and operators are investing in developing quality networks to support the demand.
In all the events I’ve attended in the past few months in emerging markets, the economy is a matter of concern, but operators are adamant that they cannot halt their expansion plans, nor stop investing in innovative services in order to differentiate from their competitors. What they are doing is looking at new ways to make their spending more cost-effective. That is why managed services are creating such a big interest in emerging markets. And for some of the groups whose strategy relies on international expansion, now is probably the best time to clinch cheaper deals. That is certainly the view of my colleague Nick Jotischky, who says: “ask Etisalat about global macroeconomic conditions, and it says the current climate is an M&A opportunity. A void has appeared, since many traditionally strong - and expansionist - mobile operating groups, such as France Telecom and Telenor, are becoming reluctant to get involved in acquisitive activity. Their reluctance has encouraged some wealthy Gulf-based incumbents, which themselves face intense competition in their domestic markets, to look for growth overseas. And they are using the low-cost business models that have been a success in their home markets to gain large numbers of customers in Asia and Africa.”
How operators adapt to new market conditions are one of the main topics discussed at events in the Com World Series this year. It will be interesting to see how the answers evolve as the year goes by. 2009 will close with our Middle East event, with a special focus on Middle Eastern operators’ international strategies, which will be a great way to update Nick’s point.
16 Apr 2009
When football and telecoms meet in South Africa
It seems not so long ago that Zinedine Zidane headbutted his way out of the football world cup final in Germany, but the next World Cup is now only a year or so away. This is even bigger news as usual, as it is taking place for the first time in Africa, one of the most football-crazy continents. Having visited African countries during or just after the last African Football Cup of Nations, I can testify that is a big deal there – and it was definitely useful to make friends with a taxi driver in Egypt who was more than pleased to comment on his country’s recent win.
Now, what is the link with telecoms? Well, for a start, large sporting events have always been a great way of boosting uptake of mobile content services. Due to the high price of such services, and to the limited available bandwidth, the market for such services remains small in emerging markets (with the exception of India). Operators and industry commentators also blame the limited success of such services on the lack of original local content. Next year’s world cup could be a great way for operators on the continent to make the most of their recent 3G upgrades and get customers to use their data services.
Closer to my colleagues and me, the preparations for the 2010 event in South Africa are having a considerable impact on our schedule of congresses. Next November, FIFA is holding the final draw of the teams playing in the competition. Judging from the show they put on for the preliminary draw, it’s going to be a big event. It will take place in beautiful Cape Town, at the International Convention Centre. I know this is a great venue, as we use it every year for our flagship event AfricaCom. We were planning to use it the week before FIFA is organising the draw, but it turns out that they will need it in order to prepare for their show.
That is why, after consulting with FIFA and with the Mayor of Cape Town, we are moving our event to 11th and 12th November (instead of 18th and 19th as originally planned). Nomfanelo Magwentshu, Chief Operations Officer for the FIFA World Cup Organizing Committee, says: “it is of the utmost importance to ensure that the preparations for [the FIFA World Cup Final draw] are flawless [...] to ensure an excellent television broadcast allowing us to showcase South Africa to the world, and present the country and the continent hosting the 2010 FIFA World Cup in the best possible way”. For those of you who will join us for AfricaCom, he adds: “allow me to pass on our sincere thanks not only to Informa but also to the exhibitors, speakers and delegates of AfricaCom 2009 who have been affected by our request but without whose co-operation this would not have been possible”.
For my part, I am happy that AfricaCom can be associated, if only in a small way, to such a big event. In particular, I’ll be looking forward to the possibility of meeting football stars in Cape Town – watch this space as we are planning special guests for our AfricaCom Awards evening!
Now, what is the link with telecoms? Well, for a start, large sporting events have always been a great way of boosting uptake of mobile content services. Due to the high price of such services, and to the limited available bandwidth, the market for such services remains small in emerging markets (with the exception of India). Operators and industry commentators also blame the limited success of such services on the lack of original local content. Next year’s world cup could be a great way for operators on the continent to make the most of their recent 3G upgrades and get customers to use their data services.
Closer to my colleagues and me, the preparations for the 2010 event in South Africa are having a considerable impact on our schedule of congresses. Next November, FIFA is holding the final draw of the teams playing in the competition. Judging from the show they put on for the preliminary draw, it’s going to be a big event. It will take place in beautiful Cape Town, at the International Convention Centre. I know this is a great venue, as we use it every year for our flagship event AfricaCom. We were planning to use it the week before FIFA is organising the draw, but it turns out that they will need it in order to prepare for their show.
That is why, after consulting with FIFA and with the Mayor of Cape Town, we are moving our event to 11th and 12th November (instead of 18th and 19th as originally planned). Nomfanelo Magwentshu, Chief Operations Officer for the FIFA World Cup Organizing Committee, says: “it is of the utmost importance to ensure that the preparations for [the FIFA World Cup Final draw] are flawless [...] to ensure an excellent television broadcast allowing us to showcase South Africa to the world, and present the country and the continent hosting the 2010 FIFA World Cup in the best possible way”. For those of you who will join us for AfricaCom, he adds: “allow me to pass on our sincere thanks not only to Informa but also to the exhibitors, speakers and delegates of AfricaCom 2009 who have been affected by our request but without whose co-operation this would not have been possible”.
For my part, I am happy that AfricaCom can be associated, if only in a small way, to such a big event. In particular, I’ll be looking forward to the possibility of meeting football stars in Cape Town – watch this space as we are planning special guests for our AfricaCom Awards evening!
7 Apr 2009
Bakcell: a company to watch in Azerbaijan
Azerbaijan was one of the most talked-about markets at last week’s 6th annual Eurasia Com event in Istanbul. Although Turkey is by far the region’s leader (with great talks of broadband opportunities and MVNO launches), and Uzbekistan is hailed as the next big thing, one of the markets that was most talked about was Azerbaijan. Within it, the company that drew my attention most was Bakcell, its 2nd mobile operator.
Bakcell was represented by Ineke Botter, its new CEO of two months, and seemingly the only female senior executive in the region’s telecom (although I’d welcome anyone to contradict me on this!). With a background in Greenfield operations, she was brought to the company to rethink its position and fulfil its stakeholders’ renewed ambitions.
After 15 years in the market and 1.5 million subscribers (according to my number-crunching colleagues at WCIS), Bakcell is still somewhat lagging behind Azercell, the mobile arm of incumbent fixed-line operator Azertel (3.6 million subscribers), and threatened with being caught up by relative newcomer Azerfon/NAR Mobile, already claiming 1.01 million subscribers after a launch in 2007. Furthermore, smaller alternative operators are trying to make a mark in the market, particularly with broadband services: CDMA player Catel, and new WiMAX ISP Delta Telecom (whose CTO Rahid Alekberli also spoke at the event). In these conditions, Bakcell has been suffering, according to Ms Botter, from an image of an old-fashioned company at a standstill in the market.
But under the impulse of new shareholders with “great ambitions and great expectations”, and a new management team at the helm of the company, Bakcell is gearing up to face the competition and make a strong impact in Azerbaijan’s telecom. The company is being reorganised along some key drivers to move towards a new image and stronger market position:
- A strong team to lead the change, with new executives coming from diverse backgrounds; one of them, CMO Steinn Naevdal, was at the event and is bringing experience from other emerging markets
- Building an efficient network with new ideas to facilitate the rollout (and “not just cut and paste from other operators’ models”), and money to spend; Ms Botter said the company has “good CapEx to spend”, and indeed a GSM network expansion contract was announced with Nokia Siemens Networks last month
- Focusing on the company’s Azeri roots, to differentiate from foreign-owned competitors
- Building healthy relations with the government, with the objective of participating in the process of creating an independent regulator, which doesn’t yet exist in the country
These clear points, presented with conviction by Ineke Botter, made me think that we would probably hear more from this company. I am looking forward to hearing about the innovative solutions that are to be tried out, and maybe even more to seeing its competitors’ response.
Bakcell was represented by Ineke Botter, its new CEO of two months, and seemingly the only female senior executive in the region’s telecom (although I’d welcome anyone to contradict me on this!). With a background in Greenfield operations, she was brought to the company to rethink its position and fulfil its stakeholders’ renewed ambitions.
After 15 years in the market and 1.5 million subscribers (according to my number-crunching colleagues at WCIS), Bakcell is still somewhat lagging behind Azercell, the mobile arm of incumbent fixed-line operator Azertel (3.6 million subscribers), and threatened with being caught up by relative newcomer Azerfon/NAR Mobile, already claiming 1.01 million subscribers after a launch in 2007. Furthermore, smaller alternative operators are trying to make a mark in the market, particularly with broadband services: CDMA player Catel, and new WiMAX ISP Delta Telecom (whose CTO Rahid Alekberli also spoke at the event). In these conditions, Bakcell has been suffering, according to Ms Botter, from an image of an old-fashioned company at a standstill in the market.
But under the impulse of new shareholders with “great ambitions and great expectations”, and a new management team at the helm of the company, Bakcell is gearing up to face the competition and make a strong impact in Azerbaijan’s telecom. The company is being reorganised along some key drivers to move towards a new image and stronger market position:
- A strong team to lead the change, with new executives coming from diverse backgrounds; one of them, CMO Steinn Naevdal, was at the event and is bringing experience from other emerging markets
- Building an efficient network with new ideas to facilitate the rollout (and “not just cut and paste from other operators’ models”), and money to spend; Ms Botter said the company has “good CapEx to spend”, and indeed a GSM network expansion contract was announced with Nokia Siemens Networks last month
- Focusing on the company’s Azeri roots, to differentiate from foreign-owned competitors
- Building healthy relations with the government, with the objective of participating in the process of creating an independent regulator, which doesn’t yet exist in the country
These clear points, presented with conviction by Ineke Botter, made me think that we would probably hear more from this company. I am looking forward to hearing about the innovative solutions that are to be tried out, and maybe even more to seeing its competitors’ response.
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