Africa Keeps Talking
allafrica.com
June 6, 2002
David Shapshak
Moves are afoot to improve the continent's telecoms network.
Telecommunications in Africa received a boost in the past fortnight with the launch of a new African-owned undersea cable and Vodacom's new Congolese cellular operator. And the South African government finally invited bids for the second national operator to compete against Telkom.
The whole continent will benefit from the undersea fibre-optic cable that links Europe to Asia via Cape Town, which was officially inaugurated in Dakar.
The 28 800km cable is a combination of two projects: the South African/Far East (Safe) cable, which connects Cape Town to India and Malaysia via Mauritius; and the SAT-3/West African Submarine Cable, which links Portugal to South Africa, with landing points in eight African countries. The two cables meet at Melkbosstrand in the Cape, with a second South African landing point at Mtunzini off the east coast.
Telkom initiated the $639-million three-year process of laying the cable and setting up landing points. It contributed about $85-million to the project, but owns a proportionally larger 16% of the consortium that owns the cable, and will have access to a third of its capacity.
"We have indefeasible rights of use to 30%, the single largest access to capacity in the group," Telkom CEO Sizwe Nxasana told ITweb. The rest of the consortium is made up of 35 African, European, American and Asian countries and telecommunications operators.
An equally impressive undertaking was the roll out of Vodacom's infrastructure in the Democratic Republic of Congo. The war-ravaged country's three major centres capital Kinshasa, Lubumbashi and the diamond mining area of Mbuji Mayi are 900km apart. Calls between the three are routed via satellite. It took 52 charter plane runs to get the equipment from supplier Alcatel into the country. Vodacom installed 88 base stations, including generators for each to counter the erratic electricity supply.
Despite this, Vodacom says it took just three months to get the network up and running. This is no easy feat no matter where it is done.
Vodacom invested $94-million in the new operator, which incorporates one of the cellular pioneers of Africa, Congolese Wireless Network (CWN). In three weeks of operation it has already captured 52 000 subscribers, including 12 000 from CWN.
Despite the Afro-pessimism common to business ventures in Africa and the particular despondency associated with the Congolese civil war, Vodacom is surprisingly upbeat.
Vodacom expanded into Africa because the South African market is becoming saturated.
Indeed, Vodacom Congo is predicting it will achieve an operational profit in the first year, reap profits in two years and contribute 30% of the Vodacom Group's revenue by 2006.
Subscribers are expected to spend $25 to $30 a month, compared with $8 to $9 in South Africa.
"Whatever [gross domestic product] figures are published about the Congo are far from the truth about the economy. There is far more liquidity in this economy, in hard currency," says Vodacom Congo chairperson Andrew Mthembu.
However, he adds the "financial infrastructure is non-existent to say the least" and expansion into the country's war-torn hinterland will be driven by market potential and peace.
The demand for this service is likely to be high the country has an estimated 60-million citizens and only 100 000 landlines. When Vodacom changed over to SIM cards for its new network four weeks ago, giving away $5 dollars of air time, there were reportedly near riots at the launch at a Kinshasa hotel.
"We believe that the total market stands at 10% of the 60-million inhabitants of this country," says Mthembu, who adds the company aims to capture 50% of this market in the next 10 years.
"We'll do this through extensive coverage, more coverage than any of the other networks. We'll also do it by introducing affordable tariffs, value-added services as well as world-class quality."
Subscribers can call another Vodacom user for $0,24 a minute in any of the three centres, make international calls for $1 a minute, while calls to other Congolese networks or Vodacom South Africa will cost $0,50.
Subscriber success stories have been a consistent theme in new cellular ventures in Africa. Vodacom and MTN's original South African projections in 1994 were rapidly overshot and Cell C, South Africa's third cellular operator, announced last week it had captured more than 500 000 customers in the lucrative prepaid market.
Vodacom Congo's flood of users mirrors that of MTN's Nigeria subsidiary, which shot past the 300 000 subscriber mark earlier this year.
MTN paid $285-million for a cellular licence in Nigeria last year and has captured 50% of the market to become its leader. Original estimates were of 175 000 active subscribers.
The number of cellphone users in Africa grew to 30-million last year from only two million in 1997, according to the United Nations's International Telecommunication Union. Most of these are prepaid users, says research house BMI-TechKnowledge, while the growth of this market in Africa is massive, increasing at a rate of up to 50% a year.
The prepaid market is obviously the most attractive to both operators and customers because it supersedes all the usual credit check requirements.
However, it is significantly more expensive than the contract-based post-paid, by as much as 60% in South Africa.
"Prepaid billing is also fuelling a thriving black market for handsets, with redundant handsets being picked up for next to nothing in developed countries and then sold in Africa, where handset prices remain quite high," says BMI-TechKnow-ledge analyst Dobek Pater.
MTN and Vodacom's customers for 2001, according to a BMI-T report, were around 60% prepaid and 40% contract. The majority of Cell C's subscribers are prepaid, but it says it also has 40 000 post-paid contracts.
Cell C originally aimed for 800 000 subscribers in its first year, but has revised that to one million, says chairperson and CEO Talaat Laham, adding this "bodes well for our aim of achieving 20% market share by 2007. We forecast a total market in 2007 of around 16-million subscribers."
There are currently about 10-million cellphones in South Africa. The number of Telkom subscribers is about five million only 700 000 up from 1997 when it was given its five-year exclusivity deal.
Local and foreign operators now have three months to submit their bids after the government issued the invitation to apply to be the second national operator two weeks ago.
This came almost three weeks after the second national operator could legally have started operations, as Telkom's five-year exclusivity expired in May. Optimistic estimates are that the company may be licensed before the end of the calendar year, with an operational launch in the first quarter of 2003.
Potential bidders have their work cut out for them. Any company or consortium that wants to claim the 51% stake must submit a detailed bid, including business plans stretching over five years, by the end of August.
Bidders have a month to examine their shotgun-wedding partners, Eskom's Esi-Tel and Transnet's Transtel, which will hold a combined 30% of the company.
If they are lucky, they may know which of the seven bidders for the 19% black economic empowerment share will be their third partner.
The Department of Communications hopes that the Independent Communications Authority of South Africa (Icasa) will announce its preferred empowerment bidder before the August 30 deadline, but neither party could commit to a date.
Icasa only recently started to examine the qualifying bids, submitted in mid-April, after a dispute between it and the Department of Communications on the legality of the selection process.
Additional reporting by ITweb |
