Versatile Amphibian

The market went tower mad (or should that be "mast crazy"?) in October, with large sales of cellular towers in the USA , Brazil , Cameroon and Cote d'Ivoire . Nearly $3b was spent on assets that the buyers - generally infrastructure or private equity funds - thinking they will represent an excellent long term investment as the market goes increasingly mobile.* One thing I noticed in analysing the amounts being paid was that once again African operators sold off their assets on the cheap. The chart shows valuations of tower infrastructure globally for the last three years. The orange dots are African. Even if you remove the inflating effects of the USA from the data, it's clear that African countries underperform in asset sales. And these aren't wartorn countries ruled by tinpot dictators. Both Cameroon and Cote d'Ivoire are reasonably stable growth economies with 20m citizens. I suppose we should thank market capitalism for asset owners seeking an early...

I've just finished an analysis of the cost of broadband versus individual wealth in 29 African countries. It makes disturbing reading. Simply put, the poorer you are, the more expensive it is to get a data connection. The implication of this is pretty stark. We may be about to see a rapidly growing digital divide in Africa between those countries that have good cheap connectivity and those without. If we believe (and I do) that digital technology will be an accelerator that will lift education and services in the continent much closer to developed market norms much faster than would have historically been possible then the total lack of affordable connectivity in countries like Sierra Leone, Malawi, Burkina Faso and Togo will doom their residents to falling further and further away from their neighbours and from desperately needed improvements in quality of life. The World Bank has helped many of these countries get international connectivity. Now it's time t...

Despite the fact that half of the investor community are on vacation, July was a good month for African telecoms, with $2.5Bn of new infrastructure investments announced. Two things stand out. Firstly, the reawakening of the north African telecoms sector in the wake of the Arab Spring. As stability returns to the major markets, investment is coming with it. In July, Vodafone committed $50Mn to core network upgrades in Egypt. In Algeria, Mobilis will invest $1.7Bn over five years to upgrade and extend their mobile network. North Africa led investment in the continent up to the point that the revolutions started in early 2011. If they are to maintain competitiveness and exploit their geographic location then more investment will be required to enable ICT development and economic growth. I expect further big announcements before the year is out. The second characteristic of July was the large volume of spats and court cases that broke in the month. In Swaziland, MTN demanded $...

I've completed my analysis of the trends in African telecoms for the first half of the year and thereby amended my forecast for the remainder of 2012. Overall, investment was up 54% over the same period last year, however it remains 33% down on H1 2010. As the table shows, much of this decline is due to the destabilising effects of the Arab Spring, which has almost completely halted investment in North Africa. In 2010 and 2009 countries in this region accounted for a third of all investment in the continent. In 2011 they represented 3% of the total and are on track to be the same this year. Overall only Central African countries are likely to show an uptick in investment from 2010, driven by the nascent emergence of the continent's third most populous country - the DRC - and coincident investment by telecoms groups who are keen to find a non-Nigerian market to focus on. The market I'm most worried about is Kenya, so long a leader in digital Africa, but now, t...

$1.1Bn of new investments in African telecoms infrastructure were announced in May 2012. When summed with the $3.1Bn France Telecom (finally) paid for full control of Egyptian mobile operator Mobinil this makes May the most successful month of 2012 for telecoms investment in the continent. Significant activity includes the launch of Movitel, Mozambique's third mobile operator, to increase competition in this increasingly vibrant east coast market. Movitel has deployed 1,800 BTS to date and intends to double that number by the end of next year. The former gives them capacity for about 7Mn subscribers - more than enough to cope with likely demand in a country of 20Mn people. Elsewhere, Airtel have commited $100Mn to rolling out 3G in Rwanda over the next three years. Although on the surface this looks like a small amount of money, it should be remembered that Rwanda has a population of roughly 11.5Mn and Airtel's investment should be sufficient to upgrade 1,000 urban cell...

$322 million of new investment in African telecoms infrastructure was announced in April 2012 and an additional $2 billion was spent by France Telecom to increase their stake in Egyptian mobile operator Mobinil to 95%.   But the month’s news was dominated by continued intervention by African governments into their telecoms markets. In Algeria, the wrangle between the Government and Vimpelcom over ownership of local mobile operator Djezzy ground on. Unable to easily get its way through compulsory purchase, the former has imposed $1.3 billion of fines on the Telco to attempt to force Vimpelcom’s hand over an asset that it now values at $6.5 billion. The south and east of the continent fared no better. Here’s a few more stories: In Tanzania it transpired that the Government owns 40% of Airtel’s subsidiary in the country and has no intention of selling; Malawian telecoms regulator MACRA was fined $67 million for breach of contract over cancelled spectrum licenses; Telkom So...

In geekier moments, it entertains me that mobile telecoms towers – one of the dullest parts of the TMT world - are also one of the hottest areas in telecoms rights now. Nowhere is this more true than in Africa, which regular readers will know is the market I find most interesting. This post focuses on the opportunity in towers in Africa. Cellular towers are the building blocks of mobile telephone networks. Typically they consist of a pylon on a leased site (“passive” network components), to which is attached the base station and antenna (“active” network components). In a country like the UK the average network has about 14,000 of these location, many of which are shared. In India, Airtel alone has over 70,000 towers, whereas in Africa networks even in the largest countries like Nigeria make do with a few thousand apiece. The latter fact hints at why towers are hot property and why the three largest infrastructure companies are involved in a land grab for these assets. Tower sharin...

I’m of the belief that participants in the TMT industry need to read widely in order to understand the present and future dynamics of the market. To that end, this post is a collection of the articles that have caught my eye. This week: Spotify, Indian semis and the Academic Spring build momentum, HTC, Yahoo lose it; how the iPad dominates online shopping and why blue is the future of Internet infrastructure Emerging markets India’s semiconductor consumption is expected to grow 20% this year, to over $9Bn. The appetite of newly-middle class consumers for tech’ is huge – most good tech’ products provide unmatched aspirational bang for the buck compared to more traditional products like cars. http://www.theregister.co.uk/2012/04/10/semiconductor_india_growth/ TV set top boxes are just one such product. Technicolor have shipped 5Mn of them to Tata Sky customers. A huge number and demonstrative of the enduring value of TV in a market that has become consumerist in the era of smart devices....

$388Mn of new African telecoms infrastructure investments were announced in March 2012. It’s too early to tell whether this is a sign of any kind, but the first quarter of this year has been the weakest for African telecoms investment for 3 years. On the flip side, it could just be that investment opportunities are now more difficult to come by – both MTN and Maroc Telecom made announcements this month that they were seeking to invest billions more in “bolt on” operations in African countries in which they don’t currently operate, however with nearly $8Bn of M&A done in the last 3 years targets are getting bigger and more expensive (and that doesn’t include the $10.75Bn Airtel spent on Zain, because it was officially done in Kuwait). The standout deal was actually the smallest. Movicel in Angola spent $10Mn to buy a stock of 100,000 3G enabled tablets from Datawind. By my estimation, there are fewer than half a million PCs in Angola, so this one order almost certainly means that Da...

A new piece of analysis I’ve just completed on total telecoms investments in Africa from 2009 to 2011. What it shows is the extreme concentration of investment in the top 3 markets – 55% of the investment that went into Africa in 2009 to 2011 went into Nigeria, South Africa or Egypt. On a per person basis, it’s no surprise that residents of richer economies do better than average. That said, I remain bearish about Kenya’s long term prospects as a digital leader in Africa. Interference from government and regulator, coupled with slowing national investment in public sector IT has led to the country becoming a less attractive destination for FDI. Since it lacks its own telecoms powerhouse (Safaricom being largely foreign owned), Kenya risks falling behind regional competitors. Zimbabwe may well be one of those competitors. Chinese investment in a number of local players has boosted infrastructure capabilities and provides a basis for long term growth of the sector. Provided governmental ...

I’m firmly of the belief that participants in the TMT industry need to read widely in order to understand the present and future dynamics of the market. To that end, this post is a collection of the articles that have caught my eye. This week – $50k the price of ideology, Airforce, NOAA dispense with RIM, Amazon beats up HMV and forces Indian retail consolidation while Netflix “destroys” TV New business models Fascinating – ideological hacking has replaced criminal hacking as #1. Also worth noting the rise of attacks originating in Asia. No corporate can overlook this threat to their externally facing web properties. http://www.theregister.co.uk/2012/02/08/ddos_attack_trends/ Although extorting $50k doesn’t seem particularly ideological. Slightly amusing that the torrent got malware infected within hours of being uploaded. No honour amongst thieves! http://www.theregister.co.uk/2012/02/07/pcanywhere_shenanigans/ Bye bye RIM. Even government doesn’t think security is enough of a differe...

As Ory Okolloh recently put it: if mobile phones are the computers for Africa, why do all the journalists who write about them do so on laptops? I wholeheartedly agree. The smartphone is a great handheld entertainment and communication platform, but it isn’t a good device for the creation of much more than a drunken text message. No, the truth is that that laptop computer - or some variation of it - is almost certainly the utility computing platform for a connected Africa. It can do pretty much everything a smartphone, TV, desktop or tablet can do, yet costs less than any one of those devices. It isn't perfect, but it is the best utility computing device available today. In my view the device challenge is not to identify the computer for Africa, but to create a supply chain that reduces unit costs to a point that is affordable to the middle class (in the first instance). So if the computer for Africa probably isn't a phone, why should it'd connection be designed for a ph...

$1,418Mn of investment in African telecoms infrastructure was announced in January, down very marginally on the same month last year, but up 15% on 2010. As ever, cellular network upgrades dominated proceedings, with large capex commitments being made in Nigeria, Tanzania and Liberia. Staying with mobile for a moment, the launch of 3G networks continue to make headlines, with HSPA being switched on by operators in Zambia and Kenya. There also seems to be light at the end of the tunnel for Vodacom in DRC, where resolution to their dispute with their local partner appears close, potentially unlocking nearly $500Mn of much needed investment into Africa's 3rd most populous country. Also worth mentioning is the continued success of alternative wireless broadband access network solutions, such as wifi (Burkino Faso), WiMAX (Namibia), satellite broadband (South Africa) and TD-LTE (Nigeria). These are generally quite small investments, but are meaningful in that they extend data provision ...

New investments in African telecoms infrastructure fell 42% in 2011, from $17.6Bn in 2010 to $10.2Bn in 2011. While at face value this seems like a profoundly negative thing for the continent, the story is actually still mostly positive for its population. In total, the average African citizen benefited from just under $29 of new infrastructure since January 2010, often coming from a very low base. Many countries, such as Zimbabwe, Mozambique and Malawi experienced quantum leaps in backhaul and access network connectivity, taking them from laggards to leaders and closing the gap to traditionally leading countries like Kenya and Ghana. There are also a number of mitigating factors that should be taken into account when looking at the raw numbers. First amongst these are the effects of the Arab Spring uprisings, which began in the early part of 2011 and rumbled on throughout the year. Egypt and Morocco suffered worst in telecoms infrastructure terms - shown below - receiving only nominal...

I had a discussion with a colleague today, in which he claimed that consumer data will soon become a driver of mobile revenues in Africa. Suffice to say, I disagree, but he wasn’t to be shifted. So I did the following calculation to back up my point of view. Taking Safaricom as a good baseline (because it is large, technically and commercially sophisticated and based in Kenya, where the populous is relatively rich and educated), I first calculated the maximum possible capacity of their 3G network. Safaricom has about 1,300 3G sites. After overheads, those sites can physically serve about 86TB of data in a year if they are 100% utilised all the time. Safaricom charges about 1c per MB for data, meaning that if fully utilised all the time, the maximum return the network could produce today is $860Mn. There are 5.1Mn 3G subscribers on Safaricom, so data ARPU in this scenario is about $14. All well and good, except that the maximum utilisation of the network is about 60% in the real world –...