TELECOMMUNICATIONS IN AFRICA: SOME USEFUL CONSIDERATIONS

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TELECOMMUNICATIONS IN AFRICA SOME USEFUL
CONSIDERATIONS
MIT November 6, 2000 Guy Engon Zibi, Senior
Analyst Pyramid Research
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AGENDA

• General Overview of the African market
• Regulatory Trends
• Market Trends
• Technology deployments
• Critical Considerations
• For local governments
• For investors
• For the business
• Concluding comments

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REGULATORY TRENDS

• Evolution of policy mindset governments are
  divesting
• Competition is becoming the name of the game
• Strong monopolies still exist
• Regulatory frameworks cannot keep up with the
  pace dictated by global trends and technology.

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MARKET TRENDS

• Telephone penetration rates remain low..but
  cellular is taking over thanks to competition,
  pre-pay packages.

Estimates for 26 markets in SSA Source Pyramid
Research
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MARKET TRENDS

• Internet, broadband still trailing major
  opportunities lie in infrastructure build-out.
• Last mile bottlenecks
• High backbone connectivity costs
• Initial start-up costs are high
• Low literacy rates
• E-commerce and other Internet-related services
  have a strong potential in South Africa.
• Elsewhere, they remain a difficult proposition.

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TECHNOLOGY
IN GENERAL, WIRELESS IS MOST OPTIMAL
SOLUTION Cellular for basic voice services, and
soon data Africa is GSM-centric Solutions
exist for urban, rural deployment Fixed
Wireless for basic voice service, rural
deployments Rapid deployment, service
flexibility Watch for standard, frequency,
logistics issues VSATs Still best/only solution
for Internet access in many markets
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TECHNOLOGY

• BUT FIBRE IS BEST FOR DATA SERVICES
• Better for high-end, carrier-grade services
• Initial capital expenditure is high
• But long-term savings in operating costs are
  considerable

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Critical considerations

• FOR THE GOVERNMENT
• How much money does the government get, short and
  long-term?
• What are the immediate and long-term economic
  implications of your business?
• Will you serve rural areas, lower-end market
  segments?
• If not, what are you ready to do to help the
  government develop these markets?

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Critical considerations

• FOR INVESTORS
• What is the return on investment? How soon do I
  get my returns?
• Do you have government, international institution
  support?
• What is the level of risk? Are potential returns
  worth taking that risk?
• What is my exit strategy?

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Critical considerations

• FOR THE BUSINESS
• Whats the actual demand for the service Im
  going to offer? What are the returns?
• How reliable is the regulatory framework?
• Who is my local partner? Does my partner have
  resources/network/influence?
• Who are my competitors? How can they hurt me? Do
  I have any protection?
• What is the existing infrastructure in the
  country? Can I rely on it?

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Concluding comments
1. Thoroughly understand the policy and
regulatory framework they can make the
difference between success and failure. 2. There
is no one-size-fits all for technology. What you
use depends on market, service offered. The wrong
technology can set you back for years. 3. Dont
let the hype drive your strategy study the
market and give people/businesses what they want
and are ready to pay for.
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Thank you