East and Southern Africa Telecommunications Report Q2 2008

Full-year figures from several of Africa's major telecoms groups give us a clearer picture of the state of the market at the end of 2007. Growth in Kenya in particular fell short of our expectations, following a disappointing performance by Celtel in the second half of the year, when it actually lost subscribers. The outlook for the Kenyan market in 2008 also looks less positive in light of the wave of violence that hit the country after December's presidential election. Although that has since subsided, the economic disruption that it caused is likely to impact overall growth in 2008, with knock-on effects expected for the mobile market.

On the other hand, 2008 should see the launch of two new operators: fixed-line incumbent Telkom Kenya, which was awarded a GSM licence in 2007 ahead of its privatisation, and Econet Wireless. This increase of competition could offset many of the negative effects of the aforementioned moderation in economic growth.

Elsewhere in the region, growth prospects continue to look good. Although we have lowered our 2007 estimate for Sudan at end-2007, in terms of growth the market is streets ahead of its regional peers.

Subscriber numbers more than doubled during 2007 and we are forecasting around 6mn net additions in 2008, on the back of intense price competition in the capital Khartoum and the expansion of network coverage to more rural areas.

Significant investment is also forecast for the Ugandan market where a new operator, Warid Telecom, launched in January 2008. Another competitor, HITS Telecom is set to begin commercial services later in the year, taking the number of operators to five. In addition to the network rollout plans of the two new entrants, Uganda's existing operators have been investing heavily in their networks: UTL launched 3G services in the capital Kampala in November 2007, in time for the Commonwealth Heads of Government conference, while Celtel Uganda has also undertaken a major investment project.

Despite some minor changes in the overall scores for some countries, our business environment rankings for the African telecoms market remain largely unchanged. The markets of East and Southern Africa continue to rank high in the table, with Tanzania, Uganda and Botswana all particularly impressive. As we highlight, the region's strong performance is largely due to its progressive licensing regimes, which have helped foster competition and drive penetration rates upwards.