Sylvain Béletre and Russell Southwood
The ICT sector is one of the fastest growing on the African continent. Fueled by heavy investments, telecommunication infrastructures have improved drastically. Over the past five years, Africans have embraced ICT innovations fast especially in the mobile telecommunications and in the IT segments.
The next wave that is about to hit the continent will include new infrastructures such as broadband fibre optic cables and data centres, telecoms added value services and IT innovations. Here is a review of 2010 and key trends to prepare for 2011.
1. Africa now officially a new emerging market thanks to ICT demand
Over the past 12 months, there has been continued activity and interest in Africa despite increasing competition, particularly in mobile markets. For example, Orange has officially announced that Africa has become an important market for the future and MTN keeps investing everywhere on the continent. Two Indian carriers, Bharti Airtel and Essar have made key acquisitions in the mobile sector.
ICT growth – particularly within the mobile sector – has focused interest on the continent as a place with interesting emerging markets in North and sub-Saharan Africa (particularly South Africa, Nigeria, Kenya, Senegal and Ghana).
The telecoms and internet sectors in Africa have come out of 2010 with greater confidence but there’s that nagging feeling that things will never be the same as they were in the earlier golden years.
2. More telecoms infrastructure investments
2011 will see renewed telecoms infrastructure investments, not only in mobile and satellite but also in fixed infrastructure including national fibre backbones and local data centres to meet growing demand.
Since going live in July 2010, capacity sales on EASSy, the 10,000km high speed fibre-optic cable connecting southern and eastern Africa, have outstripped initial forecasts. As a result, WIOCC, the largest shareholder in the cable, has announced that the system will be upgraded in 2011 to more than double its current capacity. Operators such as Econet Wireless Zimbabwe will invest additional money on expanding and upgrading their networks.
Operators of all kinds ramped up their bandwidth requirements considerably in 2009, some by as much as ten times as they finally got their hands on even cheaper bandwidth on Africa’s east coast. So, for those selling international bandwidth, 2010 was inevitably a somewhat quieter year. The steady downward cascade of retail internet prices was slower than might have been anticipated but it’s begun to happen.
Africa, too big to dominate
Coming out of dealing with over-staffed and unreliable incumbents, it was hardly surprising that mobile operators did not trust others to do things like provide network infrastructure for them. So a number of mobile operators have poured money into acquisitions and fibre network roll-out. But 2010 will probably go down as the year when many companies realised that it was not possible to dominate the national or international fibre space in Africa: it’s just too big and will cost too much.
Year 2010 saw the arrival of the EASSy and Main One cables. Main One looks set to extend itself to South Africa.
O3B will not start its service until the first half of 2013, well after all the remaining international cables (WACS and ACE) are finished. Prices for international fibre keep coming down, although it’s happening more quickly on the east rather than the west coast of Africa. With some exceptions, satellite operators and resellers are either reporting some degree of revenue loss or through gritted teeth saying things are “holding steady.”
MWeb has landed SAT-3 cable capacity in its Cape Town node, after the internet service provider was affected by Seacom’s downtime in July and announced that it would source additional capacity. It says this forms part of its ongoing bandwidth capacity upgrades and brings a degree of resilience to its network.
Read Satellite to fibre – Africa’s big change is really under way, says new report and The imminent arrival of “fibre heaven” in Africa spoiled by a number of nagging questions on www.balancingact-africa.com.
3. New race for spectrum ownership
Another trend to watch is the start of a potential war for spectrum. Several telecoms licences need to be renewed and ICT regulators will start to call for bids. However, the market has become much more competitive, margins have dropped and we hope that licence fees will reflect this difficult context. Particular pressure is coming from both the introduction of WiMAX and before too long LTE (Kenya’s Safaricom is testing it and Vodacom says it’s on their road map).
Kenya’s regulator CCK may yet be a trend-setter in saying that it will review downwards licensing and spectrum fees for a commitment from operators to extend coverage to rural areas. However, spectrum will be auctioned so we await the outcome with interest.
4. More mergers and acquisition and partnerships
2010 saw some interesting deals including Bharti’s acquisition of Zain’s assets in Africa back in March 2010 for US$9bn. African operators have remained focused on cost control which has driven some cost sharing examples.
At Africacom, there was much talk of Bharti Airtel’s focus on its OPEX costs through outsourcing and its ambitious plans to make an impact on several different parts of the industry outside of their own operations. Their focus on the cost side of the business will affect all operators and 2011 may be the first year in which we see mobile casualties. They won’t go bankrupt but be quietly absorbed by their competitors for less than stellar deal prices.
As competition and the need for more revenues increase, Balancing Act expects strategic partnership between operators, vendors and even TV players. The most successful players will be the ones who form alliances with key players in the equipment, IT, content providers (ie. media companies, especially audiovisual) to offer a wider range of services to their customers. Affordable bundled packages, especially multi-play will start to emerge in the most advanced African countries.
Creating a national structure
If at an international level you can create a structure several companies will trust, why not at a national (or indeed cross-border) level? The approaches may differ between small markets (with an SPV like the Burundi Backbone System) to more informal alliances over trench digging as has happened in South Africa. We also expect more sharing of tower infrastructure between telecoms operators. (Read Tower sharing can save mobile operators “north of 20%” in costs, says Eaton Towers CEO).
The second, more virtual alliances (think airline service companies) are where several companies are able to offer a single branded service to move traffic around the continent: in other words, putting together the bewildering jigsaw puzzle of fibre network that is coming into existence so that it can work in some more unified way.
5. Demand for new models, technologies and apps
Niche competitors may yet have a more successful service focus than the “do-everything, control everything” big company. Operators and governments will have to choose between several complex and expensive technology upgrades (LTE, Wimax, 3-4G).
On the enterprise side, technologies such as cloud computing and virtualisation will disrupt old models and help companies cut costs or improve productivity and efficiency. Business analytics will shape new IT strategies and support further growth. (Read Africa’s Cloud Computing: what will it take for it to become big across the continent?).
Areas like the Maghreb, South Africa, Kenya, Ghana and Senegal will drive cloud services adoption on the continent. Large enterprises and government organisations are expected to deploy IT projects using those technologies.
Read Creating the right weather for Africa’s services and applications entrepreneurs – new money and opportunities open up, AfricaCom 2010 – Bigger than ever but wide-scale changes as the industry seeks to absorb changes, AfricaCom: Africa’s mobile industry needs to re-invent itself to meet tomorrow’s challenges and Time is ripe for African innovators in the online services and apps market to up their game.
(Concluding part in March Edition)
Source:bizcommunity.com/ Image: Gulfnews.com