New Reports
Investment Opportunities in the ICT Sector in Africa: 2010
About this report
Africa is a continent of contrasts. Endemic poverty and political malfeasance are the most widely understood characteristics, but the nascent market power of an underdeveloped continent with a population that is expected to exceed 1 billion people for the first time in 2010, is staggering. The continent that gave birth to the concept of the ‘Digital Divide’ has, with a speed that has confounded even the most optimistic, embraced aspects of information and communications technology at an envious pace. Over the past five years growth in Africa’s mobile communications market has outstripped growth in the global mobile market by a factor of 2 to 1 and at the end of 2009 there were almost 450 million mobile subscribers. Internet usage growth has shown a similar trend.
These developments have not been a result of some global intervention to save Africa from itself. They have been robust and market-driven, meeting the needs of people who are experiencing the compelling pull of the new world of communications. But more than that, the high growth rates have been accompanied by innovation tailored to the needs of the African user. Safaricom’s M-Pesa payment platform is probably the most well-known, but each African country has a story to share. Unique business models have been developed. And early investors have made exceptional returns. Where else in the world will a mobile operator be able to earn an EBITDA of 60% off a subscriber base with a blended ARPU of $12?
The high growth experienced in segments of the African ICT sector has been on the back of huge investment in infrastructure by mostly private sector organizations who built on the legacy investment made by governments over a period of decades. These investments had to be financed, often drawing on the creativity and daring of the investor to provide capital to such risky ventures in capital-deprived countries. And risks there were, and still are, as anyone that has played the African game will attest to. Politicians have their own agendas, sometimes personal and sometimes political. Strife and conflict can erupt at any time. Licenses can have meaning, or not. Facilitation fees may make the difference. But the era of opportunity is far from over. As a continent, ICT penetration is still well below global averages, and African teledensity is bordering on 50% in a world where the 100% mark represents no barrier. Some countries, notably, the island states of the Seychelles and Mauritius, and South Africa, have already breached the 100% penetration mark. Others, such as Ethiopia and Burundi are striving for 10%.
In this report – the first in a series of such reports – we examine market growth prospects and ICT investment opportunities in three countries, notably, Zimbabwe, Ethiopia and Nigeria. These countries have been selected on the basis that they are high growth/high opportunity markets, markets that have sometimes not received the same level of attention that others in Africa may have.
We believe that ICT investment opportunity review and market forecast that we have prepared for each country will provide important information for companies that are interested in investing in, or competing in, the ICT sector in emerging African markets. Members of the investment community, including investment bankers, development bankers, venture capitalists and private equity companies, angel investors, institutional investors and corporate investors, will find the information in this report invaluable in providing background, context and strategic analysis. It provides a comprehensive review of the investment environment in each country. Mobile operators, fixed line operators, ISPs, telecommunications and IT equipment providers, software suppliers and professional services firms will find these opportunity assessments valuable for developing their strategies for each market.
© BroadGroup TMT Ventures and Technology Strategies International
TABLE OF CONTENTS: Investment Opportunities in the ICT Sector in Africa: 2010
EXECUTIVE SUMMARY I
INTRODUCTION 1
BACKGROUND 1
OBJECTIVES OF THE STUDY 2
RESEARCH METHODOLOGY 3
A NOTE ON FORECASTS 3
CURRENCY 4
ACKNOWLEDGEMENTS 4
INVESTMENT OPPORTUNITIES IN THE ICT SECTOR IN ETHIOPIA 6
RATIONALE FOR SELECTING ETHIOPIA 7
OVERVIEW 7
ICT’S IN ETHIOPIA 11
THE FIXED LINE MARKET 12
THE MOBILE MARKET 14
INTERNET 16
CHALLENGES IN ETHIOPIAN ICT MARKETS 18
PROFILE: ETHIOPIAN TELECOMMUNICATIONS CORPORATION (ETC) 19
REGULATORY CONTEXT AND PROGNOSIS 21
TELECOMMUNICATIONS REGULATION IN ETHIOPIA 21
LICENSING FRAMEWORK 22
PROSPECTS FOR LIBERALISATION OF THE MARKET 23
INVESTMENT ENVIRONMENT 25
FOREIGN INVESTMENT 25
BANKING SECTOR 29
PRIVATE EQUITY 30
INVESTMENT PROSPECTS 32
MARKET GROWTH PROSPECTS AND FORECAST 32
INVESTMENT OPPORTUNITIES IN THE FIXED LINE NETWORK 35
INVESTMENT IN THE MOBILE NETWORK 35
INTERNET SERVICE PROVIDERS 36
OTHER INVESTMENT OPPORTUNITIES 36
INVESTMENT IN ETHIOPIA IN PERSPECTIVE 37
© BroadGroup/TMT Ventures and Technology Strategies International 4
INVESTMENT OPPORTUNITIES IN THE ICT SECTOR IN NIGERIA 38
RATIONALE FOR SELECTING NIGERIA 39
OVERVIEW OF THE NIGERIAN ECONOMY 39
OIL DEPENDENCE 40
REGIONALISM 42
CORRUPTION 42
VISION 2020 44
PROSPECTS FOR THE NIGERIAN ECONOMY 46
ICT’S IN NIGERIA 47
THE FIXED LINE MARKET 49
UNDERSEA CABLE 50
THE MOBILE MARKET 51
INTERNET 54
CHALLENGES IN NIGERIAN ICT MARKETS 55
KEY PLAYERS 56
NITEL 56
MTN NIGERIA 58
GLOBACOM NIGERIA 59
ZAIN (FORMERLY CELTEL) 60
EMTS 61
MAINONE CABLE COMPANY (NIGERIA) LTD 61
VISAFONE COMMUNICATIONS LTD 62
STARCOMMS NIGERIA PLC 62
G-CELL WIRELESS LTD (GICELL OR G-CELL) 63
HELIOS TOWERS 64
NIGCOMSAT 64
IPNX 65
REGULATORY CONTEXT AND PROGNOSIS 65
OVERVIEW OF ICT LEGISLATION 65
LICENSING FRAMEWORK 66
INVESTMENT ENVIRONMENT 69
FOREIGN INVESTMENT 69
BANKING SECTOR 71
PRIVATE EQUITY 72
INVESTMENT PROSPECTS 74
HISTORICAL INVESTMENT IN THE ICT SECTOR 74
MARKET GROWTH PROSPECTS AND FORECAST 75
THE FIXED LINE/ FIXED WIRELESS ACCESS MARKET 75
MOBILE MARKET FORECAST 77
INTERNET MARKET FORECAST 78
GOVERNMENT INVESTMENT PROMOTION INITIATIVES 80
INVESTMENT OPPORTUNITIES IN THE FIXED LINE NETWORK AND BACKBONE 82
INVESTMENT OPPORTUNITIES IN MOBILE NETWORKS 82
OTHER INVESTMENT OPPORTUNITIES 83
INVESTMENT IN NIGERIA IN PERSPECTIVE 84
© BroadGroup/TMT Ventures and Technology Strategies International 5
INVESTMENT OPPORTUNITIES IN THE ICT SECTOR IN ZIMBABWE 86
RATIONALE FOR SELECTING ZIMBABWE 87
A DECADE OF DECLINE 87
A BRIGHTER FUTURE? 89
ICT’S IN ZIMBABWE 93
THE FIXED LINE MARKET 95
THE MOBILE MARKET 96
INTERNET 98
CHALLENGES IN ZIMBABWEAN ICT MARKETS 101
KEY PLAYERS 102
TELONE 102
NETONE 102
ECONET WIRELESS (PVT) LTD 103
TELECEL 104
BROADLANDS NETWORKS 106
REGULATORY CONTEXT AND PROGNOSIS 106
OVERVIEW OF ICT LEGISLATION 106
LICENSING FRAMEWORK 107
THE NEW ICT BILL AND THE WAY FORWARD 108
INVESTMENT ENVIRONMENT 110
FOREIGN INVESTMENT 110
BANKING SECTOR 111
PRIVATE EQUITY 111
INVESTMENT PROSPECTS 113
MARKET GROWTH PROSPECTS AND FORECAST 113
MOBILE OPERATOR INVESTMENTS 115
INVESTMENT OPPORTUNITIES IN THE BACKBONE NETWORK 116
OTHER INVESTMENT OPPORTUNITIES 116
INVESTMENT IN ZIMBABWE IN PERSPECTIVE 117
APPENDIX 1: KEY CONTACTS A-1
LIST OF FIGURES
ETHIOPIA
ETHIOPIA: REAL ANNUAL GDP GROWTH RATE 8
ETHIOPIA: CONSUMER PRICE INFLATION RATE 9
TELEDENSITY IN AFRICA (ETHIOPIA) 12
ETHIOPIA: FIXED LINES IN SERVICES (2000 – 2009) 13
ETHIOPIA: MOBILE SUBSCRIBERS (2000 – 2009) 15
ETHIOPIA: INTERNET USERS (2000 – 2009) 17
ETHIOPIA: FIXED LINE FORECAST (2000 – 2014) 33
ETHIOPIA: MOBILE SUBSCRIBER FORECAST (2000 – 2014) 34
© BroadGroup/TMT Ventures and Technology Strategies International 6
ETHIOPIA: INTERNET SUBSCRIBER AND USER FORECAST (2000 – 2014) 34
NIGERIA
NIGERIA: REAL ANNUAL GDP GROWTH RATE 40
TELEDENSITY IN AFRICA (NIGERIA) 48
NIGERIA: FIXED LINES IN SERVICES (2000 – 2009) 49
NIGERIA: MOBILE SUBSCRIBERS (2000 – 2009) 51
NIGERIA: INTERNET USERS (2000 – 2009) 55
NIGERIA: CUMULATIVE PRIVATE SECTOR INVESTMENT (2000 – 2008) 75
NIGERIA: FIXED LINE FORECAST (2000 – 2014) 76
NIGERIA: MOBILE SUBSCRIBER FORECAST (2000 – 2014) 77
NIGERIA: INTERNET USAGE FORECAST (2000 – 2014) 79
NIGERIA: INTERNET SUBSCRIBER FORECAST (2000 – 2014) 79
ZIMBABWE
ZIMBABWE: REAL ANNUAL GDP GROWTH RATE 88
ZIMBABWEAN DOLLAR EXCHANGE RATE TO THE USD 89
TELEDENSITY IN AFRICA (ZIMBABWE) 94
ZIMBABWE: FIXED LINES IN SERVICES (2000 – 2009) 95
ZIMBABWE: MOBILE SUBSCRIBERS (2000 – 2009) 97
ZIMBABWE: MOBILE MARKET SHARES BY SERVICE PROVIDER 98
ZIMBABWE: INTERNET USERS (2000 – 2009) 99
ZIMBABWE: FIXED LINE FORECAST (2000 – 2014) 114
ZIMBABWE: MOBILE SUBSCRIBER FORECAST (2000 – 2014) 114
ZIMBABWE: INTERNET USAGE FORECAST (2000 – 2014) 115
© BroadGroup TMT Ventures and Technology Strategies International
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