Scanbi Invest
12007-11-14
Anders Engvall
Options for Terrestrial Connectivity in Sub-Saharan Africa
5th International Conference on Open Access – Bagamoyo, Tanzania
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Study Objectives
• Increase the awareness of mobile investments in backbone facilities
• Identify the issues for improved utilization
Sida of Sweden financed the study
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An Improved Picture
Telephones per 100 inhabitants. Sub-Saharan Africa
0,0 10,0 20,0 30,0 40,0 50,0 60,0
Bots wana
Gabon
NamibiaC ape Verde
Sw az iland
Mauritania
Eq. Guinea
Gambia
Senegal
Lesotho
Nigeria
Cameroon
Kenya
Côte d'Ivoire
Congo
Togo
Ghana
Mali
Zimbabw e
Benin
Angola
Zambia
Mozambique
Guinea-Bissau
Uganda
Tanzania
Burkina FasoL iberia
DRC
Malaw i
Rwanda
Madagascar
Guinea
Sierra L
Burundi
ChadNiger
Central Afr. Rep.
Ethiopia
Percent of population
Average Tele-Density 12.3 % by end 2005
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Mobile Business Dominate the ChangeMobile subscribers per fixed line.
0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0
Ethiopia
Eritrea
Sudan
Zimbabwe
Djibouti
Namibia
Swaziland
Malawi
Sierra Leone
Somalia
Benin
Burundi
Central African Rep.
Botswana
Guinea-Bissau
Gambia
Lesotho
Togo
Burkina Faso
Senegal
Guinea
Côte d'Ivoire
Madagascar
Ghana
Equatorial Guinea
Zambia
Angola
Mali
Niger
Rwanda
Tanzania
Kenya
Chad
Gabon
Mozambique
Nigeria
Mauritania
Uganda
Cameroon
Liberia
Congo
Estimated traffic share between fixed and mobile networks
0%
20%
40%
60%
80%
100%
1999 2000 2001 2002 2003 2004 2005 2006
MobileFixed
Average Mobile/Fixed 10 times by end 2005
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Mobile share of transmission.km
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%C
am
ero
on
DR
C
Ch
ad
Ma
da
ga
sca
r
Co
ng
o
Ug
an
da
Gh
an
a
Nig
er
Tan
zan
ia
Ken
ya
Za
mb
ia
Sie
rra
L
Ma
law
i
Bu
run
di
Rw
an
da
Mo
zam
biq
ue
Cô
te d
'Ivo
ire
Bu
rkin
a F
aso
Fixed%
Mob %
Study Results on Backbone Ownership
Mobile Operators own 70 % of the Backbone Networks in the 18 studied countries
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Gaps in Backbone Networks
Our study showed that:• When > 80 % coverage is obtained,
• the backbone networks are countrywide with very few gaps• 23 % of the countries are in this category
• With < 50 % coverage• there exist major gaps in backbone networks• 40 % of the countries are in this category
A recent study by GSMA showed that GSM in Sub-Saharan Africa had reached 60 % population coverage by end 2005
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Future Trends
Mobile operators will continue to account for the lion’s share of the growth:
• They are all aiming at > 90 % population coverage, probably corresponding to market penetration of at least 40%
• They will show an increasing attention to international traffic (especially the regional traffic)
• They are starting to promote and offer data services on their networks (technology choice still an undecided issue)
The Fixed Line incumbents market position is rapidly deteriorating
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Connect Africa ConferenceKigali October 2007
New data on private investments:• USD 35 billion has been invested by GSM operators in Sub-
Saharan Africa to date • USD 50 Billion in planned network investment in next five
years• By end 2012, population coverage will be above 90%• Increased attention to data services will require
proportionally more investment in backbone facilities
Donor financing of investments: • World Bank claimed that there are very few gaps • Some targeted projects with its Regional Communications
Infrastructure Program (RCIP) • Donor financing only a fraction of private investments (<5%)
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The Celtel Service Expansion in Nigeria
Q1 07
Q2 07
Q3 07
Q4 07
Q1 08 3520 sites
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The Celtel Fibre Network in Nigeria
10
Lagos
Kano
Abuja
Port Harcourt
Bauchi
Ibadan
AsabaBenin
Kaduna
Uyo
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Conclusion of the Study
Sub-Saharan Africa will soon have countrywide backbone networks
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Changing International Traffic Pattern Change in international tariffs, selected countries
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
Mali
Tanza
nia
Rw
anda
Moza
mbiq
ue
Nig
er
Benin
Sie
rra L
Burk
ina
Faso
Côte
d'Iv
oir
e
Senegal
Ghana
Nig
eri
a
US
$ p
er
min
Int 2002/4
Int 2007
Local 2007
International tariffs to and from Africa
0.00
0.50
1.00
1.50
2.00
2.50
FromEast
Africa
FromotherAfrica
FrommobileEuropé
Fromfixed
Europé
SkypeOut toAfrica
US
$ p
er
min
ute
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Change in international tariffs, selected countries
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
Mali
Tanza
nia
Rw
anda
Moza
mbiq
ue
Nig
er
Benin
Sie
rra L
Burk
ina
Faso
Côte
d'Iv
oir
e
Senegal
Ghana
Nig
eri
a
US
$ p
er
min
Int 2002/4
Int 2007
Local 2007
International tariffs to and from Africa
0.00
0.50
1.00
1.50
2.00
2.50
FromEast
Africa
FromotherAfrica
FrommobileEuropé
Fromfixed
Europé
SkypeOut toAfrica
US
$ p
er
min
ute
90% drop
Changing International Traffic Pattern
The satellite cost component for voice is less that the national
interconnect rate
Now cheaper to call from Africa to EU than from EU to Africa
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Africa is the First Continent Moving Towards Free Roaming
• Celtel introduced ”One Network” for Kenya, Tanzania and Uganda in September 2006. Expanded to coast-to coast in 2007
• Safaricom in Kenya, Vodacom in Tanzania, and MTN in Uganda joined forces and offered the same services in February 2007
• Conclusion: Mobile operators are no longer only focusing on the domestic market
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Two Dominating Trans-African Operators - Opportunities & Threats
Celtel Footprint
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Main Issues for Backbone Networks
• The Open Access Issue
• The Pricing Issue
• The Fibre Issue
• The Regulatory Issue
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Open Access - Competition Only at the Service Layer
• Selling transmission capacity not in the mobile operators’ business model
• Little opposition to sharing capacity with other licensed operators
• Mobile operators not in favour of open access• Network built for coverage - perceived competitive
advantage
• License is often specifically for own use
• Sales to third parties a threat
• Open access also threat to fixed operators
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The Pricing Issue – Mozambique Example
By mid-2008, the incumbent TDM will have a countrywide backbone network based completely on fibre.
There is no competing backbone carrier
The issue is -
Will it be used?
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Prices Issue - Mozambique Example
The long-range marginal cost of SDH M/W is below USD 40 per E1 and km.
Market prices are 5 to 10 times this level in the studied countries.
Without a dramatic price change, the fibre will be underutilized!
Prices comparison - Existing TDM prices vs. own development
0100200300400500600
E1 35km
34Mbps35 km
STM 135 km
NewMWcost
An
nu
al c
os
t/p
ric
e p
er
km
(U
SD
)
Prices/costsSelected price level
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The Fiber Issue
• Low traffic volumes on most routes, implying microwave is the least cost solution
• Very limited fibre links of total installed capacity
• Existing fibre (railways, power utilities…) is rarely integrated with public networks
• Mobile operators generate the bulk of demand - must be involved and drive fibre investments
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The Fibre Issue - Tanzania Example A Shared Network Approach
•Total Cost upgrade fibre/MW network:
• USD 25 millionUSD 25 million
•Total Cost all fibre network (use existing):
• USD 77 millionUSD 77 million
•Total Cost all newnew fibre network:
• USD 99 millionUSD 99 million
•Total Cost upgrade fibre/MW network:
• USD 25 millionUSD 25 million
•Total Cost all fibre network (use existing):
• USD 77 millionUSD 77 million
•Total Cost all newnew fibre network:
• USD 99 millionUSD 99 millionUpgrade MW
Existing fiber
New MW
Border crossing
TANZANIA PROPOSED NATIONAL BACKBONE
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The Regulatory Issue
• Restrictions on resale are gradually removed
• Mobile operators are becoming dominant
• Weak or no regulation of domestic dominance
• No regulation on regional dominance
• New trends towards regional domination and cartels
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Conclusions
• There are extensive backbone links in Sub-Saharan Africa.
• They could be available for forming “national backbone networks”
• Issues to solve are Open Access, Pricing, Technology and Regulation
• Considering the rapid change, there is a short window of opportunity
• If the issues are solved, Sub-Saharan Africa could have adequate national and regional backbone networks in a few years
• There are extensive backbone links in Sub-Saharan Africa.
• They could be available for forming “national backbone networks”
• Issues to solve are Open Access, Pricing, Technology and Regulation
• Considering the rapid change, there is a short window of opportunity
• If the issues are solved, Sub-Saharan Africa could have adequate national and regional backbone networks in a few years
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What Could Governments Do?
• Remove any remaining regulatory barriers
• Stimulate competition (e.g. allow electricity companies to become carriers’ carrier)
• Avoid interference on the supply side (not invest in backbone networks)
• Increase demand for broadband connectivity (pre-purchase of capacity for public organizations)
• Remove any remaining regulatory barriers
• Stimulate competition (e.g. allow electricity companies to become carriers’ carrier)
• Avoid interference on the supply side (not invest in backbone networks)
• Increase demand for broadband connectivity (pre-purchase of capacity for public organizations)
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Telephone Kiosk in Africa
Thank you!
Report Available on www.scanbi-invest.com
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Close Correlation Market Penetration and Extent of Backbone Networks
GSM penetration, area and population coverage
0
10
20
30
40
50
60
70
80
90
100
Madagasc
ar
Chad
Buru
ndi
Moza
mbiq
ue
Zam
bia
Nig
er
Tanza
nia
Congo
Ghana
DRC
Côte
d'Iv
oire
Burk
ina F
aso
Cam
ero
on
Sie
rra L
Rw
anda
Kenya
Mala
wi
Uganda
Perc
en
t
% pop
% area
GSMA teledensity