SANDTON, South Africa-A wave of liberalization and privatization is transforming the cellular market in Africa. Countries riding high on this tide include South Africa, Morocco, Egypt, Tunisia, Mauritius, C”te d’Ivoire, Kenya and Uganda.
Pyramid Research predicts that only Angola, Burundi, Libya and Gambia will have cellular monopolies, while the rest of the markets in Africa will eventually have both international operators and competition.
“The resulting competition will induce price reductions, diversification in VAS (value-added service) offerings, improved responsiveness to customers and better quality of service,” said Guy Zibi, senior researcher for Pyramid. “The combined effects of these factors will fuel subscriber uptake of the services.”
To further promote and foster the process of liberalization and privatization, the 14 governments of the Southern African Development Community (SADC), which include Angola, Botswana, Democratic Republic of Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe, have drawn up a protocol. or working document.
This document serves as a guideline to introduce telecommunications policy aimed at promoting and sustaining competition between networks, enhancing capacity and capability, developing complementary strategies and ultimately attracting investment.
The protocol has already been set in motion in several of the SADC countries, and a tide of cellular activity has followed the wave of liberalization. New licenses have been awarded in Mauritius and Tanzania, while licenses are planned for Namibia and Zimbabwe.
South Africa, which is approaching 4 million subscribers on its two existing networks-operated by Vodacom and MTN-is to issue a third license at the end of 1999 after much delay. International operators such as Telia/Telenor, MSI Cellular Investments, Telecel International, GTE, Distacom, SB Telecom and Nextel have positioned themselves for a slice of the lucrative market. Many operators see the South Africa license as a stepping stone into the rest of Africa.
GSM’s popularity
Adopting GSM as a digital standard has become a trend in Africa. Other technologies, including CDMA and PHS, are being used mainly in fixed wireless access applications. In Tanzania, for example, wireless local loop (WLL) trials are being conducted using the PHS-based Digital Cordless Telephone System (DCTS) from NEC. CDMA WLL is poised for further expansion in Nigeria with operator Intercellular planning a US$30 million expansion of its network.
GSM is to become the driving force behind Telecel International, which operates several AMPS, GSM and CDMA networks in Africa. The company split into two entities earlier this year.
Telecel One, run by American Joseph Gatt, will remain headquartered in Washington and will control the networks in the Democratic Republic of Congo, Guinea and Madagascar.
The remaining networks in Burundi, Central African Republic (CAR), Ivory Coast, Zambia and Zimbabwe have become part of a new company headed by Miko Rwayitare and based in Geneva. This group, which retained the name Telecel International, has embarked on launching networks in Benin, Niger and Togo. It was recently granted a license for a GSM 900 rollout in Gabon. The AMPS networks in Burundi and CAR are being upgraded to GSM. In Zambia, Telecel’s CDMA system will be replaced with GSM because the Zambian government wants to standardize cellular technology in the country.
The remaining CDMA network in Africa will be in the Democratic Republic of Congo, operated by Telecel One. It is not known, however, if this network will continue in its present form.
Some bidders for the third cellular license in South Africa, however, are looking at CDMA and iDEN for their rollout plans, but whether it would be for only fixed wireless purposes is still uncertain. The higher frequency GSM 1800 standard is still very much a novelty in Africa, and South Africa could lead the way when its third cellular operator is licensed; GSM 1800 is being considered for the third licensee.
Analog networks-for example, the NMT 900 network in Algeria and the Burundi AMPS system-are being converted to GSM standards to allow for roaming and more value-added services. In June, only about 25 networks used analog systems, such as AMPS, TACS and NMT. Vodacom in South Africa shed its C450 customer base of 4,500 subscribers at the end of June, and the spectrum will probably be reallocated for lower frequency GSM 450 purposes.
Expanding privatization
With 12 countries set to liberalize or privatize their cellular markets in 1999 and 2000, the window of opportunity for global GSM operators to enter Africa is wide.
Pyramid Research said the market opportunities for GSM operators will continue to expand within the next two years, and more than 12 GSM operators will be licensed as countries liberalize their markets and add more competition.
Currently, cellular phone service is available in more than 35 African countries, and nations such as Senegal, Gabon and Chad are actively seeking to increase the number of cellular providers. In addition, as some of the state-owned cellular services and national operators become privatized, this will increase the potential of GSM as both a global and African standard.
After South Africa, Morocco and Egypt are seen as the most lucrative GSM investments in Africa.
Morocco’s second GSM license tender recently attracted top international operators, including Vodafone/Airtouch, SBC International Development, GTE, France Telecom Telecel, Telefonica/Portugal Telecom and Telecom Italia Mobile, among others. The consortium including Telefonica and Portugal Telecom won the license, paying nearly US$1.1 billion. The license award represents a significant coup for the consortium because the existing sole cellular operator in Morocco, operated by state-run Ittissalat Al Maghrib, has only about 130,000 subscribers. The population of Morocco is about 30 million.
Egypt’s meteoric rise in the GSM cellular sphere began in 1997 with its selling of 70 percent of the shares of its main operator, ARENTO. Since then, with three cellular networks as of the end of March 1999, Egypt boasted well over 300,000 users on its networks.
Pyramid’s Zibi noted that Tunisia constitutes another lucrative market for international operators. The state-owned GSM cellular service gained more than 32,000 cellular subscribers from the time it launched service in April 1998 until the end of 1998.
“Furthermore, Tunisia’s government has pledged to introduce cellular competition in 2000 as part of the country’s World Trade Organization (WTO) commitments,” said Zibi. “While no solid plans for a second cellular license have materialized yet, the cellular liberalization precedents set by Morocco and Egypt will encourage the Tunisian government to follow through its commitments.”
In Sub-Saharan Africa, C”te d’Ivoire leads the way in the telecommunications market with three GSM networks and more than 120,000 subscribers.
Mauritius is close behind with approximately 100,000 subscribers. In addition, Emtel, which operates a TACS network in the country, is launching a GSM network, so the number of subscribers is likely to increase even more.
The strong economy in Senegal provides the potential for a lucrative cellular market with well over 200,000 subscribers. Only 15 percent of this market has been tapped so far.
Uganda, with the planned 51-percent privatization of Uganda Telecom, the solicitation of new bids for potential bidders, and expansion of GSM networks including a recent service from MTN, is likely to have strong cellular subscriber numbers.
Morocco, Egypt and South Africa have an advantage over other African countries in terms of income per capita. The highest consumer-access hurdle
s are in the low-income nations such as Mozambique, Kenya and Malawi.
Countries like Nigeria, however, wher
e the income per capita is one of the lowest in the world, still have great potential as profitable markets. Strive Masiyiwa, the pioneer who fought his way through numerous legal wrangles to introduce private networks in Zimbabwe and Botswana with Econet and Mascom, has proved that through careful marketing strategies and competition, a GSM network can become a successful investment in Africa in a one-year period. Econet currently has about 40,000 subscribers, and Mascom has 20,000.
At least 10 more African countries will introduce cellular competition between 1999 and 2000. The Cameroon, Ethiopia, Malawi, Mauritius, Nigeria, Senegal, Togo and Tanzania have already issued cellular licenses and rollout should begin in 1999.
A fifth cellular license in Tanzania was granted to Vodacom by the Tanzania’s privatization commission, and the new carrier is expected to be operational by the end of the year. In July 1999, the privatization committee in Gabon granted two licenses for GSM networks to Telecel International and Celtel. If both companies fulfill the requirements, they will also become operational by December. Benin, Ghana and Cameroon are to issue one new GSM cellular license each by the last quarter of 1999, following finalization of the proposal reviews by their governments.
Namibia and Kenya, which has started to implement legislation passed in 1998 to liberalize telecommunication services, will issue tenders for the second cellular licenses in 2000. Algeria is expected to privatize and liberalize its cellular market after 2000.
“The growth potential in Africa’s cellular markets will ignite interest in global cellular operators and vendors,” said Zibi. “Established operators in Africa, such as Telecel International, will continue to eye most opportunities in the markets with the largest growth potential such as Morocco. Morocco, like South Africa in 1994 and Egypt in 1998, is the present crown jewel of Africa’s cellular opportunities.
“The markets with high growth potential will also trigger interest from infrastructure and handset vendors.”
Africa’s upcoming liberalization and privatization can only result in a reinvigorated and completely transformed African cellular market.
