2008 Africa - Telecoms, Mobile and Broadband in Western Region

Telecommunications in West Africa is expected to receive a major boost from the arrival of new submarine fibre optic cables in 2008 and 2009 which will bring direct access to fibre-based international bandwidth to many countries in the region for the first time. In others, the new fibre links will finally create competition to SAT-3/WASC, the only international fibre currently serving the African West coast. At the same time, extensive national fibre optic backbone networks are being rolled out.

Nigeria overtook South Africa in early 2008 to become the continent's largest telecom market with over 44 million mobile subscribers. While growth prospects in the region's mobile voice market are still excellent, declining ARPU levels are forcing the operators to transform themselves into providers of converged fixed, mobile and broadband services. Continuing liberalisation of VoIP is creating new opportunities for wireless broadband access networks that are set to replace the extremely underdeveloped copper fixed-line networks and ultimately compete in the mobile sector as well.

While some countries in the region are struggling to clean up disorderly regulatory regimes left behind by corrupt previous governments, foreign investors from Europe, the Middle East and South Africa continue to keep a keen eye on every takeover opportunity or new operator licence being tendered.

A dispute about licence fees between the government of Benin and leading mobile network operators in the country in 2007 led to an only temporary dent in investor confidence. A newly licensed fifth mobile network successfully launched services in June 2008. Growth prospects are excellent, with penetration rates in all market sectors well below African averages. The Internet and broadband market is underdeveloped due to the poor national fixed-line infrastructure and high cost of international connectivity. A planned new international fibre link is expected to lead to significantly lower prices from 2008/09. However, for the market potential to fully unfold, several key policy decisions by the government are required. For the country overview, see chapter 1, page 1.

Following the majority-privatisation of Burkina Faso's incumbent telco, Onatel, fresh investment and new technologies have accelerated the development of the national network infrastructure. The landlocked country will not benefit directly from the new submarine fibre optic cable systems reaching the region in 2008/09, but it will gain additional connectivity options through several of its neighbouring countries. Mobile telephony has experienced outstanding growth, with subscribers to the three digital networks now outnumbering fixed lines in the country by more than 15:1. With market penetration well below African averages, the growth potential in all market sectors is excellent. For the country overview, see chapter 2, page 15.

A peace agreement signed in 2007 gives hope for a normalisation of affairs in Cote d'Ivoire which was once the economic powerhouse of the region. The economic turnaround is supported by offshore oil and gas production which has now replaced cocoa as the country's main income earner. However, most segments of the telecommunications market have continued to flourish during the crisis which started in 1999. The recent aggressive launch of a third and a fourth GSM network has accelerated the already fast growth of the mobile sector where market penetration is above the African average. Cote d'Ivoire has a relatively well developed infrastructure that supports ADSL broadband services with speeds of up to 8Mb/s. An auction of WiMAX spectrum is expected in the near future, while the first commercial service using this technology is already available. At least two of the new international fibre links planned for the region will have landing points in Cote d'Ivoire, creating competition with the existing SAT-3/WASC cable. For the country overview, see chapter 3, page 27.

Gambia has a relatively well developed national backbone network, but fixed-line penetration has remained low at around 3%, which in turn has hindered Internet usage. The introduction of wireless systems is beginning to accelerate developments in both of these market sectors. ADSL broadband services have been available in the country since 2006. Gambia is set to get its first own international fibre landing point which will eliminate the country's dependence on neighbouring Senegal for international bandwidth. Mobile penetration is well above the African average and is expected to be driven further by the recent launch of a third network and the licensing of a fourth. The recent privatisation of fixed-line incumbent, Gamtel, and the new Telecommunications Bill, including new guidelines on VoIP, are expected to lead to new opportunities for additional market players. For the country overview, see chapter 4, page 41.

Ghana led the way in telecommunications liberalisation and deregulation in Africa when it privatised Ghana Telecom as early as 1996. Following the exit of the investor in 2007, the company is currently being re-privatised. Similarly, the second national operator, Westel, was re-privatised in 2007. An IPO is expected from both companies in the near future. The highly competitive bidding for both companies (which also hold mobile licences) indicates the huge potential that is seen in the market despite the already intense competition between four operating mobile networks. A sixth mobile licence was issued in mid-2008. The new submarine fibre optic cables set to reach the country in 2009 will create competition with the current monopoly provider of international bandwidth and support the ongoing convergence of technologies and services. Other key developments that will drive the market going forward are the expected full liberalisation of VoIP telephony and allocation of WiMAX spectrum. For the country overview, see chapter 5, page 54.

Guinea has vast mineral resources and is yet one of the poorest countries in the world. Penetration rates in its telecommunications and Internet market are well below African averages. The mobile sector now has five players competing for customers and is showing very healthy growth, while the fixed-line and Internet markets are virtually untapped. A new strategic investor may soon be sought for the incumbent telco, Sotelgui. The recent entry of two world-class international operators, MTN and Orange, with investments of hundreds of millions of US$, is expected to drive the market forward through convergence between fixed and mobile, voice and data services. The planned arrival of two international submarine cable systems to the country's shores in 2008/09 promises to bring fibre-based bandwidth to Guinea for the first time which should help to lower prices and stimulate the market. For the country overview, see chapter 6, page 88.

Five years into peace, following more than a decade of civil war which destroyed much of its infrastructure, Liberia became a prime example of an almost entirely wireless telecommunications market. Four mobile operators are competing for customers while the virtually non-operational fixed-line incumbent is rolling out a wireless CDMA system with a view to possibly also entering the mobile market as a fifth player. Internet services are available from a number of wireless ISPs and the mobile networks using GPRS, EDGE and WiMAX technology. Despite the expensive operating environment due to the lack of basic infrastructure in the country, competition has led to some of the lowest call prices in Africa. However, penetration rates are still well below African averages in all market segments. Without even a functioning satellite earth station, the country will particularly benefit from the arrival of a new international submarine fibre link in 2009. For the country overview, see chapter 7, page 99.

Home to one of the world's most isolated cities, the fabled Timbuktu, and a generally challenging geography for the provision of telecom services, penetration rates in Mali are still below African averages in all market segments, including mobile. France Telecom was extremely successful when it entered the market as the second player in 2003 and quickly amassed more than 80% market share. With privatisation of the incumbent telco Sotelma planned for 2008, its mobile subsidiary Malitel has made great efforts to improve its coverage and services, which has lead to annual growth in excess of 130%. The government is planning to license a third mobile operator. The introduction of ADSL, WiMAX and mobile data services has started to accelerate growth in the Internet and broadband market. Like Burkina Faso, Mali is landlocked, but it will gain additional connectivity options through several of its neighbouring countries from the arrival of the new international fibre systems to the region in 2008/09. For the country overview, see chapter 8, page 112.

Nigeria overtook South Africa in early 2008 to become the continent's largest telecom market with over 44 million mobile subscribers. New customers are currently signing up at a rate of almost one per second, and yet market penetration is still at relatively low levels. However, declining ARPU levels are forcing the operators to introduce new services and transform themselves into providers of converged fixed, mobile and broadband services. Far reaching liberalisation has led to hundreds of companies providing virtually all kinds of telecom and value-added services. The mobile sector has been joined by a number of additional players under a new unified licensing regime which is expected to also boost the country's underdeveloped Internet and broadband sector. A fifth GSM operator was licensed in 2007 and 3G mobile services launched in early 2008. The new market entrants are receiving hundreds of millions of US$ in investments from local and foreign investors while Nitel, the recently privatised but still ailing incumbent telco, is looking for an additional strategic investor and new business models to turn the company around. For the country overview, see chapter 9, page 125.

Senegal has developed one of Africa's most extensive and modern telecommunications infrastructures. The national telco, Sonatel, is partially privatised and highly profitable. A second national operator and third mobile operator licensed in 2007 is expected to launch services in 2008. Since the introduction of competition in the mobile sector in 1999, the number of mobile subscribers has risen dramatically, now representing around 95% of all telephone lines. Senegal was one of the first African countries to introduce ADSL broadband service in 2003 which has almost completely replaced dial-up as the Internet access method of choice. The country has been a successful reseller of international bandwidth from its SAT-3/WASC landing station to other countries and will be able to expand this business with the new international fibre links, the first of which has already reached its shores. Overall penetration in all sectors of Senegal's telecom market is still low, resulting in attractive opportunities for new entrants. For the country overview, see chapter 10, page 193.

Following more than a decade of civil war, Sierra Leone has enjoyed peace and stability since 2002. The country's traditional telecommunications infrastructure has suffered damage and neglect, but the mobile sector has experienced excellent growth with now five GSM networks competing for customers and up to three more expected to launch shortly. However, recent government intervention in some regulatory matters has created a degree of uncertainty about market growth in the medium term. At the same time, rapidly declining ARPU levels are forcing the operators to improve their services and find new revenue streams, such as Internet access via mobile data services. In this area they are competing with a large number of wireless broadband network operators that have emerged as providers of converged Internet and VoIP telephony services. Overall, penetration rates in all market segments are still well below African averages, leaving ample potential for future growth. For the country overview, see chapter 11, page 212.

Key highlights:

• New international fibre links will reduce the cost of international bandwidth by up to 90%.
• Fixed-line, mobile and Internet market forecasts to 2010 and 2015 for Benin, Ghana, Nigeria, Senegal and Sierra Leone.
• 3G mobile services have been launched in Nigeria and are being prepared in a number of other countries in the region.
• ADSL and wireless broadband are rapidly replacing dial-up as the Internet access method of choice.
• Privatisation of national telcos in the region is continuing with significant premiums over reserve prices being paid.
• Monthly mobile ARPU has broken the US$10 barrier in most markets, but some operators are achieving up to 60% higher ARPU than their direct competitors.
• ARPU forecast for Nigeria for 2010 and 2015.

Celtel Nigeria monthly ARPU - 2006 - 2008

• Year Monthly ARPU (US$)
• 2006 14
• 2007 12
• 2008 (Mar) 10

(Source: BuddeComm based on company data)

Peter Lange
August 2008

Data in this report is the latest available at the time of preparation and may not be for the current year.