April 2012 African telecoms investment - Land of Confusion

$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 South Africa was forced to cut broadband rates 30% and had its network build suspended by the regulator;
• The Management of struggling incumbent Telkom Kenya was accused of not understanding the market by Government ministers; and
• Glo, a prospective new mobile entrant in Ghana was told that it’d lose its license if it didn’t launch by next month. In fairness, it has been saying its “about to launch” since summer 2008!

 As I blogged about last month, this kind of distracting argument weakens the case for external investment in African telecoms markets and I believe ultimately slows national growth by reducing the capability of vital ICT capabilities. I totally understand the social and political need to find short term funding for projects, however taking this from the ICT market is foolhardy in the extreme if these countries wish to have functioning 21st Century economies.

 

It is little surprise that capital expenditure on telecoms in Brazil alone was greater than that that reported in the entire African continent. Brazil is hardly a paragon of regulatory and legislative transparency, but at least it’s reasonably predictable. Most African governments aren’t. They need to correct this if they are to modernise their economies.