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BMI-T Communication Technologies Handbook: Africa - Overview

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Overview: The African Telecommunications Renaissance This report is a summary of information contained in the Communication Technologies Handbook 1999 which is authored by the BMI TechKnowledge Group

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Introduction Fixed-lines Mobile cellular

Internet Universal access Future prospects

Introduction Other Players ...

Africa has emerged as the region with the world’s highest economic growth with Mauritius, Uganda, Senegal and Cameroon forecast to be among the ten fastest growing economies in the world in 1999. This renaissance is also evident in the African telecommunication market: growth in main telephone lines in 1997 was the highest in over ten years, the number of mobile cellular subscribers almost doubled, and twice as many African countries were connected to the Internet by mid-1998 compared to the beginning of 1996. If these trends can be sustained, the continent will be one of the world’s most dynamic telecommunication markets as we enter the new millennium. Fixed-lines During 1997, Africa registered its highest annual growth rate in main telephone lines since 1985 boosting the region’s overall teledensity to just below two. If this rate of growth could be sustained, the 1997 number of 15.2 million telephone main lines should almost double by the year 2003. At an average cost of some US$ 1,500 per line, this would indicate a market size of around US$20 billion for the fixed network alone. The high growth in main lines suggests that sector liberalisation strategies such as separating posts from telecommunications, granting greater autonomy to telecom operators, selling stakes in incumbent operators and granting new licenses for basic telephony are starting to pay off. For example, Ghana, Guinea and Senegal were among the countries that registered the highest growth in main telephone lines in 1997. The incumbent telecom operators in these countries represent three of the five privatisations of African public telecommunication operators (PTOs) between 1996 and 1998. By the end of 1998, some 18 incumbent operators in the region had some degree of private and/or foreign ownership. One of the factors which has encouraged private investment is the continuing high level of expenditure per line in the region. For Africa as a whole, telecommunication revenue per line stood at US$687 per year in 1996, a rise of 15 per cent, in US dollar terms, over 1994. For Sub-Saharan Africa, the figure is even higher at US$1,175. These figures reflect the intensive usage that users in Africa make of the limited number of telephone lines. This augurs well for private investors looking for a quick return on their capital. Mobile cellular

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Almost twenty new mobile cellular networks came online in Africa in 1997 and 1998, a clear indication of the dynamism of this market. The number of cellular subscribers in the region neared the two million mark in 1997, probably surpassed three million by the end of 1998 and is forecast to reach over 5.5 million by the year 2000. A number of factors are driving growth in African cellular markets: Private sector investment. Almost all new cellular networks on the continent are backed by private strategic partners. These include established cellular investors such as Telecel of the United States and the Luxembourg-headquartered Millicom. More recently, larger multinational telecom operators have entered the African market. One example is the joint entry of Air Touch and Vodafone into the Egyptian market as members of the Misrfone consortium, a portent of Vodafone’s planned acquisition of AirTouch. The strategic partners bring expertise and leverage with equipment manufacturers that will help get African cellular networks up and running quickly. For example, Misrfone launched its GSM network only six months after winning the licence. Pent-up demand. The undeveloped state of fixed-line networks in the region means that there is considerable unfulfilled demand for telecommunications. More than half of all new telephone subscribers in Africa in 1997 signed up for cellular service and the ratio of mobile to fixed subscribers is increasing. Competition. The cellular market has been opened to competition in a number of African countries. Allowing additional market entrants helps boost growth as shown by countries which have licensed more than one operator. For example, the Côte d’Ivoire, Guinea and Tanzania, each with more than one cellular operator, doubled their cellular subscribers in 1997. Marketing. Mobile cellular brings a whole new concept to telephony. Unlike stodgy state-owned fixed-line operators, mobile cellular companies invest a lot in marketing to attract subscribers. This includes a variety of packages tailored to ifferent customers. One concept that could revolutionise the adoption of mobile cellular in Africa is the introduction of the pre-paid card. Pre-paid makes mobile available to many who would not normally qualify for a regular subscription. In South Africa, more than a third of the market-leading Vodacom subscribers are pre-paid. If inexpensive handsets can be made available – either through subsidies, mass production or programmes to import used handsets – then it is not hard to envisage a day when pre-paid mobile subscribers outnumber post-paid telephone subscribers in Africa. Internet Most of the countries in the region have now developed some form of Internet access either through local dialup, store and forward e-mail with a gateway to the Internet, or through a full leased-line service. The three key indicators of Internet development are: the number of host computers, the number of Internet Service Providers (ISPs) and the number of users. Internet host computers: By mid-1998 there were about 150,000 Internet host computers in Africa, of which 140,000 were in South Africa, 3,700 in North Africa and the remainder in Sub-Saharan Africa. The annual average growth in hosts has been averaging over 50 per cent a year in South Africa, around 100 per cent a year in North Africa and over 150 per cent a year in Sub-Saharan Africa. Internet Service Providers (ISPs):

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A majority of African countries allow competition for the provision of Internet access. Of the roughly 400 ISPs in the region by the end of 1998, around 75 are in South Africa, 100 in North Africa and close to 200 in Sub-Saharan Africa. Internet Internet users: By the end of 1997, there were an estimated 150,000 Internet users on the continent, in addition to 850,000 in South Africa. The high price for an Internet connection relative to income is probably the major inhibiting factor for wider use of Internet in Africa. Considering the low incomes of most African countries, it is unrealistic to expect widespread individual Internet access. A more logical approach is to provide Internet access in public places such as schools, libraries and payphone centres. Another obstacle in the path of rapid Internet growth is the lack of telecommunication infrastructure. Although many countries have taken major steps to improve their infrastructure, great variation still remains between regions and countries; rural areas, where 70-80 per cent of the population resides, are largely uncovered by telephone service. International Internet bandwidth is lacking and peering between ISPs is limited. Proposals such as the Africa One and SAFE-2 undersea fibre-optic cables and wireless technologies including WLL, VSAT, and HF radio promise to extend Internet services to both urban and rural areas. An increasing number of African countries are allowing Internet Service Provider (ISP) competition. For most, this is their first experience with allowing any sort of private involvement in the telecommunication sector. Foreign ISPs are also entering Africa. As the Internet market becomes increasingly liberalised, and market forces take shape, private efforts are likely to ensure the continued growth for Internet in Africa. Prices will be driven lower, making access more affordable and creating new and innovative services for Africans. AFRICA’S TOP TEN Top ten African Public Telecommunication Operators (PTO) ranked by 1997 revenues (US$) PTO (Country) Telecom revenue Total telephone Cellular (US$ m) subscribers subscribers (000s) 1997 Change 1997 Change as % of total 1 Telkom (South Africa) 4,375 15.1% 4,645 9.1% 0% 2 Vodacom (South Africa) 955 64.2% 974 76.1% 100% 3 Egypt Telecom 874 13.0% 3’453 13.9% 0% 4 Itissalat Al Maghrib (Morocco) 643 -7.5% 1’449 12.0% 5% 5 MTN (South Africa) 620 35.8% 700 75.0% 100% 6 KPTC (Kenya) 307 3.2% 275 3.2% 2% 7 Tunisie Telecom (Tunisia) 295 -0.3% 662 12.0% 1% 8 MPT (Algeria) 242 16.5% 1’415 9.7% 1% 9 CI-TELCOM (Côte d’Ivoire) 201 33.8% 142 9.4% 0% 10 PTC (Zimbabwe) 137 0.4% 218 24.6% 3% Top 10 8,650 16.9% 13,393 16.2% 13% Note: Privately-owned PTOs are shaded.Total telephone subscribers refers to both fixed and mobile cellular telephone customers. Source: ITU Public Telecommunication Operator Database.

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Universal access The average African cannot yet afford the cost of an individual telephone connection. Furthermore, the majority of the region’s inhabitants live in rural areas where telephones are few and far between. Therefore governments should focus on providing wide-scale reasonable access to telephones by adopting policies that call for the availability of a telephone within a certain distance. This requires a better understanding of the spatial characteristics of those without telephones. South Africa provides an example of how this can be done. Its national statistical agency, Statistics South Africa, has conducted a detailed survey of telephone availability, providing an elaborate portrait of those without telephones. This has enabled the country to develop practical goals for enhancing access such as providing telephone service to more than 50 per cent of households that can afford service within five years as well as a goal to ensure that no one is more than thirty minutes travelling distance to a telephone. Other countries are adopting goals relating to time and distance from a telephone that are more relevant than simple overall teledensity targets. For example Malawi is pushing for telephone access within 10 kilometres of all inhabited areas while Kenya would like telephones within walking distance. Other countries are targeting access to localities. In Ghana, this is defined as making a telephone available in every town of more than 500 people. Widespread public telephone availability is the cornerstone of a universal access policy and more relevant measurements of commitment to accessibility for the region include public telephone density and the share of public telephones to total telephone lines. A growing number of countries realise this and are implementing policies to enhance the supply of public telephones either by establishing targets that operators must meet or by allowing the private provision of public telephones. An example of the former is South Africa, where the two cellular operators have been mandated to install 29,500 community public telephones. In addition, the fixed-operator, Telkom, must install 120,000 payphones between 1997 and 2002 as part of its licence conditions. An example of the latter is Senegal where entrepreneurs are allowed to operate “Telecentres privés (TCPs)”. More than 5,000 TCPs were in operation by the end of 1996, accounting for over 5 per cent of all telephone lines in the country. Future prospects The last few years have been a period of significant growth in the African telecommunication landscape. Economic revival, regulatory reform and private sector involvement are fuelling this upswing. A significant development is the rapid growth in mobile cellular with the number of networks doubling over the last four years. A visible sign of the growth of the mobile market is that two of Africa ’s top ten telecom operators (by revenue) are pure mobile operators which barely existed five years ago. They illustrate how the combination of private capital and a new service can grow quickly. There is no reason to believe that these ingredients cannot work in other African markets, albeit on a different scale. Ironically the characteristics of mobile cellular – personal use and mobility – stand in stark contrast to the existing situation in Africa. The majority of Africans live in rural areas where poor transport limits mobility. And most Africans cannot afford a personal telephone service. Policies are needed to extend shared access such as programmes to increase the availability of public telephones by franchising their operation to private entrepreneurs, obligating incumbent and new operators to install public telephones in rural and disadvantaged areas and promoting widespread use of pre-paid cards. These types of initiatives, involving local private business people, will be just as important as the more visible large-scale privatisations in alleviating telecommunication access shortages and making the telecommunication recovery underway sustainable and beneficial to the majority of the region ’s inhabitants. Michael Minges International Telecommunication Union

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