East and Southern Africa Telecommunications Report Q1 2008

While BMI retains its view that mobile, and GSM in particular, will remain the largest growth area in the African telecoms market for the foreseeable future, East and Southern Africa is seeing increasing levels of investment in the broadband market. WiMAX wireless broadband technology is attracting considerable interest, with service rollout already underway in Uganda and Mozambique to name just two examples.

Meanwhile, a number of undersea fibre-optic cables are currently under construction that will finally link the region to the world's backbone infrastructure. This report contains a special focus on this area of investment and its implications for the region's business environment, given that it should dramatically cut the cost of broadband and international calling services. However, we also examine the potential dangers to planned investment, as operators and national governments dispute the ownership and operating model of the various planned cables.

Our bullish view on the mobile market's growth prospects remains in place, supported by robust growth rates across the board in the first half of 2007. This growth is not restricted to the least developed markets, such as Angola. Indeed, the number of mobile subscribers in Botswana shot up by more than 20% in the first half of 2007, despite the fact that penetration was nearly at 60% by year-end 2007. As a result, we have had to raise our forecasts for that country and we now project that Botswana could be the first in our report to see penetration exceed 100%. Customer data provided by the country's two operators may well include a significant number of inactive subscribers, but nonetheless, Botswana is a shining example of what can be achieved in Africa given the right combination of economic stability and good governance.

Improvements are being made in other countries. In Kenya, for example, the government's dominance over the telecoms sector is being dismantled through the forthcoming privatisation of fixed-line incumbent Telkom and the IPO of its mobile subsidiary Safaricom. The two deals have both been subject to some delays and will both miss their end-2007 deadlines but nonetheless, the huge investor interest that they are garnering from operators around the world is testament to the growth opportunities available in the Kenyan market. Furthermore, the government has finally ended its legal disputes with third mobile licensee Econet, meaning that the latter should be in a position to launch commercial services in 2008.

New entrants are also gearing up to enter the Ugandan market. At the time of writing, two new licensees - HITS Telecom and Warid - were both rushing to roll out their networks in a bid to get their services up and running by the end of 2007.