Pan-African Cellular Build-Out Attracts WorldTel Funding
[See section on France Telecom]
By David Molony at CommunicationsWeek
International
21 July 1999
A U.K. mobile network investor is building an African wireless
portfolio that could eventually form the basis of a pan-African
cellular network.
And the company, MSI Cellular Investments Holdings BV,
registered in Amsterdam, is picking up powerful support from
financial institutions.
Over the past year Cellular Investments has acquired eight
licenses to build and operate GSM services in African
countries, with another three applications pending.
"We want to develop a pan-African network," said Terry
Rhodes, executive director at Cellular Investments. "We
intend to be a dominant force in African telecoms."
WorldTel Ltd., of London, a project finance management
company that specializes in telecoms in developing regions
such as Latin America, will take a 7%-8% equity stake in
Cellular Investments later this month as part of a new round of
financing which will value the company at more than $100
million.
Commonwealth Development Corp., London, will convert
existing options into a 7% equity stake. And a number of
investment banks including London-based ING Barings,
which has already committed $15 million of debt financing
under a previous capital-raising round, are expected to renew
funding.
The license acquisitions give Cellular Investments a footprint
across the continent of 750 million people that has attracted
the attention of U.S. and European investors.
And the company has applied for the third mobile operator
license in South Africa, which it proposes to turn into a
testbed for wireless technologies by building the world's first
GSM network to operate in three frequencies, without needing
to switch terminals or cards.
"For the time being we are constrained to building national
networks. But we want to build connectivity between them,"
said Rhodes.
Analysts said the strategy would test the economics of
telecoms systems in Africa.
"They won't get the same synergies [wireless operators] get in
other regions," said Luca Tassan, London-based director of
Strategis Group Inc., Washington DC. "But they will get some.
It's economic if they can find some economies of scale in the
provision of service. For that they need interconnection with
other other networks, domestic and international."
Analysts say Cellular Investments has the advantage that
fixed networks in most African countries are hopelessly
inadequate. "It's clear wireless is the right technology for
African countries," said one analyst.
In some countries, wireless networks can be built for as little
as $10 million. France Telecom, which operates a mobile
license in Cameroon, and Millicom International Cellular SA,
Luxembourg, which operates two networks in Africa, are
reported to collect $2,000-$3,000 average revenue per user
(ARPU) per annum.
However, a spokesperson for Millicom, which has 51,000
subscribers in Ghana and Tanzania, said growing prepaid
usage made ARPU figures hard to estimate. Millicom's third
license, in Senegal, will be marketed entirely as a prepaid
service.
"Over the next five to eight years [Cellular Investments] need
to concentrate on national rollout," said Strategis' Tassan.
"They should configure the network as if it were a fixed
network, with [comparable] tariffing."
However, the company is partnering with another
multiple-license vendor, Telecel Ltd., a Virgin Islands
company, which already holds licenses in nine African
countries, to bid for the third mobile license in South Africa.
Their agreement raises the prospect of more extensive
cooperation, and although the two companies do compete in
one country, Zambia, between them they would hold licenses
in 15 countries. Bids for the South African license closed last
month.
Cellular Investments was spun off from network planning and
management software developer Mobile Systems International
Ltd., of London, in March 1998, to manage MSI's minority
investments in cellular licenses in Uganda, India and Hong
Kong.
Since then, Cellular Investments has sold the Indian and Hong
Kong holdings and acquired cellular licenses in Malawi,
Zambia, Sierra Leone, Congo Brazzaville, Chad, Gabon and
Egypt. Several of the new interests are majority shareholdings:
80% in Zambia and 70% in Malawi, for example. The company
is also negotiating for a license in Nigeria, and will bid for a
license in Kenya.
In South Africa, the Cellular Investments/Telecel consortium,
Khuluma 084, would build a tri-band GSM network, operating
in the 450 megahertz, 900 MHz and 1800 MHz wavebands.
Although the third South African license is for an 1800 MHz
system, the licensing authority has mandated national roaming
onto existing networks.
The company is proposing a system that would allow
domestic roaming across the first two 900 MHz networks, with
additional 450 MHz coverage in rural areas where traffic
density will be much less.
The third license is being issued at a fixed price of $17 million,
but the award will go to the operator with the best network
investment program, taking into account coverage of rural
areas as well as the amount of the investment.
According to Rhodes, the Khuluma network, if built, would
incorporate intelligent switching technology from MSI that
would automatically allocate a user to the least congested
frequency.
"South Africa will address complex technology issues years
ahead of the rest of the world," claimed Rhodes.
© EMAP Media 1999
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