[kictanet] Telecoms in developing markets

Tue May 27 19:50:04 EAT 2008

Interesting article from New York Times

Third World Telecom Moves to the Front The New York TimesBy HEATHER TIMMONS and KEVIN J. O'BRIENPublished: May 27, 2008 

The MTN Group, a small mobile operator in South Africa, attracted an investment in 1995 from SBC, an American telecommunications company. Now MTN is a sprawling company that spans 21 countries with 70 million customers, and it is attracting outside investors again.But this time around, companies in emerging markets are on the prowl, reflecting a new order in the mobile telecommunications industry. American companies, it seems, are taking a backseat to upstart rivals overseas.Over the weekend, MTN traded Indian suitors, swapping merger partner Bharti Airtel for rival Reliance Communications. Whether or not this combination holds up, bankers predict some deal will be completed. In the last few days, China said it would reorganize its six telecommunications companies into three. In effect, two of its old fixed-line companies will get some assistance to put them on better footing with China Mobile, the world's largest leading mobile company with almost 400 million subscribers. If both series of deals go through as planned, four of the top seven operators, China Mobile, China Unicom, América Móvil and MTN-Reliance, would be based in emerging markets. Of the three remaining based in the West, two - Vodafone of England and Telefónica 02 of Spain - have extensive operations in developing markets. The other is T-Mobile of Germany. "The focus of the wireless business is shifting rapidly from the developed Western markets to the developing world," said Madhusudan Gupta, an analyst based in Singapore for the research firm Gartner.Although American mobile operators were active investors in emerging markets during the 1990s, many of them quickly exited, a trend that accelerated after the plunge in telecommunications and dotcom stocks in 2000. SBC, now a part of AT&T Wireless, sold its stake in MTN after only two years. It paid $90 million to acquire nearly 16 percent. That portion of MTN would cost about $6 billion today."Many big U.S. telcos eventually lost interest in these markets: they were too small," said Robert Chaphe, who was chief executive of MTN from 1995 through 2002 and is now semiretired and living in Florida. "Now U.S. telcos see more opportunity closer to home. After all, risk ratios are lower in Kansas than in Africa."The development of the mobile markets was left for years to Europeans and homegrown companies. Now these fast-growing telecommunications giants are eager to go global. John Gole, an analyst at International Data Corporation in Prague, said that recent rapid economic growth in India, China and the Gulf states had created a new breed of regional mobile operators. They include companies like Orascom of Egypt, with 71 million customers in Africa, the Middle East and Asia; Etisalat, based in Abu Dhabi, with 6.6 million customers and 10 operators in Africa; and the Zain Group of Kuwait, with 45.7 million customers and 22 operators in Africa and the Middle East."These booming economies and a general economic liberalization have led to the creation of new competitors with the means and experience to expand in emerging markets," Mr. Gole said.A combined Reliance and MTN would have about 116 million customers, making it the seventh largest mobile operator in the world, just below T-Mobile, the wireless subsidiary of Deutsche Telekom. It would dwarf the largest operator in the United States, AT&T Wireless which has 71.4 million customers.Putting together a deal will not be easy. Reliance's market capitalization is $27.5 billion, about $10 billion less than MTN's, and it has about 20 million fewer customers. MTN's management balked at a takeover by Bharti, a bigger company, proposing that MTN become the parent company instead. Even though it's a smaller company, Reliance may also balk at a subsidiary role. It is a publicly traded unit of a conglomerate controlled by Indian businessman Anil Dhirubhai Ambani, a conglomerate with a market value of $75 billion. Bankers, analysts and news reports suggest a handful of nascent mobile powers based in emerging markets are interested in MTN, as well as European telecommunications companies. "Something has to happen," said a banker whose firm was working with a third telecommunications company, which he would not identify, that hoped to woo MTN.MTN and Reliance have been skillful at generating profits from customers who typically spend very little for mobile service - less than $20 a month at MTN and less than $9 at Reliance, based on their latest quarterly reports. That compares with $54 a month at Verizon Wireless in the United States, according to a quarterly report from Vodafone, which owns a 40 percent stake in Verizon.Reliance earned a profit of $1.4 billion on $4.8 billion in sales in the year that ended March 31. MTN had a profit of 11.9 billion South African rand, or $1.6 billion, in 2007 on sales of 73.1 billion rand, or $9.7 billion.Reliance has recently expressed serious interest in Africa, where there are few landlines and much potential growth in mobile lines. Through its subsidiary Reliance FLAG, the company is investing $1.5 billion to lay a submarine fiber optic cable to Africa. In February, the company bought a small Ugandan telecommunications company, and said it plans to invest about $500 million there in the next five years to provide mobile, Internet and broadband service. There are many risks for any outside company looking at Africa's fast-growing markets, analysts say. Andre Wills, managing director at Africa Analysis, a wireless industry consulting firm in Centurion, South Africa, said: "You need to have a significant understanding of the African operating environment and the challenges of working across all of these different regulatory environments."If Reliance were to move significantly into Africa, it could raise the stakes for international investors like Vodafone, which has a subsidiary in Egypt and operations in seven other African countries; Orange, which owns stakes in operators in 13 African countries, and Portugal Telecom, which has operations in Angola and Morocco.Other possible suitors for MTN might be Vodafone, which owns 50 percent of Vodacom, another South African operator, and Deutsche Telekom and VimpelCom, which is based in Russia. Vodafone executives have said that the company is not planning any move on MTN. Deutsche Telekom and VimpelCom declined to comment.Africa, where 29 percent of the population owns a cellphone, according to Gartner, is just one of several promising markets. In India, market penetration is 34 percent, well below the United States, at about 70 percent, and Western Europe, at more than 90 percent. Kevin O'Brien reported from Berlin and Heather Timmons from New Delhi.
Sent from my BlackBerry® smartphone provided by Celtel Kenya

-----Original Message-----
From: "Barrack Otieno" <otieno.barrack at gmail.com>

Date: Tue, 27 May 2008 18:15:40 
To:pkukubo at ict.go.ke
Cc:KICTAnet ICT Policy Discussions <kictanet at lists.kictanet.or.ke>
Subject: Re: [kictanet] Public Sector Roles (activities,
	motives & challenges) Day 7 of 1

Members Commisioning of the e-government Secretariat, formation of the ICT board and liberization of the ICT sector have all been fantastic initiatives, however we need to strengthen Public private Sector collaborations if we are to realise more gain, key areas that we may focus on are Entrepreneurship training so that we may tap into the benefits of new technologies before they are obsolete, we must stop experimenting with technology and do business using technology, this brings in another aspect POLICY, there is likely to be a paradigm shift in the  way businesses are run if we are to fully embrace technology as a matter of fact some businesses might totally disappear as a result of technology whereas new ones will emerge, the problem is that there are lots of boardroom games that stand in the way of enactment of some of this policies which must be dealt with may be we need some online mass action, the future looks bright but it is important to coordinate all ict4d initiatives whether fronted by Government, private or public sector

On 5/27/08, John Walubengo <jwalu at yahoo.com <mailto:jwalu at yahoo.com> > wrote: Morning all,

 Today we wish to turn our attention to what the Public
 (Govt) is doing with regard to ICT4Ds.

 >From my observation, there has been quite some impetus in
 the last 5years or so on this regard.  What comes to mind
 in no particular order, is the commissioning of the eGovt
 Secretariate and the ICT Board, the liberalization of ICT
 sector through the Kenya Comm Act 1999, the gazettement of
 the the National ICT Policy, the Privatisation of the
 national Telco Provider and the initiation of the TEAMs,
 submarine project.

 It would be nice for members to share their opinion on the
 activities and challenges surrounding the above and other
 government initiatives.

 The floor is open, we have only today Tue May 27th and
 tomorrow on this.

 walu.

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Barrack O. Otieno
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