JOHANNESBURG, South Africa-As Africa enters the threshold of the African Renaissance and progresses toward privatizing and liberalizing its telecommunications sectors, powerful alliances are being forged in the wireless arena.
“The rapid privatization of the telecommunications sector in east African countries and southern Africa is attracting considerable attention from consortia backed by investors and operators with considerable expertise,” said Guy Zibi, research analyst for U.S.-based Pyramid Research.
An alliance that will have a strong presence in the coming years, especially for dual fixed/mobile licenses, is the Telia Overseas AB/MTN group. Telia, from Sweden, brings fixed-network expertise, while South Africa’s MTN adds knowledge of the continent and cellular-market expertise.
Ross Macdonald, head of MTN’s international business development said, “We signed a memorandum of understanding [in early 1998] with Telia Overseas to pursue joint ventures when there is scope for the two operators to work together.”
Their first joint venture was in Uganda, where they obtained a license as the second national operator to offer services for both the fixed and mobile markets. The structure of the MTN Uganda consortium is MTN Holdings (Pty.) Ltd. (S.A.), equity holding 50 percent; Telia Overseas A.B. (Sweden), 30 percent (Telia Overseas A.B. is an international development and investment subsidiary of Telia A.B.); Invesco Uganda Ltd., 10 percent; and Tristar Investments S.A.R.L (Rwanda), 10 percent. Tristar Investments is a private company registered in Rwanda in 1995 whose activities center on various construction projects, banking and general trade.
The consortium is likely to bid for a stake during the privatizations of KPTC in Kenya and TTCL in Tanzania. It generally is looking at important markets in southern, eastern and west Africa. But Macdonald emphasized, “MTN and Telia Overseas do not look at all opportunities together, but only if either group believes they need the additional assistance. Then they are obliged in terms of the MoU to give the other party the opportunity to join the consortium.
“Our strategy is to view the region holistically. Individual markets are small, but when viewed collectively, they make sense. Our strategy is to establish a regional presence optimizing the use of our brand and purchasing power to reduce costs. It will also be easier for training and transfer of skills to take place.”
Telia Overseas was rather “surprised and disappointed” when MTN’s 25-percent stakeholding by Cable & Wireless plc recently went up for sale and was sold to a local conglomerate, Johnnic.
In view of the partnership with MTN, Cable & Wireless was seen as a front runner in the operation. But Lennart Broman, vice president of Telia Overseas, said the stake sale will not affect its relationship with MTN.
Another consortium that is gaining momentum on the African continent is Telekom Malaysia/Telkom S.A. Following the privatization of the Ugandan state-run service provider, Uganda Telcoms, the group considered a joint bid for a controlling stake before they parted ways. The group may bid jointly in Kenya or in other privatized countries in southern Africa.
“This alliance makes sense because [Telekom Malaysia] holds a stake in Telkom S.A., but it has not quite born fruits,” according to Zibi.
The South African government sold 30 percent of Telkom to Thintana Communications for R5.58 billion (US$984.9 million) in April 1997 in one of the largest privatization deals in southern Africa. Thintana Communications was formed by SBC International and Telekom Malaysia. SBC owns 18 percent of Telkom, with the remaining 12 percent held by the Malaysian group.
“Mauritius may also be taken into account,” said Zibi. “There could be a variation of Telkom S.A.-Mauritius Telecom. Mauritius Telecom has the funds to invest and only needs a partner. It would not be surprising if they chose Telkom, as Telkom and [Mauritius Telecom] have worked together for the SAFE-SAWA (South Africa Far East-South Africa West Africa) submarine cable project and are likely to repeat the experience.”
Other prominent companies present in Africa, but that have changed partners for the different projects, include Portugal Telecom (PT) and France Telecom. PT joined with the Aga Khan Fund for Economic Development for a bid in Uganda. This consortium may surface again in Kenya and Tanzania. France Telecom is less present in East Africa and likes to bid alone or with local partners.
France Telecom’s and PT’s strong interests in Africa date back to colonial times. In spite of the colonial past, PT and France Telecom have strong, positive relationships with many African countries and have a wide base of contacts from which to draw local partners.
Portugal Telecom Director Pedro Reis explained, “PT’s first priority in Africa is building a presence in Portuguese-speaking countries such as Mozambique, Cape Verde and Guinea Bissau and Angola. Their second priority is accorded to countries that have a strong immigrant Portuguese community, such as Botswana and South Africa.”
PT is positioning itself to compete in the privatization of Mozambique’s TDM, expected in the second quarter of next year. PT in fact signed a cooperation agreement with TDM in October 1997 to strengthen the relationship between the two companies.
Overall, PT seems more interested in cellular licenses than in the fixed-network acquisitions. In Uganda, PT lost a bid for the country’s second network operator license by US$500,000. The winning bid, submitted by the Telia/MTN consortium, acquired the license for US$5.6 million.
Although PT is working with Telef
