West and Central Africa Telecommunications Report Q2 2008

The major trends outlined in our last report remain in play. On the positive side, we continue to see growing competition in the mobile sector. In Mauritania, Maroc Telecom (the parent company of market leader Mauritel) acknowledged the increase in competition since the launch of Sudatel subsidiary Chinguitel in 2007. We think that this could have a depressive effect on interconnection rates in the Mauritanian market. The high costs of making phone calls between networks is thought to be a major factor behind Mauritania's high mobile penetration rate, with many customers carrying SIM cards from both Mauritel and Mattel. In Senegal, Sudatel has yet to launch commercial services after winning the country's third mobile licence in late 2007. Yet even without the entry of a third operator we are forecasting an acceleration in growth, as the market recovers from the impact of a compulsory SIM registration scheme introduced in the first half of 2007 (which saw net losses at both Orange and Tigo).

New data has revealed some surprising trends elsewhere. In Gabon, the most mature market in this report, growth appears to have surged in 2007, despite penetration rates in excess of 70%. Indeed, we believe that by the end of 2007 there were 83 active SIM cards for every 100 inhabitants, a rate that is unprecedented elsewhere in West Africa. Despite the apparent saturation of the market, we estimate that subscriber numbers jumped by 43% in 2007, possibly on the back of the takeover of second-ranked Libertis by Morocco's Maroc Telecom. This level of growth is unlikely to prove sustainable in 2008, but we nonetheless forecast a continued rise in mobile users throughout our forecast period. We now believe that penetration will exceed 100% by the end of our forecast period in 2012, although operator figures are likely to contain a significant number of inactive subscribers.

However, we are disappointed by the lack of progress in the privatisation of Ghana Telecom. The sale was cancelled by the government after bids failed to live up its expectations. The state insists that the sale is still on the table and it is seeking fresh bids. Yet we are slightly sceptical as to how much more any operator will be willing to bid; France Telecom reportedly offered between US$500mn and US$600mn for the Ghanaian fixed-line group. We believe that investors may also be deterred by the government's inconsistency. This is a negative move for the Ghanaian telecoms market and for Ghana Telecom itself: its fixed-line rival was sold to Kuwait's Zain group in 2007 and the latter will be keen to profit from this period of uncertainty at Ghana Telecom to steal market share.