Communications Review Telecoms in Africa: Innovating and Inspiring

Communications Review Telecoms in Africa: innovating and inspiring

A journal for telecom, cable, satellite and Internet executives Volume 17, No. 1

A survey of telecom markets in Africa Africa is the second largest continent in A new approach to improving the world, with a population of more than network performance one billion people. The social and economic What’s next for mobile payments? impact that telecommunications have had on Africa over the past decade are astounding. How industry CEOs feel about the future And there’s more to come. Perspectives from telecom executives in Africa Cover image: Nairobi, Kenya

Communications Review 300 Madison Avenue New York, New York 10017 USA

Editor Pierre-Alain Sur

Managing editor Shelly Ramsay

Contributing writers Shailabh Atal Ahmed Chohan Adrian Dunsby Mohamed Kande Harish Nalinakshan Pierre-Alain Sur Johan van-Huyssteen

Designer Cinthia Burnett

PwC’s Communications Industry practice delivers a complete range of professional services to telecom, cable, satellite and Internet service providers across the globe. The group provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders.

Drawing on our accumulated experience, we anticipate and meet the challenges of global regulatory change, and help our clients deal with the impact of industry convergence. We continue to add measurable value to our client relationships through our leadership and innovation, which are evident in our evolving services and products.

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents accept no liability and disclaim all responsibility for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in the publication or for any decision based on it. Should professional advice be required, you may contact Pierre-Alain Sur of PwC by phone at [1] 501 772 8067.

To request additional copies of this publication, please contact Shelly Ramsay by e-mail at [email protected]. Back issues are available for download at www.pwc.com/communicationsreview.

Communications Review is a trademark of PricewaterhouseCoopers LLP. Contents

6 Message from the editor

Features 8 34 Africa: a continent offering a world of opportunity Enabling possibilities through mobile payments With billions of dollars of international investment flowing in, and Mobile payments are radically changing the shape of personal and subscriber numbers rising across the continent, Africa’s communications business banking in Africa. With a number of success stories already marketplace has now passed the tipping point from high potential to high established, mobile operators and banks are seeking to replicate growth. In addition to being one of the world’s most dynamic telecom these in other countries where the gap between banking and mobile markets, Africa is also among the most innovative – a global testing lab and penetration levels provides vast potential for further expansion. a leader in digital- and mobile-enabled applications in areas like payments, Africa’s population of unbanked people is in urgent need of access commerce, health and education. to vital financial services, and operators are ideally placed to service this need – provided they recognise the challenges that lie ahead by Johan van-Huyssteen and take steps early on to address them. by Ahmed Chohan and Adrian Dunsby

26 42 Creating a solid foundation for growth Delivering results Degraded network performance has a significant business impact: it leads Commitments to doing more business globally are accelerating in 2012 to reduced usage, increases care and assurance costs, lowers customer despite economic, regulatory and other uncertainties. PwC’s 15th satisfaction and increases churn. Those effects come as operators around Annual Global CEO Survey looks at how CEOs are adapting the way in the world are busy investing in the deployment of next generation networks which they go to market, reconfiguring processes and – at times – entire while hobbled by dwindling investments in their existing networks, cuts in operating models. Here we present a summary of key findings among network operating expenditures and declining average revenue per user. CEOs in the communications industry. Operators that take stock of their networks and invest in improving their by Pierre-Alain Sur existing networks before the next generation network technology rollout not only gain valuable insights into their existing network but also perform better and rollout new technology networks faster. by Shailabh Atal, Mohamed Kande and Harish Nalinakshan

Perspectives 50 56 Wim Vanhelleputte Karel Pienaar MTN Côte d’Ivoire MTN South Africa MTN Côte d’Ivoire is the country’s number one operator and is setting its When mobile penetration soars past 100%, operators need to focus sights on 3G mobile broadband services to fight off the increasing pressure more on developing innovative services and reevaluating their from local and international operators. Here, Chief Executive Officer Wim business models. MTN is no stranger to innovation – it pioneered Vanhelleputte shares his insights on the role of mobile banking in developed prepaid mobile, is embracing LTE and investing in submarine cable. and developing countries; the symbiotic relationship of operators and Here, MTN South Africa’s Chief Executive Officer Karel Pienaar talks regulators; and how transitioning to new operating models requires not about exploring opportunities within the financial industry, the just a smart approach, but also patience. importance of telecoms in bridging the digital divide and the necessity of moving to shared-services models and partnering to deliver new services and stay competitive.

Communications Review 1 Sommaire

6 Éditorial

Articles 8 34 L’Afrique : un continent très prometteur Nouvelles possibilités grâce Grâce à l’afflux de milliards de dollars d’investissement international aux paiements mobiles et la hausse du nombre d’abonnés sur l’ensemble du continent, le marché Les paiements mobiles transfigurent les services bancaires aux des télécommunications africain a basculé d’un fort potentiel à une forte particuliers et aux entreprises en Afrique. Forts de leurs succès, les croissance. L’Afrique est l’un des marchés des télécommunications les banques et opérateurs mobiles tentent de reproduire ces modèles plus dynamiques au monde, mais compte aussi parmi les territoires de réussite dans d’autres pays où l’opportunité d’exploiter le taux plus innovants – laboratoire d’essais mondial et leader des applications de pénétration des services mobiles pour relever celui des services mobiles et numériques dans des domaines tels que les paiements, le bancaires offre de bonnes perspectives de développement. Il est commerce, la santé et l’éducation. urgent pour la population africaine non bancarisée de bénéficier par Johan van-Huyssteen des services financiers essentiels et les opérateurs sont les mieux placés pour leur fournir, à condition qu’ils appréhendent les défis et prennent rapidement des mesures pour les relever. par Ahmed Chohan et Adrian Dunsby

26 42 Établir des bases solides pour la croissance Obtenir des résultats La détérioration du réseau a un impact économique significatif : elle Les engagements en matière de croissance de l’activité mondiale se traduit par une utilisation réduite, des coûts accrus d’entretien et se renforcent en 2012 en dépit des incertitudes économiques, d’assurance, un recul de la satisfaction client et un taux croissant de réglementaires et autres. La 15e édition annuelle de l’étude mondiale désabonnement. C’est ce que l’on observe dans un contexte où les de PwC sur les priorités des chefs d’entreprise (« 15th Annual Global opérateurs du monde entier investissent dans le déploiement des CEO Survey ») de PwC examine comment les dirigeants adaptent leur réseaux de nouvelle génération tout en subissant une diminution des stratégie commerciale, refondent leurs processus et parfois l’intégralité investissements dans leurs réseaux existants, une compression des de leurs modèles opérationnels. Nous vous présentons une synthèse des dépenses d’exploitation de réseau et une baisse du revenu moyen par principales conclusions de l’étude sur les chefs d’entreprise du secteur abonné (ARPU). Les opérateurs qui évaluent leurs réseaux et investissent des télécommunications aujourd’hui dans l’amélioration avant le déploiement de la technologie par Pierre-Alain Sur de nouvelle génération bénéficient d’informations précieuses des réseaux existants, fonctionnent mieux et accélèrent ce déploiement. par Shailabh Atal, Mohamed Kande et Harish Nalinakshan

Perspectives 50 56 Wim Vanhelleputte Karel Pienaar MTN Côte d’Ivoire MTN Afrique du Sud MTN Côte d’Ivoire est le premier opérateur du pays et mise sur les Lorsque le taux de pénétration des services mobiles est supérieur services 3G (haut débit mobile) pour répondre à la pression croissante des à 100 %, les opérateurs doivent davantage se concentrer sur le opérateurs locaux et internationaux. Dans cet article, Wim Vanhelleputte, développement de services innovants et la réévaluation de leurs CEO de MTN Côte d’Ivoire, expose sa vision du rôle de la banque mobile modèles commerciaux. L’innovation est un domaine maîtrisé par dans les pays développés et en voie de développement ; les relations MTN qui est l’un des pionniers de la téléphonie mobile prépayée, étroites entre les opérateurs et les régulateurs ; et comment le passage à a adopté le LTE et investit dans le câble sous-marin. Karel Pienaar, de nouveaux modèles opérationnels n’exige pas seulement d’adopter une CEO de MTN Afrique du Sud décrit les opportunités du secteur démarche intelligente mais également de faire preuve de patience. financier, le rôle des télécommunications dans la réduction de la fracture numérique, ainsi que la nécessité d’adopter des modèles de services partagés et de nouer des partenariats pour développer l’offre de services et rester compétitifs.

2 Índice

6 Mensaje del editor

Artículos 8 34 África: el continente que ofrece Cómo facilitar el pago con móvil un mundo de oportunidades El pago con móvil está cambiando drásticamente el uso de banca Con la entrada de miles de millones de dólares de inversión personal y profesional en África. Los operadores móviles y los bancos internacional y el aumento de abonados en todo el continente, el están intentando replicar historias de éxito en países donde la brecha mercado de las telecomunicaciones en África ha rebasado el punto de entre la banca y los niveles de penetración móvil ofrece un gran inflexión y pasar de tener un alto potencial a registrar un crecimiento potencial de expansión. Las personas “no bancarizadas” en África elevado. Además de ser uno de los mercados de telecomunicaciones necesitan tener acceso de forma urgente a servicios financieros y más dinámicos del mundo, África se encuentra entre los mercados más los operadores están en una posición ideal para dar este servicio innovadores: cuenta con un laboratorio de pruebas global y es líder en – siempre y cuando aprecien los desafíos y sepan tomar medidas aplicaciones digitales y móviles, en áreas tales como pagos, comercio, anticipadas para poder cumplir éstos. salud y educación. por Ahmed Chohan y Adrian Dunsby por Johan van-Huyssteen

26 42 Crear cimientos sólidos para el crecimiento Entregar resultados Un rendimiento de red degradado repercute de manera significativa En 2012, los compromisos para emprender más actividades de en el negocio: se traduce en una disminución del uso, aumenta los negocio en todo el mundo están en plena aceleración, a pesar de costes de mantenimiento y aseguramiento, reduce la satisfacción del las incertidumbres económicas, normativas y de otra índole. La cliente e incrementa la rotación de clientes. Este es el resultado de decimoquinta Encuesta Global Anual a CEOs de PwC examina que operadores de todo el mundo estén ocupados invirtiendo en el cómo están adaptando los altos directivos la forma de entrar en el despliegue de redes de nueva generación, lastrados por la disminución mercado, reconfigurando los procesos y – en ocasiones – los modelos de la inversión en sus redes existentes, los recortes en los gastos de de explotación en su totalidad. En este artículo se presentan un explotación de redes y el descenso en los ingresos medios por usuario. resumen de las conclusiones clave de los consejeros delegados Los operadores que hacen balance del estado de sus redes e invierten pertenecientes al sector de las telecomunicaciones en mejorarlas antes del lanzamiento tecnológico de aquellas de nueva por Pierre-Alain Sur generación no solo adquieren una percepción valiosa de su red actual, sino que además logran un rendimiento más elevado e introducen las nuevas redes tecnológicas con mayor rapidez. por Shailabh Atal, Mohamed Kande y Harish Nalinakshan

Perspectivas 50 56 Wim Vanhelleputte Karel Pienaar MTN Côte d’Ivoire MTN South Africa MTN Côte d’Ivoire es el operador número uno del país, que tiene la Cuando la penetración móvil se eleva por encima del 100%, mirada puesta en servicios de banda ancha móvil 3G para resistir a los operadores deben centrarse más en desarrollar servicios la creciente presión de operadores locales e internacionales. En este innovadores y en reevaluar sus modelos de negocio. Innovar no artículo, su consejero delegado, Wim Vanhelleputte, comparte su es algo desconocido para MTN: fue pionera en la introducción de visión acerca del papel de la banca móvil en los países desarrollados y servicios móviles de prepago, está adoptando el proyecto LTE e en desarrollo; la relación entre operadores y reguladores; y cómo una invierte en cable submarino. En este artículo, el consejero delegado transición hacia nuevos modelos de explotación requiere además de de MTN South Africa, Karel Pienaar, habla sobre cómo explorar una aproximación inteligente, paciencia. oportunidades en el sector financiero y la importancia de las compañías de telecomunicaciones a la hora de superar la brecha digital. Además puntualiza la necesidad de moverse hacia modelos de servicios compartidos y hacia la consolidación de alianzas que permitan ofrecer servicios nuevos y seguir siendo competitivos.

Communications Review 3 Inhaltsverzeichnis

6 Vorwort des Herausgebers

Beiträge 8 34 Afrika: Ein Kontinent bietet Neue Möglichkeiten durch mobile Bezahlsysteme eine Welt voller Möglichkeiten Mobile Bezahlsysteme werden sowohl das private, als auch das Milliarden von Dollar an internationalen Investitionen flossen in den geschäftliche Banking radikal verändern. Mobilfunkbetreiber und afrikanischen Telekommunikationsmarkt. Die Anzahl der Kunden stieg Banker bauen auf einigen bereits vorhandenen Erfolgsgeschichten stetig an. Nun wird der Kontinent seinem Ruf als “high potential” gerecht auf und versuchen diese Geschäftsmodelle in weitere und glänzt mit hohen Wachstumsraten im Telekommunikationssektor. Länder zu exportieren, wo die Kluft zwischen Banken- und Afrika ist nicht nur einer der dynamischsten Telekommunikationsmärkte Mobilfunkpenetrationsraten ein hohes Entwicklungspotential weltweit sondern auch einer der innovationsstärksten – ein globales eröffnet. Der Teil der afrikanischen Bevölkerung, welcher nach Testlabor und Marktführer für digitale und mobile Applikationen in wie vor kein Bankkonto besitzt, ist dringend auf den Zugang zu Bereichen wie Zahlungsverkehr, Handel, Gesundheit und Bildung. modernen Finanzdienstleistungen angewiesen. Die Anbieter mobiler Bezahlsysteme können sich hier optimal positionieren – von Johan van-Huyssteen vorausgesetzt, sie erkennen die zukünftigen Herausforderungen und ergreifen frühzeitig Maßnahmen, um diese zu bewältigen. von Ahmed Chohan und Adrian Dunsby

26 42 Eine solide Basis für Wachstum entwickeln Konkrete Ergebnisse liefern Schwächelnde Netzwerkleistung hat einen signifikanten Einfluss Trotz ökonomischer, regulatorischer und anderen Unsicherheiten auf das Geschäft: sie führt zu einer verminderten Nutzung, erhöht die haben immer mehr Unternehmen vor, ihr Geschäft in 2012 Pflege- und Sicherheitskosten, senkt die Kundenzufriedenheit und deren internationaler aufzustellen. Der 15. PwC Annual Global CEO Loyalität. Diese Effekte entstehen, da Betreiber weltweit mit Entwicklung Survey beschäftigt sich mit der Frage, wie Unternehmenslenker Netzwerke nächster Generation beschäftigt sind, und gleichzeitig durch die Art und Weise von Marktbearbeitung bestimmen, Prozesse abnehmende Investitionen in bestehende Netzwerke, Kürzungen der neustrukturieren und gegebenenfalls ganze Geschäftsmodelle Betriebsausgaben sowie einen sinkenden Durchschnittsumsatz pro anpassen. Hier präsentieren wir Ihnen eine Zusammenfassung Nutzer (ARPU) eingeschränkt sind.Betreibern, die vor der Einführung der wichtigsten Umfrageergebnisse unter CEOs in der neuer Netzwerktechnologien eine Bestandsaufnahme ihrer Netzwerke Telekommunikationsbranche. machen und in die Verbesserung bestehender Netze investieren, von Pierre-Alain Sur bekommen nicht nur wertvolle Einblicke in ihre Netzinfrastruktur, sondern bringen auch eine bessere Leistung und können neue Netzwerktechnologie schneller implementieren. von Shailabh Atal, Mohamed Kande und Harish Nalinakshan

Perspektiven 50 56 Wim Vanhelleputte Karel Pienaar MTN Côte d’Ivoire MTN South Africa MTN Côte d’Ivoire ist der führende Telekommunikationsbetreiber Wenn die Mobilfunkpenetration die 100-Prozent-Marke überschreitet, an der Elfenbeinküste und richtet nun seine Aufmerksamkeit auf müssen sich Telekommunikationsanbieter stärker auf die Entwicklung mobile 3G-Breitband-Dienste, um dem zunehmenden Druck innovativer Dienste und die Neubewertung ihrer Geschäftsmodelle von lokalen und internationalen Anbietern standhalten zu können. konzentrieren. MTN ist kein unbekanntes Unternehmen in Sachen CEO Wim Vanhelleputter teilt mit uns seine Erfahrung bezüglich der Innovation: Es war einer der ersten Anbieter mit mobilen Prepaid- Rolle des Mobile-Bankings in Industrie- und Entwicklungsländern, Modellen, setzte früh auf LTE-Technologie und investiert nun in gibt eine Einschätzung zu den Interdependenzen zwischen Unterseekabel. Der CEO von MTN South Africa Karel Pienaar spricht Telekommunikationsanbietern und Aufsichtsbehörden und legt über das Ausloten von Chancen in der Finanzbranche, die Bedeutung nahe, dass eine Umstellung auf neue Betriebsmodelle nicht nur der Telekommunikation bei der Überbrückung der digitalen Kluft sowie intelligente Ansätze sondern auch Geduld erfordert. die Notwendigkeit, auf Shared-Services-Modelle und Partnerschaften umzustellen, um neue Dienstleistungen anbieten und wettbewerbsfähig bleiben zu können. 4 目录

6 主编寄语

本期专题 8 34 非洲大陆 - 充满机遇的新世界移动商务：抓住机遇跑马圈地

伴随着数十亿美元的投资以及用户数的上升，非洲通信行业的潜力不断在非洲，移动支付正从根本上改变着银行对公和对私业务的状况。移被挖掘并持续高速增长。作为全球最具活力同时也最具创新性的电信市动运营商和银行已经在一些国家取得了成功，现在，他们正试图把这场之一，非洲正逐渐成为电子支付、电子商务、医疗和教育等领域的移样的成功复制到那些银行和移动电话普及率都存在巨大增长空间的国动通信能够得到广泛应用的实验室和实践先驱。家。目前非洲许多没有银行账户的民众对一些重要金融服务都有着迫切的需求，运营商们正信心十足的希望为他们提供这些服务 — 但这作者 : Johan van-Huyssteen 其中依然隐藏着诸多挑战，运营商需预先做好充分准备以克服困难。作者 : Ahmed Chohan 和 Adrian Dunsby

26 42 磨刀不误砍柴工 - 如何为增长奠定基础交付成果 - 通信行业全球CEO调查摘要

如今，全球的运营商们在忙着投资部署下一代网络的同时，也面临现有尽管存在着诸多经济、法规等层面的不确定性，加强全球化业务往来网络投资萎缩的窘境，伴随而来的是网络运营支出的削减和用户平均收的呼声在2012年中显得更为迫切。普华永道第15届年度全球CEO调入（ARPU）的降低，这些因素导致网络质量不再尽如人意，进而对行业查的内容主要包括：CEO们如何优化市场进入方式？如何重新设计业带来了重要影响，包括：网络使用率下降、客户关怀及服务保障费用的务流程甚至颠覆整个经营模型？本文将展示对通信行业CEO们的主增加、客户满意度的降低以及客户流失率升高。研究显示，那些对现有要调查成果。网络环境进行细致评估，并在推出下一代移动网络前同样重视投资于现作者 : Pierre-Alain Sur 有网络进行改造的运营商，不仅对现有网络的情况理解的更透彻、网络运营的更有效，同时他们推出下一代通信网络的速度也更迅捷。作者 : Shailabh Atal, Mohamed Kande 和 Harish Nalinakshan

前沿观点 50 56 Wim Vanhelleputte Karel Pienaar MTN Côte d’Ivoire MTN South Africa

作为该国最大的运营商，MTN Côte d’Ivoire为了应对来自本地和国际运当移动业务渗透率超过100%时，运营商需要将精力更多的聚焦于如营商日益加强的竞争压力，正在把目光投向3G移动宽带服务。其首席执何开发创新服务和重新评估其商业模式上。MTN一向热衷于创新，政官 Wim Vanhelleputte与普华永道分享了他对下述主题的洞见：移动银借助其领先的预付费移动电话服务，MTN大力发展LTE并投资海底光行业务在发达和发展中国家的功用；运营商和监管机构的共生关系；以缆。其首席执政官Karel Pienaar与普华永道分享了他对下述主题的及向新型运营模式转换不仅需要有智慧的方法，更需要企业家的耐心。洞见：拓展通信服务在金融行业的商机、电信在跨越数字鸿沟中的作用、以及为提供更好的服务和保持强劲的竞争力而向共享合作模式转换的必要性。

Communications Review 5 Message from the editor

As global communications leader of To provide a high-level view of the PwC and as editor, I am delighted African growth story, we begin this and honoured to welcome you to edition with an article by Johan my first edition of Communications van-Huyssteen, ‘Africa: a continent Review. Like my predecessor in this offering a world of opportunity’. As role, Colin Brereton, I am committed Johan points out, Africa’s relative lack to ensuring that this publication of legacy infrastructure has enabled reflects the concerns, aspirations it to bypass fixed-line services and and issues foremost in the minds of move straight to the mass-adoption the leading decision makers in the of mobile. As consumers rush to take global communications industry. I up and use new mobile services, would like to take this opportunity to the result is one of the world’s most pay tribute to the outstanding track dynamic communications markets. record Colin earned as global leader The market also is one of the most and to his great dedication to PwC’s innovative, especially in fast-growing communications practice and to our applications like mobile payments. clients’ performance. As Johan highlights, operators across Today, one region of the world stands Africa are responding to the opportunity out as a vast opportunity for untapped by creating and rolling out value-added growth: Africa. So the theme I chose services that already are making a real for this edition – ‘Africa: innovating difference to the lives and well-being and inspiring’ – not only is timely but of millions of people. Looking closely also reflects the future of the industry at ten of Africa’s communications there. Africa is now at the inflection markets, all significant and at various point where high potential starts to stages of development, he shows us turn into high growth. A range of the positive effects on the ground. factors – including Africa’s relative lack The message is clear: for the global of installed infrastructure in services communications industry, Africa has like communications and banking, arrived – and the really exciting part its rising disposable incomes and the of the journey is just beginning. escalating economic vitality among its rural population – means the industry Our second article, ‘Creating a solid will grow dramatically as well as very foundation for growth’, builds on differently than in other markets. the first by examining a challenge confronting operators in Africa and around the world: sustaining and improving network performance. Authors Shailabh Atal, Mohamed

6 Message from the editor Kande and Harish Nalinakshan look Operators pursuing the mobile us on a journey from MTN’s at the root causes, implications and payment opportunity face hurdles, like origins in 1994, when wealthier operational and financial impacts managing regulatory change, creating South Africans had about 4m fixed of poor network performance. They profitable business models, building lines, to today’s ubiquitous network analyse the successful steps operators agent coverage and preventing fraud. of 53m mobile connections linking are taking to improve their existing But, clearly, the prize for overcoming people of all demographics. networks, paving the way to roll out these challenges will be well worth next-generation technology more the effort and the investment. Reading through the articles effectively and to grow faster in the in this issue, I felt the sense of future by increasing productivity. Our fourth article, ‘Delivering results’, excitement, adventure and social analyses the findings of PwC’s 15th value that characterise the fast- The authors conclude that a well- Annual Global CEO Survey. The article growing communications sector in executed network operations assessment pinpoints how chief executive officers Africa. As well as building networks and improvement programme can in the communications industry are and revenues, our industry is acting enhance a network’s key performance actively reshaping their go-to-market as an engine of social and economic indicators by more than 20%. And approaches, business processes and development across the region. We such a programme can deliver major even end-to-end operating models to are offering innovative services that savings in both capital expenditures boost their organisations’ ability to touch, change and enhance the lives – and operating expenditures. As the do more business globally. The article and the personal and financial well- authors put it, very few arrows in the makes absorbing reading for everyone being – of millions of people every operator’s quiver are capable of hitting running a communications business day. I am grateful to have stepped so many targets at the same time! in an increasingly globalised world, into the editor’s role at such an wherever they may be based. energising time both for Africa and In our third article, we zero in on one for Communications Review, and of Africa’s most exciting and highest- Finally, in our Perspectives section we I look forward to receiving your potential areas of opportunity and once again meet some movers and suggestions and feedback. Please innovation: mobile payments. In the decision makers behind the headlines send any comments to me at pierre- article, ‘Enabling possibilities through in the global communications sector. [email protected], or feel free mobile payments’, Ahmed Chohan and Focusing – of course – on Africa, we to call me on [1] 501 772 8067. Adrian Dunsby describe how rapid interviewed two leaders at MTN, a advances in mobile payments are pan-African operator at the forefront transforming personal and business of growth and innovation in the region. banking in Africa at a headlong pace. The authors draw on recent First, MTN Côte d’Ivoire Chief Pierre-Alain Sur PwC research to show how Africa’s Executive Officer Wim Vanhelleputte Partner unbanked customers – from rural talks with us about such topics as the Global Communications Leader farmers to mid-sized urban businesses role of mobile banking in economic PwC – are using mobile devices to access development and the practicalities of financial services that previously transitioning to new operating models. were unavailable to them. Then MTN South Africa’s Chief Executive Officer Karel Pienaar takes

Communications Review 7 Africa: a continent offering a world of opportunity

With billions of dollars of international investment flowing in, and subscriber numbers rising across the continent, Africa’s communications marketplace has now passed the tipping point from high potential to high growth. Unburdened by a legacy of installed telecom infrastructure, Africa has leapfrogged the fixed-line phase of development to go straight to mass-market mobile networks and services. Even as Africa’s total mobile subscriptions soar past 500m, a huge, untapped market is still up for grabs by a wide range of local, regional and global players. In addition to being one of the world’s most dynamic telecom markets, Africa is also among the most innovative – a global testing lab and a leader in digital- and mobile-enabled applications in areas like payments, commerce, health and education.

by Johan van-Huyssteen Johan van-Huyssteen is partner in PwC’s telecom practice in South Africa. For more information, contact Johan by phone at [27] 11 797 5840 or by email at [email protected].

8 Africa: a continent offering a world of opportunity Two young men working with laptop, Mamako, Mali. Two

The past ten years have been a heady In stark contrast, mobile services across Mobile growth supported period of dramatic growth, rising Africa tend to be highly competitive, by rising investment investment and rapid technological with multiple providers – frequently progress in communications services including some players controlled by One of clearest indicators of the rise of across Africa. But for many reasons, it’s global majors – and penetration rates mobile in Africa is the shifting pattern clear that achievements to date are just that are increasing strongly. In some of investment in communications the beginning – and that Africa’s future countries, subscription penetration infrastructure and services. According potential dwarfs the growth seen so far. is well over 100% and still rising. to estimates by BMI-TechKnowledge Industry estimates suggest that the Group, total combined fixed and mobile The most powerful of these reasons number of mobile subscribers in Africa cumulative capital expenditure made is that in communications platforms has exploded from 16m in 2000, the in Africa since 2000 is set to grow from and technologies, the story in Africa year when mobile overtook fixed US$78.8bn in 2008 to US$145.8bn by is mobile. Fixed-line penetration in subscribers, to reach 246m in 2008 2015. This money is being invested in most markets across Africa tends to be and more than 500m today. a wide array of local, regional, pan- very low – sub-10% in the majority of African and global infrastructure, countries, and even sub-1% in some services and operations. As Figure 1 markets – and relatively flat or declining. illustrates, this rising tide of investment Fixed services are still heavily state- is undergoing an accelerating shift away dominated, with fixed-line customers in from investment in fixed-line services many countries relying on partially or and infrastructure, and towards mobile. wholly government-owned monopolies for their services.

Communications Review 9 As a result, by 2015 the mobile sector About 60% of these operators The continued interest in Africa will account for over two-thirds – an are affiliated with such major confirms that, despite the rapid growth estimated 68.9%, or US$100.1bn – of international telecom groups as to date, the biggest opportunities all cumulative investment in African France Telecom, Vodafone, MTN, are still to come, as a result of the telecommunications. This massive Bharti Airtel and Millicom. This strong remaining massive potential for mobile investment is both underpinned and involvement by global players is a subscriptions to grow. The real growth sustained by the rapid take-up of mobile function of the consolidation process opportunity is even bigger than it subscriptions, and it’s reflected in the of recent years. The world’s biggest appears at first sight, because of the expanding ranks of mobile operators operators – facing market maturity, high level of multi-SIM behaviour by active in the region. According to Africa cutthroat competition and slower African consumers. As with consumers & Middle East Telecom Week, the number growth in their more established in other lower-income, price-sensitive of mobile operators with live operations markets – have turned their attention markets with healthy competition in Africa (excluding mobile virtual to the opportunity in Africa. Recent among providers, many subscribers network operators) rose more than major deals include Bharti Airtel’s in Africa look to optimise their costs 10%, from 158 in the first quarter of US$10.7bn acquisition in 2010 of by mixing and matching their use of 2008 to some 175 at the end of 2010. the African assets of Kuwait’s Zain. various networks. And they are doing At the time of writing, several of the this by buying and using handsets that other majors reportedly are looking enable them to subscribe to multiple to add to their portfolios with further operators through multiple SIM cards. acquisitions in the region. According to a report in 2011 by the researchers GfK RT, one in ten of the mobile phones being sold in the Middle East and Africa are now dual Figure 1: Fixed-line versus mobile, cumulative investments in African telecoms (US$ millions) SIMs. That figure rises to about 25% of handsets in Ghana and to more 120,000 than 30% in Nigeria. As statistics from Informa Telecoms and Media confirm 100,000 (see Figure 2), this high use of dual 80,000 SIMs has opened up a significant gap between ‘subscription penetration’, 60,000 estimated to be just over 60% in 2011,

40,000 and ‘subscriber penetration’, at slightly US$ millions above 43%. With Informa forecasting 20,000 that almost half of Africa’s population still won’t be connected to mobile 0 2008 2009 2010 2011 2012 2013 2014 2015 services in 2016, it’s evident that the

Mobile cumulative investments Fixed-line cumulative investments market’s potential is largely untapped.

Source: BMI-T Africa Infrastructure and Investment Analysis, 2010–2015.

10 Africa: a continent offering a world of opportunity The importance of local These factors mean that both Operators also need to appreciate that, market factors operators entering and those currently while Africa is commonly characterised doing business in Africa need to develop as a single marketplace, its markets To turn this potential into revenues, lean operating and business models actually are highly diverse – certainly operators first need to overcome a that can be profitable at relatively low more so than in other regions like number of hurdles. In Africa, the level average revenue per user. Increasingly, Europe. A look across the continent of disposable income is generally low these models include cooperating with reveals some communications markets compared to many other markets. competitors to share infrastructure that can be classified as mature in The biggest challenge is how to make costs and overheads. Sharing towers global terms – though still expanding services available and sell them has become commonplace in the US, – like Nigeria, South Africa and the profitably to a population of users Europe, India and South America. North African region. In contrast, other who generate relatively low revenues Now that sharing is taking off in markets are at various stages of rising per user, and many of whom are Africa as well, large swathes of from a low base, with investment and geographically dispersed across mobile infrastructure are passing take-up now hitting a growth curve. massive rural areas. from operators to independent tower companies in Ghana, Nigeria, Tanzania, Alongside their varying levels of the Democratic Republic of Congo, maturity, what further distinguishes Uganda and South Africa. African markets is their regulatory structures. Regulation plays a vital role in the development of all communications markets, but especially ones changing and growing as rapidly as those in Africa (see Understanding regulation). Across the region, most of Figure 2: Mobile subscriptions in Africa, 2009-2016 the national regulatory regimes and 1,000 100 bodies were set up in the 1990s as part 900 of a wave of liberalisations that crossed 90 Percent penetration 800 80 the continent. A few, like South Africa, 700 70 are now in the second wave, having 600 60 been fundamentally overhauled in 500 50 recent years. Many others are under 400 40 Millions review to catch up with developments 300 30 such as 3G and 4G. 200 20 100 10 As we noted earlier, there are distinct 0 0 2009 2010 2011 2012 2013 2014 2015 2016 differences between fixed and mobile regulation in most African countries. No of mobile subscriptions (m) LHS No of subscribers (m) LHS Fixed services tend to be characterised Subscription penetration (%) RHS Subscriber penetration (%) RHS by tight regulation and a low number of players, and even monopoly status Source: Informa Telecoms & Media. for a state-controlled operator. Mobile markets are much more deregulated and competitive, with multiple companies and often a high degree of overseas ownership. Many governments have fostered this global influx through open and competitive spectrum auctions.

Communications Review 11 Understanding regulation: a vital influence on market development and growth

In the 1990s and early 2000s, many African countries moved to liberalise their telecommunication markets. They aimed to increase competition and thereby introduce lower prices, more choice, greater investment and improved service quality. This widespread deregulation set the scene for the rapid expansion seen during the past decade, and the entry of international players seeking to capitalise on investment opportunities.

Both new and existing investors need to understand the regulatory frameworks in various African countries for two main reasons: • For new entrants, regulation affects the potential returns on investment by influencing the cost of entering each market, the likelihood that more competitors will come in and the degree to which market participants compete on price or other factors. Regulation also impacts the level of infrastructure investment required to gain a foothold in the market, and the latitude available to incumbents in trying to limit competition from new entrants. For example, if regulators permit tower sharing it may reduce barriers to entry. • Existing players within each market need a firm grasp of the regulatory details to understand which competitive strategies will and will not work, and to make compelling public interest arguments to the authorities in favour of regulatory changes. Understanding the local political and regulatory environment is especially helpful for investors in some emerging countries in Africa, where the procedures for obtaining licences may have a greater political element than in mature markets like Europe and North America.

While Africa’s regulatory regimes vary widely, moves are under way to create more unified and consistent regulation across the various countries. For example, in November 2011 the Nigerian Communications Commission (NCC) – which regulates Africa’s biggest communications market – threw its weight behind introducing unified regulation of the industry in the West African region. Supporting proposals by the West African Telecom Regulators Assembly, the NCC stressed that it sees more consistent regulation as imperative for fostering growth and cost-effective communication between countries across West Africa.

12 Africa: a continent offering a world of opportunity A further common theme in mobile Mobile payments and commerce A force for change regulation is the growing support are among the biggest areas of service for tower sharing. Regulators have opportunity, reflecting the potential Across Africa, operators are harnessing encouraged the shift in tower to use mobile and broadband to reach headlong growth by giving customers management and ownership towards Africa’s large unbanked population reliable, accessible services at low third-party tower companies because it and enable them to participate in cost. Recognising how rising telecom makes existing operators more efficient mainstream financial services. This penetration is fuelling economic and lowers the barriers to entry for role was underlined by the globally growth and social development, a new operators coming into the market. recognised success of the M-PESA diverse range of stakeholders – not Governments, also, favour the sharing branchless banking system, which is just operators but also governments, of infrastructure because it increases backed by Vodafone, and which has nongovernmental organisations, mobile connections and taxable industry expanded from Kenya to several banks, healthcare companies and revenues as well as removes the need other countries. more – are working together to build for competing towers to be built close on the digital mobile revolution. to each other. African consumers’ strong appetite for mobile payment and retailing They are doing so by creating and services was highlighted in a recent rolling out new generations of value- Increasing bandwidths = added services that will make a real, new service opportunities study by the mobile ad network InMobi. It found that 59% of South African lasting and positive difference to This environment gives a sound basis users have now purchased at least one people’s lives. As a result, the African for growth in 3G services, which are digital product through their mobile telecommunications landscape is expanding rapidly across Africa and device. The study found that more not just about getting more mobile are available or planned for rollout in mobile Internet users in Africa prefer subscriptions, but also about expanding most countries. With the relatively low to shop for clothes, electronics and opportunity and social inclusion for penetration of fixed lines, especially entertainment products, like tickets and individuals across the continent. For in rural areas, satellite broadband music, from their mobile devices (46%) that reason alone, Africa is one of operators are launching a rich mix than from their desktop computers the fastest-growing communications of broadband platforms in Africa. (10%) or even in a store (44%). markets in the world as well as one of the most exciting. The rising availability of bandwidth Mobile health is also growing fast, brings implications that go much enabled by rising connectivity and Let’s take a look at a sample of ten wider than the communications fuelled by collaboration among communications markets in Africa, industry itself. On the economic front, operators, nongovernmental each at its own particular stage of studies suggest that an increase of organisations, governments and health development and maturity. The 10% in mobile penetration equates providers. As long ago as 2007, an countries selected represent the most to a rise of roughly 0.6% in the rate SMS-based campaign called ‘Smile for significant communications markets in of economic growth. As broadband You’ helped 40 South African children the regions, namely, Southern Africa, becomes more widely available in get operations to reverse cleft palates. Africa Central and Francophone Africa. Africa, it’s increasingly having a A 2009 United Nations’ survey found PwC acknowledges that some of the positive impact on people’s lifestyles that Africa led the world in the number information used in the following and well-being, including boosting of mobile-health projects in the region, country profiles is courtesy of Business financial inclusion and healthcare. with 21. That number has since risen Monitor International (BMI). fast, with a flow of projects targeting issues including HIV/AIDS and drug counterfeiting. More generally, the social and economic potential of communications links in Africa was underlined recently in an interview given by a senior UN official (see Delivering the benefit of information).

Communications Review 13 Delivering the benefit of information: to coffee growers, to educators

In December 2011, UN High Representative Cheick Sidi Diarra – who is a member of UNESCO’s Broadband Commission for Digital Development, and whose role includes helping to improve the well-being of the world’s least developed countries – described what the role of telecoms will be in those countries. In an interview with Telecoms.com, Mr. Diarra cited the example of a sugar cane or coffee grower in Africa.

“If you take the case of a coffee grower, the first stage would be for him to access information related to weather: how best to take advantage of weather conditions to grow better coffee,” he commented. “[Another] application for a coffee grower would be to look through the Internet to access the international and domestic markets to have an idea about the coffee prices. So there are a lot of applications sectors for different sectors of intervention.”

Mr. Diarra continued: “It’s true for all aspects of the economic development and it’s also true for different aspects of our social lives… health applications, education applications and sharing information in general. Sharing information is something that empowers people in their daily activities.”

14 Africa: a continent offering a world of opportunity 2

Southern Africa:

3 South Africa The South African fixed communications Neotel entered the South African market is served by two operators, fixed communications market in The South African telecommunications Telkom South Africa and Neotel. 2005. The consortium that owned sector boasts one of the continent’s Neotel comprised Videsh Sancharm most advanced telecom markets in Telkom SA was created in 1997 with Nigam Limited (VSNL), renamed Tata terms of technologies and services. The the partial privatisation of the entity Communications, the telecom arm of Electronic Communications Act (ECA) when a 30% stake was sold to Thintana India’s Tata Corporation, with 26%; of 2005 replaced the earlier telecom Communications, a consortium the two parastatal entities, Transtel and legislation, the Telecommunications comprising Telkom Malaysia Berhad and Eskom Telecommunications, holding Act of 1996, ushering in an era of South Western Bell Communications a combined 30%; the black economic services-based competition as opposed of the USA. The privatisation of the empowerment entity Nexus Connexion, to the previous vertical, technology- operator entered a new phase in 2003 with 19%; and Communitel and Two orientated regime. when the government listed 20% of Consortium, each holding 12.5%. In its 67% stake in the network on the early 2009, the initial holdings by Eskom The South African mobile market Johannesburg Stock Exchange (JSE) Holdings (15%) and Transtel (15%) is nearing saturation, with mobile and New York Stock Exchange (NYSE). were sold to Tata Communications, penetration approaching 110%. The The free float allocation was later which raised its stake from 26% number of subscribers or active SIM increased to 47.3%. In 2008, Telkom to 56% and made it the majority cards reached 52.2m at the end of 2010, sold its shareholding in mobile operator shareholder within Neotel. representing a mobile penetration Vodacom to the UK-based Vodafone. of 107.2%. Fixed-line connections Towards the end of 2009, Telkom continued to stagnate, at 4.3m during announced that it would launch its own the same period. According to All Media mobile network using the W-CDMA Products Survey statistics, 76% of South platform (which it achieved in 2011). Africans over the age of 15 personally Around the same time, the company owned, rented or had use of a cell phone announced that it would seek to delist in 2010. There were 4.1m fixed lines from the NYSE because of the global in the country at the end of 2010, a economic conditions and deciding penetration rate of 8.59%. that the JSE was sufficient for its capital requirements.

1 Zulu Warrior speaking on a cell phone, South Africa.

2 Commuters at bus station, Francistown, Botswana.

3 Truck in Namibia Desert, Namibia, Africa.

4 Men talking in Mukuni Village outside Livingstone, Zambia, Africa.

Communications Review 15 In June 2011 Tata Communications Other submarine cable systems, like the Regulatory environment acquired a further 12.5% stake West Africa Cable System (WACS), will and outlook previously held by Two Telecom go live in 2012, fuelling competition The Independent Communications Consortium. The acquisition resulted further. The South African express cable Authority of South Africa (ICASA) in Tata Communications becoming is expected in 2013. It will link South is the telecommunications and a 61.5% shareholder in Neotel, with Africa, Angola and Brazil, creating the broadcasting regulator, created Neotel now a subsidiary of Tata shortest route to North America. through the merger of the South Communications. The consortium African Telecommunications Authority received a licence to operate a national Four mobile operators – Vodacom, and the Independent Broadcasting and international fixed-line network MTN, Cell C and Telkom SA’s 8ta – Authority in 2002, under the terms of in 2005. The launch of the second serve the South African market. At the the ICASA Act No. 13 of 2000. In 2006, national operator under the banner end of 2010, there were 52.2m active the ICASA Amendment Act No. 3 of of Neotel took place in August 2006. SIM cards on the networks in South 2006 amended the ICASA Act. The company’s licence is valid for 25 Africa, representing an increase of 5.2% over 2009. Mobile network operators years and requires the operator to bring The regulator operates three divisions – have been particularly aggressive in services to 14 stipulated network areas the broadcasting, telecommunications launching 3G services, starting with of the country. and postal divisions. The authority Vodacom’s offer of free upgrades of is funded through parliamentary Since 2007, Telkom has faced data cards for existing 3G customers. appropriation, interest earned on competition from Neotel after the latter Drastic price cuts have added to this funds deposited, application fees, launched its wholesale, corporate and competitive dynamic. MTN led and licence fees and service fees. ICASA’s residential retail services. Telkom has Vodacom followed shortly thereafter, main functions include regulating started to feel pressure from multiple giving reductions of up to 60% and an players in the communications sector, other sources, including fixed-to-mobile increase in data allowances for contract issuing operating licences to service substitution, while alternative network and pay-as-you-go customers. providers (telecommunications, service providers (formerly classified broadcasting and postal), managing as value-added network services, The mobile operators also have been the frequency spectrum and numbering or VANS) have been moving into aggressively rolling out their own fibre plan, plus protecting consumers wholesale data services and beginning backbone networks. A major threat against unfair business practices. The to carve a slice of the voice market to mobile network operator revenues regulator is charged with implementing using IP. In response, Telkom launched has been the RICA (Regulation of policy as directed by the Department its own mobile W-CDMA network, Interception of Communication Act), of Communications (DoC), the 8ta, with coverage initially in the which has contributed to a slowdown public service arm of the Ministry metropolitan areas of the country. in the growth of subscriber numbers. of Communications. For outlying areas, Telkom roams on The proposed mobile termination rate regulations have caused and will the MTN network, which makes the The DoC developed several policy continue to cause, interconnection service available countrywide. documents in 2009, among them revenues to be cut. In addition, the the broadband policy document Telkom still enjoys a commanding operators are seeing messaging and data and the cyber security document. role in the country’s fixed-line revenues eroded by innovative services The broadband policy document broadband market in respect to like Mxit – a mobile instant messaging seeks to increase the penetration of ADSL, with the number of subscribers service that has an estimated five million broadband services in South Africa having reached 751,625 in March users across the networks. by making the service more cost 2011. Telkom has also sought to effective to the average South African, divest itself from its WiMAX network The South African telecoms sector is and to allow the country to begin to concentrate on its 3G W-CDMA expected to grow at a much slower pace building an information-based society rollout. The arrival of competition in in the future. The number of active and economy. The regulator has the form of access to international mobile SIM cards was expected to rise managed to stamp its authority on the capacity, with the SEACOM and to approximately 53.8m by the end of jurisdiction of the issue of determining EASSy cables going live, has already 2011, while the fixed-line market was the appropriate regulations for spurred several operators and service expected to remain constant at about the mobile termination rate, thus providers to pass savings on to the 4.3m connections. superseding all other agreements consumers. An example is MWEB’s made among the DoC, the Minister of uncapped ADSL options, and others Communications and the operators. are following suit almost overnight.

16 Africa: a continent offering a world of opportunity The South African telecommunications Botswana Regulatory environment regulatory environment can be defined and outlook as being in the second wave of sector Located in Southern Africa, Botswana The Botswana Telecommunications reform, a stage normally characterised had 137,422 fixed-line connections Authority (BTA) was created through by more vigorously liberalising the and 2.36m mobile subscribers at the the Telecommunications Act of sector. Over the past few years there end of December 2010. That’s a fixed- 1996, and its mandate is to regulate have been significant movements line market penetration of 7.5% and a the Botswana telecom market. The towards implementing the Electronic mobile-line penetration of 121%. The regulator is an independent entity Communications Act (ECA) of 2005. Botswana mobile market is expected to enjoying autonomy in respect of its Many of the outstanding liberalisation reach 2.65m mobile lines, representing financial and other resources. objectives, which are embodied in the a mobile penetration of close to 135% by ECA, are being addressed. the end of 2011. Fixed lines, though, will drop further, to 133,000 lines, which The New Licensing Framework introduced in Botswana in 2007 The ICASA Amendment Act has represents a penetration of just over 7%. provided a platform for technology- widened the scope of responsibility neutral licences, which takes into for the regulator, ICASA, to include The Botswana Telecommunications account the increasing convergence of postal services while entrenching the Corporation (BTC) enjoys a monopoly technologies and services. The country regulator’s independence. In the 2007- position in the country’s fixed-line has one of the most liberalised telecom 2008 financial year, ICASA granted 150 services market. BTC was established markets in the region. The service- value-added network service licences in 1980 under the Botswana and technology-neutral licensing from 163 applications and granted 36 Telecommunications Corporation Act. regime has allowed for the provision of private telecommunication network The operator is wholly government telecom service under a unitary Public services licences from 38 applications. owned and initially served as the sector regulator. The planned privatisation Telecommunications Operator Licence. The regulator has also managed to of BTC was postponed in 2008 in the The BTA has liberalised the stamp its authority on a number wake of the global economic crisis but international voice gateway and of critical issues, perhaps the most was resumed in 2011. The incumbent has lifted restrictions on voice over important being the mobile termination is in the midst of privatisation. Under Internet Protocol (VoIP), resulting in rate debate, which raged across the the sale plans, a 49% stake will be the licensing of value-added network country during 2009 and the early part sold to investors and BTC employees, services. Neutral licensing has also of 2010. The issue has been settled and a while the government will retain the allowed mobile operators to provide glide path for interconnection rates has remaining 51%. Shares will be sold to their own transmission links. The result been agreed on. ICASA has forced the citizens in stages on the condition that of implementing these provisions has reduction in interconnection rates on a when investors wish to dispose of their been to strengthen competition and sliding scale over the next three years shares, the government will have the make more services available at lower to reduce the cost of retail cellular call first option to buy them back. prices. To manage spectrum efficiently, rates. By March 2013, the rate will be the BTA has put in place an Automated capped at 40c per minute. Three public telecommunication operators bring mobile telephony Spectrum Monitoring System, which is characterised by remote spectrum The ICASA Act amendments and the services to Botswana – Orange monitoring towers connected to a state- ECA redefine and expand the powers of Botswana (formerly Vista), of-the-art Spectrum Monitoring Centre ICASA to control the communications Mascom Wireless and Botswana located in the suburb of Phakalane market. The main provisions of the Telecommunications Corporation’s in Gaborone. ICASA Act amendments remove the beMobile. Orange Botswana and minister’s power to approve regulations Mascom Wireless started offering made by ICASA, increase ICASA’s power services in Botswana in 1998, and to conduct enquiries and to enforce BTC beMobile started in 2008. its rulings, and establish a Complaints and Compliance Committee to assist ICASA in hearings and issue findings on complaints and allegations of noncompliance with the ECA.

Communications Review 17 In 2010, the BTA, consulting and Namibia Regulatory environment collaborating closely with public and outlook telecommunication operators – The Namibian telecommunications The Communications Commission Botswana Telecommunications market is served by a single fixed- Act of 1992, amended in 1995, created Corporation, Mascom Wireless line network operator, Telecom the Namibian Communications Botswana (Pty) Ltd and Orange Namibia, and three mobile network Commission (NCC) as the country’s Botswana (Pty) Ltd – and other operators: Mobile Telecommunications telecommunications regulator. industry stakeholders, updated Corporation (MTC); Cell One, which Following the Communications the 2005 cost model and pricing operates under the brand name Leo; Act 8 of 2009, the Communications framework. On the basis of the results and Telecom Namibia, which offers a Regulatory Authority of Namibia of the 2010 updated model, the mobile service on the CDMA platform (CRAN) superseded the NCC as the BTA defines and directs new pricing under the brand name Switch. Namibia communications, broadcasting and developments in the telecom market. had 145,400 fixed-line connections and postal services sector regulator as of May The purpose of the BTA’s directive is two million mobile subscribers at the 2011. This latest Act opens up a new to implement the recommendations end of December 2010. playing field for operators, especially of the 2010 cost model and pricing As a monopoly, Telecom Namibia MTC and Leo, as it allows them to move framework. In so doing, the BTA seeks enjoys a market share of 100% in fixed into the convergence and integrated to foster competition as well as make telecoms. The company was established services space. This move undoubtedly sure there are appropriate incentives in 1992 and is wholly government will broaden the range of services and for long-term sustainable investments owned through Namibia Post and alternatives available to customers. in information and communications Telecom Holding Limited. technologies in Botswana. The desired CRAN has just been established and outcome is the increased penetration Namibia has two GSM mobile network has recruited Stanley Shanapinda as and use of telecom services. The cost operators – MTC and Leo – and a third its chief executive officer. The body is model and pricing framework is in mobile operator, Switch, which offers still in the process of setting itself up line with international best practice mobile telephony services on the CDMA operationally and administratively, methodologies for costing and pricing platform. In December 2010, the two while coordinating with industry of telecom services. million mobile subscribers in Namibia players to transform the sector. Once represented an increase of 28.2% over the remaining vacant posts have been Together with stakeholders, the 2009, giving the country a mobile filled, the first challenge will be to BTA is developing a framework on penetration of 87%. implement the full provisions of the infrastructure sharing in an effort to Communications Act 8, especially enhance the regulatory environment The Namibian mobile telecom with regard to licence convergence. for the growth and development of the market was expected to grow to industry. Sharing infrastructure will approximately 2.4m connections facilitate the provision of affordable by the end of 2011, and the fixed- services – as the cost of provision of line connections to inch upwards to such services becomes manageable 146,000 during the same period. through sharing – and will deal with the global concern about the effect of infrastructure on the environment. The study is finished and the BTA has issued the draft report for discussion with the stakeholders.

18 Africa: a continent offering a world of opportunity Zambia Regulatory environment and outlook The Zambian telecommunications market is served by four The telecom regulatory telecommunications network environment in Zambia has operators – Zamtel, which is the undergone a transformation. The incumbent fixed-line operator, and former regulator, the Communications three GSM mobile network operators. Authority of Zambia, which the Telecommunications Act of 1994 At the end of October 2011, there were created, was changed to the Zambia seven million mobile subscribers in Information and Communications Zambia, representing an increase of Technology Authority (ZICTA) and 21% over December 2010, and a mobile formed by the Information and penetration rate for 2011 of 50.3%. Communication Technologies Act No. 15 of 2009 (the ICT Act). The Zamtel, which enjoys monopoly status in ICT Act has ushered in a new licensing fixed-line services, was created when the framework, although the framework is post and telecommunications entity, the still technology dependent rather than Zambian Post and Telecommunications technology neutral. Corporation, was separated in 1994. In January 2012, the Zambian government The Cost of Service Study for the ICT took over the ownership of 100% of sector was commissioned by ZICTA and Zamtel, and the entity is now under finished in September 2010. The study new management. Zamtel increased consisted of a regulatory and legal due its subscribers to one million in the diligence, a licensing regime review and year 2011. a comprehensive market analysis. The report made many recommendations, The three mobile operators – and the regulator has the responsibility Airtel Zambia (formerly Zain); of implementing the findings of the MTN Zambia (formerly Telecel); report. This was still in progress at the and Cell Z (a subsidiary of Zamtel) – end of 2011. serve the highly competitive Zambian mobile market. The Zambian mobile telecom market grew in 2011, as all the operators claimed to have increased their subscriber base substantially during the year.

Communications Review 19 2

Africa Central:

1 Nigeria Globacom secured the country’s MTEL and Etisalat Nigeria. The second national network operator Nigerian mobile market was expected The Nigerian telecommunications licence in 2002. The company’s to continue its aggressive growth sector is Africa’s largest market and major shareholder is the Nigerian and reach 102.6m subscribers by the is fully liberalised. The fixed market petrochemical company Conoil, while end of 2011, representing a mobile segment has at least 25 operators Detecon Consulting of Germany has penetration of 69.41%. The number of offering fixed and fixed-wireless been selected as the strategic partner fixed-line subscribers was projected to services. Those operators have for operational and network issues. decline to 900,000 during this period. contributed to the transformation The operator’s fixed-line businesses of the Nigerian telecom market in are divided into Glo Gateway, Glo 1 The Nigerian CDMA market has various segments, including fibre and Glo Broadaccess. 12 operators but is dominated by and satellite backbone provisioning, four major operators – Starcomms, voice, data and Internet services. The NCC established the PTO Telkom Multi-Links (now owned by licensing category in 1997 as a Helios Towers), Reliance Telecom The Nigerian mobile market is the means of increasing private-sector and Visafone Communications. The largest in Africa. At the end of 2010, participation. It includes a range of country had 6.1m CDMA subscribers the mobile market had 87.4m mobile licence categories, most of which are at the end of 2010, continuing a subscribers on the GSM network and various subclasses of private network downward trend from an estimated 6.1m subscribers on CDMA networks. links and FWA licences. They are eight million subscribers in 2009. That represents a mobile market generally local exchange carriers with penetration of 59.1%. There were restricted territory of FWA provision, Regulatory environment 1.05m fixed subscribers, representing value-added network services, Internet and outlook a market penetration of 0.71%. service providers, long distance and The Nigerian telecommunications international gateway operators, The Nigerian fixed-line market is served regulatory environment is directed including VSAT, in some combination. by the incumbent, Nitel, and by the from two distinct levels: the The regulator has licensed these second national network operator, government, which operates on a operators according to services they Globacom, together with more than 25 national and state level through the are permitted to offer. fixed-wireless access (FWA) and private Ministry of Communications, and the sector regulator, the Nigerian telecommunications operators (PTO). The mobile market is served by five Communications Commission (NCC). GSM network operators, MTN Nigeria, Nitel was formed in 1985 when Glo Mobile, Airtel (formerly Zain), Posts & Telecommunications merged with Nigerian Telecommunications Limited. The operator was awarded 1 Durbar festival, Kano, Nigeria. a fixed and GSM mobile licence for 2 Maasai man with cell phone, Kenya. a fee of US$1.8m in 2002 as part of 3 Entebbe, Uganda, mutatus drop off and collect passengers. the liberalisation initiative. The Nitel privatisation efforts have been beset with troubles, and the most recent attempt collapsed in April 2011.

20 Africa: a continent offering a world of opportunity The Ministry of Communications The Central Bank of Nigeria recently Pre-paid subscriptions represented formulates communications policy licensed 11 mobile money firms in the 99% of the total mobile subscriptions, linked to the overall objectives of country, excluding mobile network with Safaricom and Telkom Kenya government policy, plus the state operators from the process to allow registering positive gains in new government is operating through banks and independent players to enter subscriptions as Airtel and Yu the respective legislatures. The NCC the market and serve the estimated recorded a decline. was created by Decree 75 in 1992. 100m unbanked Nigerians. Nigeria’s The authority is responsible for second national carrier, Globacom, has Fixed-line connections were expected implementing government telecom been the first to take advantage of the to continue declining to approximately policy. This includes creating an open opportunity created by the payment 300,000 lines at the end of 2011. and competitive telecom environment system by striking a partnership with with a view to stimulating the growth Afri-pay Limited, a subsidiary of the Regulatory environment of telecom services and introducing United Bank for Africa (UBA). Globacom and outlook entrepreneurs into the market. The and the bank are set to launch a mobile The telecoms sector is regulated by NCC is regarded as one of the more money service called U-Mo in the near the CCK, established by the Kenya progressive telecom regulators in future. Other players are expected to Communications Act 1998. The Africa and has sought to adopt the enter the market soon. legislation was preceded in 1997 by so-called big bang approach to market the development of a telecom policy development through licensing. Kenya framework in the form of the Postal and Telecommunications Sector Policy The National Telecommunications The Kenyan telecommunications market is the giant of the East African Statement (amended in 1999, 2001 and Policy stipulates that the NCC is an 2006). In terms of the Act, the regulator independent organisation, empowered region. The incumbent network operator, Telkom Kenya, which operates is an independent body with funding to issue licences, assign and manage obtained from licensing and spectrum radio frequency spectrum and regulate under a monopoly, dominates the fixed-line market. The country boasts fees. The CCK’s mandate includes all telecom licences and service licensing operators, resolving disputes, providers. The independence of the a competitive mobile market with four network operators. managing the nation’s radio frequency regulator was further entrenched by spectrum and developing regulations the Nigerian Telecommunications Act Telkom Kenya was established in like interconnection and tariffs. of 2003. Part IV of the Act stipulates April 1999 by the Companies Act and that a parliamentary appropriation offers integrated communications CCK started implementing its unified committee is to oversee the funding solutions in Kenya through a range of licensing regime in 2009. The regime for the regulatory body. As the NCC voice and data services. In December was designed to streamline regulatory depends on parliament for funding, 2007, Telkom Kenya entered into interventions in the telecoms industry it may not be entirely independent. a partnership with France Telecom and open opportunities for operators and service providers to develop Although Nigeria is one of the world’s Group, which bought 51% equity in the company for US$390m. innovative products and services for fastest-growing telecom markets, the users. Under the unified licensing government failed in its latest efforts The Kenyan mobile market is served regime, licences have been separated to privatise Nitel after it announced in by four operators – Safaricom, Airtel according to services and infrastructure June 2011 that it had terminated the (formerly Zain), Orange (Telkom and segmented as follows: process when the reserve bidder failed Kenya) and Yu, a subsidiary of the to pay a US$105m bid security. The • International Gateway Systems (IGS) Indian-based group Essar. According government has been trying to sell Nitel to the Communications Commission • Network Facilities Provider Tiers 1 for almost a decade, but the state of its of Kenya (CCK) 4th Quarter Sector to 3 (NFP-T1) fixed-line infrastructure and its levels Statistical Report, Kenya had a total of of debt present challenges. Globacom • Application Service Provider (ASP) 25.27m subscribers by June 30, 2011, announced recently that it might launch representing 64.2% of the population. • Content Service Provider (CSP) a bid for the embattled operator.

Communications Review 21 Under the Kenya Information Uganda Regulatory environment and Communications Act and the and outlook regulations it led to, the CCK has the The Ugandan telecommunications The Uganda Communications power to manage certain aspects of market is served by seven operators, Commission (UCC) is the competition in the industry. Included including two fixed-line operators and telecommunications, broadcasting are identifying market segments, five licensed mobile network operators. and postal regulatory body of Uganda. examining the levels of competition One more licensed mobile operator The UCC was created by the Uganda in those market segments, making intends to roll out its network soon. Communications Act of 1997. This declarations of dominance, carrying The mobile market is served by five statutory body is tasked with licensing out tests to determine whether there operators – MTN Uganda, Airtel operators, managing and allocating has been abuse of dominance and, in (formerly Zain), Mango (a subsidiary spectrum, approving tariffs and such cases, implementing proportionate of UTL), Warid Telecoms and Orange monitoring quality. The Ugandan and appropriate remedies. Uganda (formerly Hits Telecoms). information and communications technology market is regarded as In August 2011, the regulator The sixth licensed network operator, one of the more liberalised and open published new regulations and Anupam Global, has yet to roll out its in Africa. The telecoms sector enjoys guidelines, including the Competition network due to spectrum issues. Sure full competition in both services Guidelines, in hopes of further Telecom, a Singapore-based mobile and infrastructure. levelling the playing field and phone company, has imminent plans to enhancing competition. Differing launch services in Uganda, and is aiming In 2011, the regulator was finalising interpretations of new regulations to roll out services first in Kampala the draft Retail Tariff Guideline for have forced operators to take hard-line before expanding into other areas. The Voice Telephony Services document on positions as they prepare to protect Uganda Communications Commission telecom tariffs. The principal objective their turf. The regulator has already said that Sure Telecom is investing of the guideline is to promote a fair, identified voice and text message US$400m in the Ugandan project. The efficient and competitive market in services offered by Safaricom, as well company plans to create a landline niche the telecoms sector. The difficulty the as fixed-line telephony services by through data, voice and other services UCC has is how to keep all stakeholders Telkom Kenya, as among those that to compete with Uganda Telecom and happy; at the moment, the tariffs require further regulatory approaches. MTN Uganda’s fixed-line service. favour the end customer. The Kenyan telecom regulator and The number of mobile subscribers in the government are talking about Uganda was forecast to reach 14.6m making more spectrum available in 2011 and give the country a mobile commercially. CCK also wants operators penetration of about 45.7%. Those to redistribute their assigned spectrum figures imply that more growth will and launch 4G services. be possible in the short term.

22 Africa: a continent offering a world of opportunity 2

Francophone Africa:

Ghana Airtel (formerly Zain) is a fixed and Regulatory environment mobile wireless telecom network and outlook The Ghanaian telecommunications operator in Ghana. The mobile operator The telecom regulator in Ghana market is highly competitive with two Celtel International, part of the Zain is the National Communications fixed-line network operators and six Group, acquired 75% of the operator Authority (NCA), created by mobile GSM network operators. Ghana from the government of Ghana in late Act 524 of 1996. The legislation had 277,897 fixed-line connections 2007, and the company was rebranded was the result of the policy directions and 17.4m mobile subscribers at Zain in August 2008. Zain was then contained in the Telecommunications the end of December 2010, giving acquired by Bharti Airtel and rebranded Development Policy of 1995. The market penetrations of 1.2% and once again as Airtel Ghana at the end NCA is an independent body charged 67%, respectively. of 2010. The government of Ghana with implementing regulations as remains a shareholder in the company, Vodafone Ghana Telecom occupies directed by policy from the Ministry with a 25% holding through the Ghana the leading market position in Ghana’s of Communications. The NCA’s National Petroleum. fixed-line market. The operator’s responsibilities include the licensing of telecom network operators and 267,033 fixed-line connections at the The Ghanaian mobile market has six service providers, as well as developing end of December 2010 represent a licensed mobile operators – Airtel, interconnection guidelines, equipment market share of 96.1%. Ghana Telecom Tigo, Vodafone Ghana, MTN Ghana, approval, spectrum allocation and was incorporated in 1974, with the Expresso (formerly Kasapa) and consumer protection. government retaining 100% ownership Globacom’s Glo Mobile. (Glo Mobile of the incumbent network operator. was still in the deployment phase and In August 2008, Vodafone acquired a not actively competing at the end of 70% stake in Ghana Telecom from the 2011.) The total subscriber base of government of Ghana, and the company 17.4m at the end of December 2010 has since been rebranded Vodafone represented a rise of 33.1% over 2009. Ghana Telecom. The government retains a 30% stake in the business. The Ghanaian mobile sector was expected to continue this rapid growth and reach 22.1m subscribers – or a market penetration of 95.5% – by the end of 2011. Fixed-line connections were expected to rise to 300,150, or a market penetration of 1.28% during the same period.

1 The port of Tema is the larger of the two sea ports in Ghana.

2 Cameroon, Dschang market.

3 Ivory Coast, Yamoussouka, herder with sheep and goats talking to friends.

Communications Review 23 The Ghanaian telecom regulator has Côte d’Ivoire Mobile subscriber numbers were indicated that it won’t issue any new expected to continue to increase, licences in the near future. But the Côte d’Ivoire had 14.5m mobile reaching 16.7m, or a penetration rate director general has indicated that subscribers and 370,000 fixed-line of 79.2%, by the end of 2011. The fixed- the country has made provisions for subscribers at the end of 2010. Those line telephony market was expected to additional data and Internet service numbers translate to penetration rates rise marginally, reaching 380,000 lines, providers to be licensed. Perhaps of almost 70% for the mobile sector but stay at the same penetration rate of the most important new regulation and 1.76% for the fixed-line sector. almost 1.8% during 2011. to impact the market will be the Côte d’Ivoire Telecom was partially imposition of the new SIM registration Regulatory environment privatised in 1997 with the initial sale regulations by the NCA, which began and outlook of a 21% share to France Telecom. on 1 July 2010. France Telecom has since increased its The telecom market of Côte d’Ivoire is regulated by the Agence Under these regulations new users shareholding to 51%, the government des Télécommunications de Côte are forced to give personal details as holds 47% and 2% is reserved for d’Ivoire (ATCI), which was created by well as a copy of their national identity staff. The operator had an estimated the Telecommunications Act of 1995. document before they may purchase 340,400 fixed-line connections at the The Act paved the way for liberalising a SIM card. The NCA is working on end of December 2010, enjoying a 92% the sector and licensing mobile more ways to stimulate competition, market share. Arobase Telecom became network operators. Two independent like mobile number portability, which the country’s second national network departments under ministerial was implemented in July 2011 and is operator after being awarded a 20-year supervision (technical and financial) fully functional. licence from the government in 2004. Civil unrest in the country delayed the ensure the regulation of telecoms in launch of services until 2005. In 2008, Côte d’Ivoire. They are the ATCI, which MTN of South Africa acquired the looks at the technical regulation, and company. Arobase Telecom had 29,600 the Conseil des Télécommunications fixed lines at the end of December de Côte d’Ivoire (CTCI), which looks 2010, an 8% market share. at the financial regulation. There may be a need, in the future, to combine The mobile services market of Côte the ATCI and the CTCI into a single d’Ivoire is served by seven mobile regulatory entity to avoid the conflicts network operators: Orange; MooV; of jurisdiction that regularly occur MTN; Comium, trading under the brand between these two regulatory bodies, KoZ; Libya’s LapGreen, trading under and to make the function of regulating the brand Oricel; UAE-based Warid the telecoms sector smoother. Telecom; and Nigeria’s Globacom, which was licensed in 2009. Warid Telecom The ATCI is reviewing its licensing and Globacom are at various stages of framework to introduce further network deployment. The market has competition, particularly in the services experienced some growth, rising to layer of the market, and to review 14.5m subscribers in 2010, an increase spectrum allocation. of 12.7% over 2009.

24 Africa: a continent offering a world of opportunity Cameroon The Cameroonian mobile market was expected to grow to 9.85m lines Cameroon had 153,818 fixed-line by the end of 2011, representing a connections at the end of December mobile penetration of 50.5%. Fixed- 2010, representing a penetration rate line connections should reach 160,000, of 0.8%. The mobile market had 8.41m maintaining a flat penetration rate customers, giving the country a mobile of 0.8% during the same period. The penetration rate of 43.1%. mobile sector is expected to become highly competitive once Camtel Cameroon Telecommunications launches its mobile operations. Corporation (Camtel) is the incumbent Third generation mobile services still national fixed communications and haven’t been introduced in the country, Internet service provider in Cameroon. It apart from Camtel’s EV-DO fixed- is completely owned by the government wireless service. of Cameroon and enjoys a de facto monopoly status in fixed-line services. Regulatory environment and outlook There are two GSM network operators in Cameroon – Orange Cameroon The Cameroonian telecoms sector is and MTN Cameroon. Camtel recently governed by the Telecommunications secured a mobile licence, although Act of 1998. The Act allowed it’s mired in controversy, and is in the for creating an independent process of rolling out a mobile service sector regulator – the Agence de based on the CDMA platform. There’s Régulation des Télécommunications also Yemba, a mobile virtual network (ART) – and for licensing the two operator launched in 2008 using the mobile networks and the fixed- CDMA technology and numbering line incumbent. The ART is tasked systems of Camtel. Yemba is owned with developing and implementing by local investors under the banner regulations, and the Ministry of Posts of Providence Technologies. The and Telecommunications determines take-up of the CDMA services has had policy for telecoms and for information limited success and is regarded more and communications technology. The as a fixed-line-services replacement. regulator demonstrated its ability to Yemba had a modest 5,000 subscribers intervene effectively in the country in 2010, but that figure was expected when it reduced the interconnection to increase in 2011. rates between the mobile and fixed-line operators, resulting in an overall tariff reduction of approximately 20%.

The ART will have major challenges and opportunities in the near future: licensing two more mobile network operators; reducing prices and breaking the Camtel monopoly on international submarine fibre optic cable access to allow the sector to grow. The new mobile operators likely will affect both MTN and Orange, which are looking to expand into rural areas to maintain their market share.

Communications Review 25 Creating a solid foundation for growth

The combination of the explosive use of mobile devices, the increasing complexity of network infrastructure and the competitive pressures within the market has brought many telecom networks to their knees in terms of performance. Degraded network performance has a significant business impact: it leads to reduced usage, increases care and assurance costs, lowers customer satisfaction and increases churn. Those effects come as operators around the world are busy investing in the deployment of next generation networks while hobbled by dwindling investments in their existing networks, cuts in network operating expenditures and declining average revenue per user (ARPU). Operators that take stock of and invest in improving their existing networks before the next generation technology rollout not only gain valuable insights into their existing network but also perform better and rollout new technology networks faster.

by Shailabh Atal, Mohamed Kande and Harish Nalinakshan Mohamed Kande is a principal and Shailabh Atal and Harish Nalinakshan are directors in PwC’s PRTM Management Consulting practice. For more information, contact Mohamed by phone at [1]202 756 1705 or by email at [email protected]; or contact Shailabh by phone at [1]202 756 1725 or by email at [email protected]; or contact Harish by phone at [1]703 856 0470 or by email at [email protected].

26 Creating a solid foundation for growth Car in desert, Nigeria.

Network performance issues are Cleaning house involves thoroughly The temptation to move to the next confronting operators in the emerging assessing network performance generation of technology is great, markets, particularly in Africa, at a issues and their root causes and but the rewards of fixing the network critical time. In these markets, the then launching a cross-functional while it is still operating on existing growth in recent years has come largely operations improvement programme. technology are too lucrative to ignore. by subscribers benefitting from easier In emerging economies like those in The good news is that operators can access to mobile telephony, cheaper cost Africa, taking these steps isn’t a luxury, tackle this challenge successfully of calls and lower up-front investment but a necessity. Every dollar of capital by using a structured methodology in devices. Voice remains the killer expenditures (capex) per subscriber is that captures near-term wins and application in these markets but as even more precious there due to lower modifies strategies for the long-term 3G networks are deployed widely in ARPU, and every opportunity to do sustainability of their operations. the emerging markets, the next wave more with less should be thoroughly of growth will come from data usage exploited before putting the next dollar through a multitude of devices like of capex into the network. smartphones and tablets. For operators, ‘cleaning house’ – fixing their current network performance issues – is imperative before they upgrade the network to 3G, or even 4G, technologies.

Communications Review 27 The case for change: rethinking the Programme in action operating model Operator Results Operators looking to the future should fundamentally rethink the Geography: The 2G mobile network of one of the largest operating model they believe has Middle East and North Africa MENA-based national wireless operators made them successful. This lesson is (MENA) lagged behind its main competitor in key hard for many but necessary for all. performance indicators, causing it to lose Network: The notion that what has made them significant market share and share value. 2G mobile network successful in the past will continue to The operator launched an audit of its keep them successful isn’t reasonable Size: network performance and operations, and for several reasons: Largest national operator developed a focused plan to improve its • Third- and fourth-generation network operations. It managed that plan (3G/4G) technologies are a until improvements in the network’s key significant step change from 2G performance indicators – and in customer technology. Operators have to retool satisfaction data – were clearly visible. (personnel skill sets, tools and These steps not only led to better capex and organisational structures) to think opex outlay, but also formed the basis for about abstract concepts such as successfully launching its 3G network. And packet losses and quality of service both improvements let the operator keep its rather than binary on-or-off circuit- lead in the market. switched connections. • Internet Protocol technology transforms the operator into an • Customers are ever more • A new set of customers (e.g., Internet service provider. This discerning about value for their M2M devices, data MVNOs), places a new, far-reaching set of money, sometimes carrying attracted by the new capabilities requirements on the operator multiple SIM cards and selecting of the networks, demand more that go beyond the engineering their own ‘least-cost routes.’ organisational collaboration to organisation. End users expect that Regulatory regimes are embracing serve them effectively while placing access to content and connectivity lower mobile termination rates, significant operating pressures on is delivered with the same five 9s increasing number portability and the operator due to the lower ARPU reliability as voice calls do. improving consumer protection. they bring. • Diversity among vendors and Over-the-top applications by After many years of aggressively interoperability requirements companies like Skype and Google building a 2G network to compete for technology cause more are offering services that operators on coverage and capacity, many complexity and an operator’s used to provide. And both trends operators are left with a cobweb of ‘walled garden’ approach to are empowering customers. ‘stranded assets,’ still insufficient managing its infrastructure • Competitive pressure between network capacity, inefficient processes, isn’t sufficient anymore. operators is forcing them to rethink a hodgepodge of tools and a ‘spent’ cost structures. Expensive public • The co-existence of multiple workforce. To roll out another marketing battles, increasing sales generations of technologies in a technology (3G or even 4G) after the promotions, higher retention costs network also places extraordinary long 2G phase would have disastrous and increasing customer acquisition demand on core engineering results – often manifested as capex costs are leaving little room for error tasks like managing spectrum, deployed inefficiently, network quality in deploying capex or managing coordinating interference, and problems and overall delays in the operating expenditures (opex). planning and designing the network. rollout of the new network.

28 Creating a solid foundation for growth Operators that take stock of their Network performance: Taking stock v1.0: networks at the end of the 2G phase focus on Africa old-style assessments and before they roll out the next technology tend to perform better Africa, in particular, has more than Most mobile operators that undertake because knowing more about their 200 distinct mobile operators spread some network assessment and existing network helps them make across more than 50 countries, with a improvement programme do so with the necessary changes faster for a few major multinational operators and a very limited scope that’s largely an 3G rollout. Their house-cleaning a large number of smaller operators. internal programme of the technology assessment includes focusing and According to the GSMA, mobile department. As a result, the focus aligning all aspects of their network penetration in Africa is slightly above is typically primarily technological planning, design, engineering, 62% and has had a compound annual and the scope is limited to technical deployment and operations. The growth rate of 35% over the last ten solutions. Examples of this include: assessment is comprehensive across years. Penetration ranges from as high new diagnostic tools are purchased technology processes, technology as 145% in Botswana and as low as 5% to assess and fix problems but leave organisation, network infrastructure in Eritrea. ARPU in Africa ranges widely, problems to resurface later. Automated and operational support systems. Often but subscriber growth and network network inventories are started but (and certainly recommended), this competition have brought ARPU levels never finished. New tools and vendors assessment extends far beyond the down by as much as 60% over the last are introduced to the network but reaches of the technology organisation. four years in some countries. While aren’t able to get very far due to the 2G networks are the standard, almost limited scope of tools deployment. While the transition from one network every country has an operational 3G technology to another is a good time network. There are even a handful of Such problems happen because the to conduct a network assessment and LTE networks already in operation. root causes of the problems – that lie improvement programme, another in operating processes, organisational opportunity arises when an operator But with the twin forces of structure and network management is about to enter into a merger or significant growth and falling systems or tools – can’t be tackled as an acquisition. It’s usually done as a ARPU levels, network operators have part of these network improvement preparatory step for a due diligence had to manage significant capex and programmes that focus solely on exercise that focuses on network opex outlays while seeing revenues technology and tools. assets and operations. Another fall. All of that is putting pressure on compelling impetus to conduct such profitability, and operators are looking This shortsighted technical approach an assessment is to understand and for every means to manage costs. manifests itself in various ways. If there remedy the perception of poor network Network performance degradation are problems with the processes, a good performance or to improve costs. Any is often one of the first unintended tool will resolve them only temporarily, opportunity for deploying significant consequences of belt tightening. and may even increase the rate at capex, such as revamping a major which problems occur. For example, platform or launching a new portfolio Looking through the lens of the the absence of cross-functional network of products, is also a good opportunity traditional 2G network performance design reviews involving network for an operator to step back and take measures of call blocks, call drops, operations and maintenance teams stock of its network. voice quality and reliability shows may cause the network design database clearly that African operators have to quickly run out of synch with the As operators around the world are been facing numerous challenges. actual network because of the lack either launching or getting ready to They’ve risen to these challenges in of a feedback mechanism to gather launch next generation networks, this many ways, often being able to do network updates and incorporate them is the right time for them to conduct more with less. However, degraded into a database. Also, having the right such an exercise so that they build their performance has had its impact on their tools but in the wrong organisational newer networks on a solid foundation. businesses – reducing usage, adding to structure may even hasten the customer care costs, lowering customer development of problems. For instance, satisfaction and increasing churn. It’s using a good network diagnostic becoming quite clear that the African tool capable of pinpointing network operators have to improve their network problems and their locations, but doing operations to meet the twin demands of so without proper privacy safeguards, satisfying and retaining more customers can lead to privacy issues. while still keeping a lower cost structure.

Communications Review 29 Taking stock v2.0: a new In the second step, a similar assessment The next step is to understand approach to assessing maps major process flows across the organisational structure and network performance technology organisations and their governance associated with the most linkages, both internal and external. important programmes the technology A newer but proven way to assess This mapping involves identifying organisation runs. Based on interviews network performance and operations important activities undertaken during of the stakeholders, including the involves being more comprehensive, the life cycle of a network (plan, leadership team, a comprehensive as shown in Figure 1. design, build, operate and remediate), review of all the elements illustrates stakeholders in the execution of these the major problem areas within the The first step of this approach is an processes, and the outcomes associated network and also points to the root assessment that gives the chief network with the processes and tools that causes of the problems. Often the officer or the chief technology officer support the execution. The process root causes lie in organisational a comprehensive view of network and analysis also includes reviewing the structure or supporting processes. information technology problems. process documentation and execution The organisational portion of the These problems range from simple metrics to assess their accuracy, assessment enumerates challenges in configuration issues to deep flaws compliance and effectiveness. During the command and control structure in network design guidelines. A this assessment, a pattern typically as well as the flow of information and comprehensive set of data collected emerges that points out that the root decision making through that structure. from internal and external sources is causes of the issues found in the used to create this view. Internal sources first step lie in the issues identified The last, but crucial, step involves of data include network performance in the second step. For example, a assessing the systems and tools that reports, trouble ticket reports, analysis high number of incorrect cell-site support the technology organisation’s of customers’ complaints, and deep modifications are sometimes caused workflow. This part of the assessment analytics like interface trace analysis and by a network engineering team sending identifies surplus and gaps in the tools network drive tests. External sources of the wrong instructions to a network portfolio, as well as the tools’ cohesion information include third-party drive operations team. for effective network operations. It tests and customer satisfaction surveys. also involves assessing the overlap in the tools’ capabilities, data sources and workflow, and the organisational stakeholders associated with the various systems.

Figure 1: Comprehensive network assessment

Business environment

Drive testing/field measurements Network planning & management

Internal measurements s Product & service development se s S e y Metrics and data c s Recommendations o t feed into the r e produce trangible Key performance indicators analysis of network P m financial results IT planning & management

performance

Interface trace analysis l Customer service s O r ga nis Customer complaints ation Vendor relationships

Benchmarking Human resources

Intra-company linkages

30 Creating a solid foundation for growth The first ingredient in launching a Programme in action successful improvement programme is to assign leadership and a team Operator Results to manage the programme. A well- defined governance structure has 1) Geography: A multinational Latin American wireless a steering committee consisting of South America operator was in accelerated growth mode senior executives; 2) a cross-functional and was experiencing a significant increase in programme strategy and an execution Network: telco costs. The costs, growing at a compound office consisting of functional leaders Multi-country mobile annual rate of 30%, included roaming, and led by a chosen programme network with multiple backhaul, interconnection and termination. management expert; and 3) a series technologies The operator’s initial impetus to perform an of core teams dedicated to specific Size: assessment was based on the cost-optimisation initiatives or programmes defined in the Niche wireless operator opportunities it anticipated in deploying its 3G charter of the improvement programme. with national footprint networks. A cross-functional assessment found specific opportunities to improve costs and a Crucial to the success of the larger, more strategic need for organisational improvement programme is the change. The cost-optimisation opportunities agreement that the steering committee were distributed to the various country is able to establish with the core teams operations teams to implement. The operator involved in the execution, and how the also established an organisation (with programme strategy and execution emphasis on centralising coordination and office manages the dashboards, decentralising execution) with the sole charter reporting and escalations during the of managing telco costs. The organisation course of the programme. Early on, a was to collaborate across its various country successful improvement programme operations to rationalise tools, define and establishes clear entry/exit and gate standardise processes and establish a single review criteria for managing the standard, multi-tier dashboard for managing cadence of execution and then holds decision making on telco costs. Through its the execution teams accountable to telco management organisation, the operator those criteria. has executed global contracts to save on costs. Finally, the initiatives in the It has also streamlined the telco life cycle set improvement programme are designed of activities that include forecasting, planning, by grouping the set of similar-themed sourcing and settling across all its operations. issues and recommendations outlined in the assessment conducted earlier. It’s important to plan the execution of these initiatives in collaboration with other This comprehensive assessment of Launching and executing teams and the rest of the organisation. network operations gives an operator Examples of some typical themes to a network improvement group initiatives around include: a list of improvement programmes to plan, post-assessment implement in order of importance – • Network ‘Get Well’ programme that is, how much each does to satisfy Identifying the root cause of network to improve the quality of the customers and how quickly gains can be operations problems is tough because exisiting network captured. These initiatives may range it requires operators to look at non- from revenue assurance to expanding technical causes, which is often the • Organisational improvement roaming coverage to streamlining opposite of their instincts. The cross- programme to turbo-charge the network maintenance operations. functional nature of an improvement organisation and its morale The priority of each will vary from programme is more complex, involving • Process improvement programme operator to operator. not just internal stakeholders but also to work better and faster external stakeholders, such as vendors • Systems and tools improvement and partners, making it significantly programme to ensure the more difficult to execute. Thankfully, organisation is able to work smarter. there are a few basic principles to base a successful improvement programme on.

Communications Review 31 Once an organisation has gone The financial elements 6. Utilities. How do utility costs and through a rigorous process of strategies compare to others? Where In the financial arena, the improvement developing initiatives and categorising might costs be reduced through plan should focus on making capex them in specific operational areas, the contracts, alternative energy or as effective as possible, eliminating next step is to synthesise the initiatives government grant programmes? into a set of programmes for executing wasteful opex and identifying where gradually. These programmes should: revenue is leaking. A plan also tries The technical elements to make sure operational costs are at • have a tangible timeline, a set of industry-accepted levels. The objective In the technical arena, the plan financials and a specific statement of this step is to build a profit-and-loss should look at a converged set of data of results they seek to achieve view of the technology organisation. – including quality indicators, drive • have a dedicated owner who’s Typically, that includes answering a test data, customer care data, site accountable for executing the number of basic questions: audits and data from other network sources – to identify specific quality work and achieving results 1. Network deployment costs. improvements for the network. How does the cost of equipment • rate the priority of the initiatives Typically, that includes answering compare to market rates? How is by a number of criteria that include a number of basic questions: how easy or difficult they’ll be the location of network selected and to implement, the likely return how much does it cost? How much 1. Network design. How does the on investment, expected effect do the sub-contractors charge for network architecture stand up to the on customer experience, and building network facilities? How demand presented to it? What are their interdependence with other can the cost be reduced? the processes for managing network capacity? How is traffic routed on initiatives or with the launching of a 2. Leases. How do leases compare the network? Are there elements new technology (3G, for example) to industry standards? Are leases of least-cost routing? • be categorised into a set of structured to enable technology short-term, medium-term and scaling and backhaul growth? What 2. Deployment management. How long-term activities that are changes in strategy may be desired? are new sites deployed? What are the rules for site engineering vis- funded appropriately. 3. Transmission. How do backhaul à-vis capacity, coverage or quality? strategy and costs compare to How are RF frequencies allocated? The executive leadership that is industry standards? Is backhaul Is spectrum management reliable? assigned ownership of an improvement scalable to enable traffic growth programme should be constantly beyond 3G? What changes may 3. Network operations. What systems involved during its execution phase. be desired? and tools are used to operate and This gives visibility to executives at the manage the network? Does the 4. Interconnect/roaming/long top and ensures broad participation network operations center have distance. How do minute-of- from all levels of the organisation. full visibility into all network use costs compare to others? elements? How fast are network Where might costs be reduced The overall planning and management outages resolved? What is the level through partnerships with other of initiatives and programmes under of collaboration across different providers? How reliable is the the umbrella of network improvement functions for problem resolution? differ from operator to operator. They revenue assurance process for vary depending on the root causes inter-carrier settlements? 4. Data network management. of performance uncovered during 5. Annual maintenance fees/ How is throughput measured? the assessment, the maturity of the licensing costs. How do annual How is customer experience operator, the intensity of the competitive maintenance fees and contracts measured across multiple devices, landscape and the outlook for upcoming compare to industry standards? locations and usage models? What programmes. But all operators can What changes may be appropriate? measures are in place for managing benefit from some common elements of What are the various costs associated data traffic? How are network these initiatives. The following sections with licensing the major systems abuses managed? provide a fairly detailed set of topics and and network elements? How can 5. Network quality of service. questions that form the basis of planning licensing costs be reduced by initiatives and defining their scope. What are the measures of quality consolidating systems’ functionality of service? What are the sources of and eliminating overlaps? data for an aggregated view of the network’s performance? How are competitors’ networks measured? How is accountability distributed for network performance?

32 Creating a solid foundation for growth Results Programme in action This approach to assessing the network and planning improvement Operator Results combines technical know-how with identifying the organisational Geography: A multinational European telco recently root causes behind operational Sub-Saharan Africa acquired a telecom operator in Africa that weaknesses. The approach becomes was considered to have the low-cost and Network: extremely powerful when used with low-quality network among its competitors. 2G mobile network external benchmarks and competitive The company’s new leaders started laying assessments of other operators. Size: the groundwork quickly for a large-scale National operator in one of transformation project of this operator. This The emphasis on fixing the root causes the largest African countries included reorganising its operating structure, of network issues rather than symptoms establishing a long-term strategy vision, makes the solutions more sustainable. It increasing revenues and modernising the focuses resources on the most impactful company’s network to take advantage of the set of issues rather than saddling the only 3G licence acquired as part of with the organisation with multiple incoherent transaction. Using the network operations initiatives; and it justifies financially improvement approach, the operator and identifies the immediate benefits has achieved disciplined execution of the to customers of every initiative. In expansion projects, redefined the network most cases, by prompting investment, KPIs and reorganised the Operations & it lets critical areas of the technology Maintenance group and the call center. This organisation grow to the next level. has led to an improvement in overall network KPIs and quality of customer service, thus A well-executed network operations propelling the network to number one in voice assessment and improvement quality and planting the seed for a successful programme not only improves rebranding in the market. performance of network assets but also prepares the operator for the next phase of growth based on gaining The operational elements 2. Network supply chain. How do productivity. This use of capital is the scope, approach, data and much better than the hundreds of In the operational arena, the plan tools used for the network supply millions of dollars operators spend should look at processes, tools, chain management compare to on customer loyalty schemes. systems and organisational constructs leading practices? How could the In PwC’s experience, the and linkages to identify specific planning process for the network be improvements in a network’s key improvements to information flow, enhanced to improve accuracy and performance indicators alone are collaboration, decision making and predictability, lower working capital upward of 20%. Capex savings – from governance. This step is the heart and reduce vendor costs? Are the avoiding or delaying buying equipment of the assessment because it makes planning and procurement processes – have ranged from 5% to 30% in changes that often are very close adequately integrated? Can capital the first year alone. Opex savings to an operator’s culture. Typically, allocation be better forecasted? that involves answering a number have shown a similar trend. The of basic questions: 3. Engineering/marketing/finance result is higher ARPU, more satisfied interface. How do engineering, customers, increased productivity, 1. Organisational structure. What marketing and finance communicate better use of capex and opex, and a operational, organisational and cost with one another? What mechanisms more satisfied employee base. Very improvements may still exist, and exist for developing a tight forecast few arrows in the operator’s quiver are what’s the potential opportunity and reviewing quarterly progress? capable of hitting so many targets at for each? How do structures and Do these organisations operate with the same time. headcount compare to leading the same definitions? practices for operators of this type? How will current approaches scale 4. Reporting. How could performance for the future? How can equipment management reports’ scope, process, vendors and technical service firms cadence, data and presentation be be better leveraged? improved to improve execution, performance and communication? Are there opportunities to enhance and/or automate data collection and reporting? Communications Review 33 Enabling possibilities through mobile payments

Mobile payments (using a mobile device to make payments electronically) are radically changing the shape of personal and business banking in Africa. The results of a 2012 PwC survey highlighted mobile payments as an accelerating trend, and already a number of success stories have been established, notably in Kenya. Mobile operators and banks are now trying to replicate those successes in other countries where the gap between banking and mobile penetration levels means much potential for expanding.

by Ahmed Chohan and Adrian Dunsby Ahmed Chohan and Adrian Dunsby are partners in PwC’s communications practice in South Africa. For more information, contact Ahmed by phone at [27] 83 274 7100 or by email at [email protected]; or contact Adrian by phone at [27] 82 577 9238 or by email at [email protected].

34 Enabling possibilities through mobile payments Mother with her children using a mobile phone, Bamako, Mali. Mother with her children

Mobile operators and banks in Africa This situation is in line with global Mobile payments: efficient, are focusing on an enormous and trends in developing countries. convenient, accelerating fast-growing opportunity – the large The CGAP (an independent policy population of unbanked people in areas and research centre dedicated to According to PwC’s recent research on where physical banking infrastructures advancing financial access for the mobile payments in Africa, the industry often don’t exist but who need access world’s poor) estimates that 1.7bn has gained significant momentum in to financial services. Already, more people in developing countries will the past year. We surveyed 11 mobile people across the continent have access have mobile phones, but no bank operators in eight countries across the to cell phones than bank accounts. And accounts, by the end of 2012. continent: South Africa, Tanzania, mobile penetration is increasing all the Botswana, Zambia, Cameroon, Ivory time. According to the International Coast, Namibia and Kenya. Completed Telecommunication Union, mobile in February 2012, the survey shows penetration in Africa had reached that mobile payments are on track to 45.2% by 2010. become a preferred mode of banking in a number of countries, as more people are attracted by the efficiency of this process.

Communications Review 35 The survey (which included mobile For Africa’s unbanked – from farmers, Mobile banking covers delivering operators, banks and joint ventures traders and craftsmen to small and mid- ‘traditional’ financial services and between operators and banks) sized businesses – paying by mobile new e-commerce capabilities by highlights the approaches being taken phone gives easy access to financial mobile phone, usually in the more- to make mobile-payment schemes as services that many banks’ qualifying developed markets where established easy as possible for people to access. criteria and branch network locations and extensive bank infrastructures All respondents offer free registration have, until now, made unattainable. already exist. In such markets, this to users and enable bank transactions Using their mobile phones as portable service is becoming increasingly within an hour of signing up. The teller machines, these people now can personalised and relevant, focused majority require no minimum balance transfer funds, pay for products and on customers’ needs and integrated for savings, and none charge monthly services and secure access to loans and across channels. All these trends fees to register for the service. All microfinance – all without having to reflect the wide availability of mobile operators set limits on the amount carry physical cash around or keep broadband and the proliferation of people may transfer when making a it at home. smart devices. mobile payment, with the maximum being US$1,270. Understanding the In spite of the hype surrounding models: with and mobile banking, banks are struggling The survey results also indicate the without banks to make this service profitable. The broad appeal of mobile payments rates of take-up remain comparatively for multiple types of transactions. Distinguishing mobile payments from slow because consumers view mobile Most often, people pay for groceries, mobile banking is an important step. financial services as a lifestyle choice, clothing and restaurants as well as The two terms are often conflated, but not a necessity. transportation and school fees and mobile banking is the broader of the utility bills. two concepts.

Figure 1: Comparison of mobile-payment models

Primary issues Model Bank-based Non-bank (NB) based Who regulates? Financial regulator Telco & financial regulator Scope Additive Transformational Who holds the deposit? Bank Bank Cash-in and cash-out points Bank Telco/NB & Bank Dominant brand Bank Telco/NB Who has access Limited to Limited to subscriber/ to the service? account holders universal access Carrier/gateway Any Telco Who owns the customer? Bank Telco/NB

Examples MTN (S-Africa), other G-Cash, Smart, Celpay SMS banking services (Zambia), M-PESA, Mobile Money

Source: Mobile banking: Overview of Regulatory Framework in Emerging Markets, Rasheda Sultana.

36 Enabling possibilities through mobile payments By contrast, mobile payments – the Two models for mobile payments Figure 1 lists the elements of the bank- focus for this article – thrive where exist – bank based and non-bank based and non-bank-based models. users are ‘new to banking’ (not ‘new based. In the former, customers have to mobile banking’). Much more direct contractual relationships with Let’s take a look at some of Africa’s complex than mobile banking, and supervised financial institutions (even mobile-payment success stories. depending on collaboration and on though they often transact exclusively We’ll also identify some of the issues retail infrastructures for ubiquity, through retail agents). In the non-bank confronting operators and banks as mobile payments are ideally suited model, no such contractual relationships they try to capitalise on the opportunity to consumers in developing markets. exist. Instead, customers exchange or of mobile payments. There, the service is, in many cases, transfer cash or funds through retail the only way people can access agents in exchange for cash credits on Pioneering mobile essential financial services. their mobiles. A crucial distinction of payments in Africa the non-bank model is that operators The most successful example of Mobile-payment schemes can be maintain customers’ bank accounts non-bank-based mobile payments profitable at scale but for most and balances, and banks simply hold in Africa continues to be M-PESA. operators, this will not be the principal deposits to represent the e-cash flowing Vodafone’s Kenyan affiliate, Safaricom, business case. Retaining the average through the system. revenue per user by reducing churn launched M-PESA in Kenya in 2007 and lowering the cost of dispensing The non-bank model has proved to in partnership with Equity Bank. airtime are the main benefits operators be the most successful in Africa (as The service now has more than 13m will perceive. subsequent examples will illustrate). users – more than 30% of the total The reason is straightforward. The population (see Figure 2). Although combination of high mobile penetration the values of cash transferred and with widespread availability of retail credited on users’ accounts are small, agents means operators are placed the very high volume of transactions better to connect unbanked people with and commissions has made the service the basic financial services they need. profitable from early on.

Figure 2: M-PESA wallets in Kenya, 2007-2010

16 25 Number of agents, thousands 14 13.3 20 12

10 8.9 15 8 10 6 5.1

Number of wallets, million 5 2 1.3

0 0 2007 2008 2009 2010

Customers Agents

Source: CGAP, Safaricom.

Communications Review 37 Partnering among mobile operators, banks and other players looks set to accelerate.

In its first year, M-PESA generated In September 2010, Vodacom and Collaborating with approximately KES 370m (US$4.2m) Nedbank announced they were banks for growth for Safaricom. Today, Kenya has launching the service in South Africa. around 20,000 M-PESA agents that Although estimates indicate South Galvanised by M-PESA’s non-bank-based are easily accessible throughout urban Africa has more than 13m ‘economically success story, mobile operators and and rural areas. In comparison, the active’ unbanked people1, progress has banks have been forming partnerships country has 840 bank branches, been slow. The initial projections of ten to capitalise on the opportunity mobile according to statistics issued by million users within three years were payments represents in Africa (primarily Safaricom. To put the scale of its not realised. By May 2011, the service in countries with the political and success into perspective, there are had registered approximately 100,0002 economic stability needed to establish now more M-PESA customers in customers. This expectation gap has the infrastructure for mobile payments). Kenya than there are bank accounts. been attributed to significant differences These relationships make sound Providing the ‘right service, at the between Kenya and South Africa, like strategic sense. Mobile operators have right time’, M-PESA enables users to the banking regulations that applied the reach that banks lack. For banks deposit and withdraw money from a at the time M-PESA was launched in to maintain and support branches in network of agents (including airtime each country. remote rural regions is prohibitively resellers and retail outlets acting as expensive. These partnerships provide banking agents), as well as transfer According to MoneyWeb, a South access to communities that would money to other users and non-users, African investment website: “A otherwise be ‘off the map’. pay bills and purchase airtime. tough regulatory environment with regards to customer registration One interesting example of the bank/ Building on its success, Vodafone went and the acquisition of outlets also mobile partnership model is Zap-M. on to roll out M-PESA in Tanzania compounded the company’s troubles, The mobile-payment service was in 2008. The initially slower-than- as the local regulations are more introduced in Kenya and Tanzania expected adoption of this service stringent in comparison to [our] African in 2009 by Zain, Tanzania’s second- was attributed to a number of issues, counterparts. Lack of education and largest mobile operator after Vodacom. including population density, lower product understanding also hindered Well-recognised for its One Network penetration rates achieved by mobile efforts in the initial roll out of the borderless mobile network in Africa service providers, agent networks product.” In June 2011, Vodacom (a world first), Zain launched Zap-M in and pricing schemes. By strategically and Nedbank launched a campaign partnership with Citibank and Standard addressing these challenges, Vodafone to reposition M-PESA that targeted Chartered Bank, to link micropayments moved towards replicating Kenya’s potential customers with higher direct to merchants. Zain’s sole source success. By 2010, Tanzania had more living-standard measures than of revenue comes from a fixed fee than nine million M-PESA subscribers. those addressed by the initial rollout. (regardless of transaction size) for

1 Source: www.howwemadeitinafrica.com

2 Source: www.techcentral.co.za

38 Enabling possibilities through mobile payments every transfer made through Zap-M. of Liberia played the critical role of Another recent survey, carried out The service leaves it to agents and ensuring that local banking regulations jointly by World Wide Worx and FNB, customers to agree on a fair price, with allowed both partners to turn vision into highlights how cell-phone banking has the agent receiving commission once reality – as pragmatically as possible.4 increased significantly in the past year. the transaction occurs.3 The Mobility 2011 survey shows that Operator-led vs. bank- 44% of cell-phone users in urban areas Zain’s business model means that its based experiences now use banking services, compared relationship with banks is quite distinct to 27% a year earlier. In smaller towns, from M-PESA’s. Zain’s relationships For the reasons discussed earlier 27% of cell-phone users rely on mobile with its two partner banks enable – comparatively unfettered access banking. In total, 37% of South Africans customers (merchants or individual to unbanked people through the above the age of 16 are using cell-phone users) to move virtual money from high penetration of mobile phones – banking services. Zap’s platform directly into their operator-led (non-bank) models for bank accounts. The attractions for mobile payments have achieved the The big four banks in South Africa banks are obvious. First and foremost, most traction across the continent. (FNB, ABSA, Standard Bank and they can tap into the money flows of Nedbank) have all made significant large companies without having to Put off by the risks involved – issues of inroads into the mobile-banking market. make any large investments in their knowing your customer, principally FNB, for example, recorded a 150% own infrastructures (Zain provides - and constrained by regulators, few jump in transaction growth for its the platform). And, what’s no less bank-led mobile-payment schemes have ‘Cellphone Banking’ service and 1,384% attractive, banks gain access to Zain’s been successful. Probably the best- growth for eWallet (which allows FNB customer base (for customers without known example of a scheme that has customers to send money to anyone bank accounts, the virtual money made inroads is MTN Mobile Money in with a valid SA cell number) for the sits on Zap’s platform and is held South Africa, a joint venture between month of December 2011 (compared to in a settlement account). MTN and Standard Bank (now acquired December 2010). In December 2011, the by Standard Bank). bank’s customers made 2.4m cell-phone Plenty of other such partnerships are transactions in Botswana, Namibia, In comparison, mobile or cell springing up. FirstBank of Nigeria Swaziland and Lesotho to the value phone banking, which is limited to and Airtel Networks recently agreed of R214m (US$25.7m) as compared balance enquiries and statement and to combine their strengths to provide to 986,000 transactions in December transaction notifications, is a booming seamless mobile money services in 2010. The bank also recently launched market. About 40% of South African Nigeria; Celtel and Celpay have joined its Pay2Cell solution that allows account mobile subscribers already make use forces to provide mobile-payment holders to make payments to other of mobile-banking services. That’s services in the Democratic Republic existing account holders using only according to PwC’s 12th survey on of Congo; Wizzit was formed in South the recipient’s cell-phone number. Africa to link debit cards and bank banking in South Africa, published in accounts to mobiles (Wizzit partners 2011, which highlights strategic and with Absa Bank and the South African emerging issues in the banking sector. Post Office); and Lonestar Cell MTN and Ecobank teamed up to bring mobile- payment services (called Mobile Money) to customers in Liberia. Interestingly, in this last example, the Central Bank

3 See http://technology.cgap.org for further analysis of Zap-M.

4 Source: www.mobilemoneyafrica.com

Communications Review 39 Recognising regulatory Other vital areas include the impact With such risks in mind, operators and other challenges of mobile payments on the stability should ensure that controls are sufficient of a country’s banking and national and security expertise is brought to bear. Partnering among mobile operators, payment systems, as well as the ability The cost of control failures in a banking banks and other players looks set of existing regulation to provide for environment may have very different to accelerate. e-money issuance. consequences compared to those in a telecommunications environment. Noting that trend was Seigne Dioum, If mobile-payment schemes are to general manager for Mobile Money continue to bring financial services to Business models need careful for MTN’s Western and Central Africa Africa’s unbanked, ICT regulators in scrutiny. The profitability of mobile- division, speaking at the 2011 GSMA many countries across the continent payment schemes as stand-alone Mobile Money Summit: “Although there also need to play their part by moving businesses remains uncertain. Once are a number of partnership models towards more transparent regulation M-PESA’s service in Kenya reached being explored, an interesting concept of telecommunications. The GSM seven million registered users, is the cooperation between banks and Association (GSMA: the operator-led corporate and institutional accounts telecommunications companies with association representing the global surged – but up to that point had advertising companies, where the focus mobile industry) recommends that, grown very slowly. In other words, would be on creating a great product when formulating their tax policies, scale is essential to profitability. and customer experience (as some governments should recognise the ways of the advertising companies have in which mobile phones and mobile Agent coverage and liquidity is managed to do) based on a different broadband have become a vital part of another crucial area, particularly economic model where the focus is on Africa’s socioeconomic landscape. This so where the expansion of agent generating advertising revenue online, mind-set needs to extend to mobile networks lags growth in mobile as opposed to through the traditional payments. By identifying economically payments. And, of course, operators banking environment. It, however, active people in Africa’s enormous must select the optimum approach to remains important to involve banks in informal cash economy, mobile negotiating relationships with bank these relationships as they have always payments are predicted to jump-start partners. Points to bear in mind when been in the money business and, at the the growth of the gross domestic negotiating include non-exclusivity end of the day, it is about payments product in many countries. arrangements; liquidity provisions; being made….therefore creating trust concentration risk; the reputation through strong security and regulatory Addressing security, fraud of the bank among the unbanked governance remains important.” and other issues ahead for population; marketing responsibilities, operators terms and conditions; what data will The reference to regulatory issues be shared; and interest rates and is especially pertinent. With mobile As they assess mobile payments bank charges. payments increasing the convergence as an opportunity, operators need between the telecommunications and to take into account a number of Beyond question, Africa’s population the banking sectors, national financial issues (see Figure 3). Security risks of unbanked people urgently needs regulators have a number of concerns. are uppermost, with identity theft access to financial services. And They must address and overcome and money laundering among the operators are ideally placed to service the concerns before mobile-payment main concerns. Fraud committed by this need – provided they recognise the schemes can be implemented. employees, agents and subscribers has challenges that lie ahead and take steps been part of the learning experience for early on to address them. At the top of the list is consumer operators to date. Typically, employees protection – safeguarding clients’ funds have circumvented security or access held as electronically stored value, controls, or agents intent on stealing ensuring the safety and reliability of identities have misled subscribers into services and reducing opportunities for giving up confidential information. agent fraud and other harmful conduct.

40 Enabling possibilities through mobile payments Figure 3: Mobile payment challenges and solutions Challenge Considerations Regulatory challenge • Get KYC right the first time; although the initial investment may be high • Meeting know-your-customer (e.g. use of biometrics) it’s likely to be a better option in the long term (KYC) requirements • For new entrants, agree on KYC minimum requirements with the regulator, • Choosing a bank-led or particularly in countries where there is low adoption of an identity system a telco-led model and a lack of addresses • Identifying the scope of services • Design data collection with the end in mind, e.g. mining collected data to understand customers better • Use empirical evidence – citing countries such as Kenya, the Philippines and Uganda – to support the model most conducive to achieving national objectives (e.g. banking the unbanked) • Manage any impact on the money supply by replenishing bank deposits and ensuring that they’re synchronised with e-cash in circulation

Evaluating the profitability of mobile • Define objectives – this may have less to do with mobile banking profitability in so banking as a stand-alone business much as it has to do with reducing churn in highly competitive prepaid markets • Define criteria and metrics to measure and monitor the achievement of objectives and to evaluate return on investment • Design commission structures that motivate agents to achieve the defined objectives, e.g. proliferate take-up and usage • Create a sub-product roll-out plan, e.g. mobile insurance, lending facilities, tie-ups with third parties

Agent coverage and liquidity • Be the first to market • Give competitors’ agents incentives to distribute your product • Design clear and transparent commission structures that are attractive and competitive • Take pre-emptive measures to manage liquidity challenges agents may face through, for example, training and education and through arranging daily borrowing facilities for agents (with the banks or telcos) • Penetrate your corporate market before your competitors do to accelerate adoption and usage • Market services to other bulk payers, e.g. donor funders

Guarding against identity theft • Educate about and create awareness of fraud risks through the mobile-banking sub-organisation and third parties, e.g. field staff, agents • Enhance existing SIM swop processes, as this is a common target for defrauders • Monitor data quality continually • Institute measures to ensure that agents comply with data-quality standards

Monitoring fraud and implementing • Make the best use of control and security experts and don’t depend on security and controls technology people to have sufficiently deep controls, security or fraud expertise • Design and implement fraud monitoring systems and reports and ensure that appropriately senior individuals review important reports • Create a control culture in the sub-organisation, which may be very different than the way the telco managed other product launches or product changes • Design commission structures in a manner that minimises the risk of commission fraud • Monitor agent behaviours to identify suspicious activity; deal with irregular behaviour timeously and decisively to avoid being perceived as condoning behaviour or not being on top of things • Conduct criminal infiltration assessments • Design and implement appropriate levels of control and security at the operating system, database and application levels

Partnering with the right vendors • Select the right bank(s) to partner with • Select the right technology partners • Select strategically critical partnerships to promote the use of mobile payments, e.g. municipalities

Communications Review 41 Delivering results

Commitments to doing more business globally are accelerating in 2012 despite economic, regulatory and other uncertainties. CEOs see the fundamentals for future growth still squarely in place. PwC’s 15th Annual Global CEO Survey explores CEOs’ confidence in prospects, and how they are building local capabilities and creating new networks for new markets. CEOs are adapting how they go to market, reconfiguring processes and – at times – entire operating models. They are also addressing risks that greater integration can amplify and are focused on making talent more strategic to pursue market opportunities. This article looks at the key findings in the communications industry, based on interviews with 42 communications CEOs in 23 countries.

by Pierre-Alain Sur Pierre-Alain Sur is the global leader for PwC’s Communications Industry group. For more information, contact Pierre by phone at [1] 501 722 8067 or by e-mail at [email protected]. To explore the full results of the 15th Annual Global CEO Survey, please visit www.pwc.com/ceosurvey.

42 Delivering results Colored houses in Kabale, Uganda. Colored

Companies in every sector have Figure 1: Confidence over 12-month revenue growth entered 2012 amid deep uncertainty about the global economic outlook, Q: How confident are you about your company’s prospects for revenue growth over the next 12 months? Are you ...? and especially about the potential impact of Europe’s sovereign debt 60 crisis. Expectations are receding that 50% 50 output in fast-growing markets such 44% 40% as China and India can take up all 40 the slack, with just 15% of the 1,258 CEOs we surveyed believing the global 30 26%

economy will improve in 2012. 20 14% 12% 10% This pessimism is – if anything – even 10 3% more marked among communications 1% 0% 0 CEOs: 55% believe the global economy Not confident Not very Somewhat Very Don’t know/ will decline over the next 12 months, at all confident confident confident refused compared to the overall average of All CEOs Communications CEOs 48%. But though communications Base: All respondents (Total sample, 1,258; Communications, 42) CEOs are gloomier about the general Source: PwC’s 15th Annual Global CEO Survey economic prognosis, they are more positive about the likely fortunes of their own companies than their fellow CEOs in other sectors. Fifty percent are very confident they can generate higher revenues in the next 12 months, whereas the average in the total sample is only 40% (see Figure 1).

Communications Review 43 That said, the percentage of Strategy: all change! The pessimism communications communications CEOs who are not CEOs feel about the state of the global at all confident of being able to deliver Disruptive change is a constant feature economy has triggered concerns about growth is also noticeably higher (14% of the communications industry and the availability of funding, too. The versus 3%). This polarisation of views the results from this year’s survey percentage who are apprehensive continues a theme that emerged in last indicate that CEOs see little sign of the about being able to finance their year’s survey: namely, the contrasting pace and scale of change diminishing companies’ growth in 2012 is more fortunes of different companies in a in the future. The rapid emergence and than double the average in the survey sector that is experiencing extremes adoption of new technologies, devices population as a whole. of success and failure. and channels – from smartphones to tablets and Twitter to Groupon – can So how do communications CEOs Specific concerns about create overnight stars and catch the propose to deal with these challenges? unprepared off guard. So it’s hardly the global economy They’re planning various strategic surprising that 36% of communications changes covering a wide range of Communications CEOs are more CEOs are planning to make fundamental financial and organisational areas over worried not only about the global strategic changes in the next 12 months, the next 12 months. Capital investment economic outlook, but also about compared to 13% across the rest of the decisions and capital structuring several related risks. As Figure 2 shows, survey population (see Figure 3). activities feature prominently in their 45% are extremely concerned about plans, for example: 31% intend to make the risk of economic volatility (versus This disruption takes a number of forms major alterations to the former and 32% of the total sample). Similarly, and has generated understandable 29% to the latter (versus 19% and 14%, 40% are extremely concerned about the nervousness. Communications CEOs respectively, of the total sample). And measures highly indebted governments are more worried about new market 29% expect to make major alterations are taking to cut their fiscal deficits entrants than their peers (48% versus in the way they manage risk, whereas (versus 27%). Conversely, they’re more 38%) and more than twice as likely to the overall average is just 17% (see relaxed about the prospect of inflation. be ‘extremely concerned’ about shifts Figure 4). Only 19% of communications CEOs in consumer spending patterns. They’re are somewhat concerned on this score also more anxious about the security (versus 31%). of their supply chains, and a significant proportion (19%) believe the lack of basic infrastructure in some markets is likely to be a serious problem for their business in the next 12 months.

Figure 2: Concern over volatile or uncertain economic growth Q: How concerned you are, if at all, about ... Uncertain or volatile economic growth?

48% 50 45% 40 32% 29% 30 19% 17% 20

10 7% 3% 0% 0% 0 Not confident Not very Somewhat Extremely Don’t know/ at all confident confident concerned refused All CEOs Communications CEOs

Base: All respondents (Total sample, 1,258; Communications, 42) Source: PwC’s 15th Annual Global CEO Survey

44 Delivering results “The potential for growth can neither be taken for granted nor does it come at zero cost. It takes effort and hard work, radical shift of mindset, collective vision and long-term planning. Above all, strict, consistent implementation of plans and measures according to schedule.” Michael Tsamaz Chairman and Chief Executive Officer OTE Group

Figure 3: Expectation of strategic change Q: To what extent do you anticipate your company’s strategy will change over the next 12 months?

60 57%

50 43% 29%

40 36%

30 21%

20 13% 10 0% 0% 0 Change in all Somewhat No change Don’t know/ fundamental ways change refused All CEOs Communications CEOs

Base: All respondents (Total sample, 1,258; Communications, 42) Source: PwC’s 15th Annual Global CEO Survey

Figure 4: Expectations of changes to risk management Q: To what extent do you anticipate changes at your company in... Approach to managing risk...over the next 12 months?

60 50% 50

40 38% 32% 33% 30 29%

20 17%

10 1% 0% 0 No change Some change A major Don’t know/ change refused All CEOs Communications CEOs

Base: All respondents (Total sample, 1,258; Communications, 42) Source: PwC’s 15th Annual Global CEO Survey

Communications Review 45 As well as changing their approach to CEOs are repositioning their portfolios Operating in a global investment and risk, communications to focus on developing new products future: new world, CEOs say they’re likely to continue and services, and fine-tuning existing new priorities cutting costs. A full 90% have already products and services. But 60% implemented cost-reduction initiatives also intend to adopt new business Communications CEOs are more in the past 12 months, which is models in response to a fast- positive about the changing dynamics significantly more than the 75% changing environment. of the world economy than their who’ve done so in our entire survey counterparts in other sectors, as sample. And 48% expect to outsource These strategic priorities are reflected befits the global nature of the their a business process or function in the in the ‘wish list’ of activities on which industry itself. Some 69% of the next 12 months (compared to the overall communications CEOs most want communications CEOs we surveyed average of 33%). Of course, outsourcing to spend more time. Whereas CEOs think cross-border flows of capital will may be motivated by the need to reduce in many sectors put developing the become increasingly easy, with fewer costs, but it’s also a component of the leadership and talent pipeline first, restrictions in place – a view only 56% major organisational changes that two- communications CEOs are more of all CEOs share. Similarly, 55% (as fifths of communications CEOs expect interested in meeting customers. opposed to 45% of the total sample) to make in 2012. Three-quarters of them think talking anticipate that globalisation will to the consumers who buy their continue to erode the barriers to free Many communications CEOs are products and services would be the trade, making it easier to move goods, reconsidering how best to manage best use of their time, if only there services and capital across borders. innovation, too. That’s not surprising, were more hours in the day. since new technologies play such a key role in the sector. Communications

Figure 5: Importance of emerging versus developed markets Q: How strongly do you agree that ...Emerging markets are more important to my company’s future than developed markets

50 45%

40 32% 30 27% 19% 20 14% 16% 14% 12% 10% 10 5% 5% 2% 0 Disagree Disagree Neither agree Agree Agree Don’t know/ strongly or disagree strongly refused All CEOs Communications CEOs

Base: All respondents (Total sample, 1,258; Communications, 42) Source: PwC’s 15th Annual Global CEO Survey

46 Delivering results Predictably, perhaps, many Communications CEOs also tend to One possible explanation for this communications CEOs are pinning their transfer employees from one country emphasis on hard data is the fact that hopes for future growth on the emerging to another as the need arises, rather many communications companies markets rather than the developed than recruiting local people: 31% prefer have been cutting back on the number markets – as, indeed, are their peers in to relocate existing employees, whereas of people they employ. Nearly three other sectors (see Figure 5). And while the overall average is only 19%. And times as many communications most CEOs with plans to expand abroad the senior management team is more CEOs have reduced their company’s are focusing on China, communications likely to be based in the country where headcount substantially – i.e., by more CEOs prefer Brazil: 26% believe it will the company has its headquarters than 8% – in the last 12 months. So be a key growth market in the next 12 (43% versus 29%). communications CEOs want to make months (versus 15%). sure they’re armed with all the facts That said, communications CEOs when they face difficult decisions about Managing talent: a mixed expect to get more information who to keep and who to let go. picture – and challenges about their employees than CEOs around information in other sectors – and they’re often more satisfied with the quality of When it comes to managing talent, information they receive. Fifty percent communications CEOs present a mixed think information about return on picture. On the one hand, they foresee investment in human capital is very less difficulty finding the talent they’ll important, for example, compared need than CEOs in other sectors: 40% to only 29% of the total sample. are very confident of being able to Communications CEOs also place hire the people they require to execute much greater weight on measures like their corporate strategies over the next staff productivity (62% versus 50%) three years, compared to just 30% of and labour costs (57% versus 41%). the total sample. On the other hand, they’re more likely to have cancelled or delayed a strategic initiative in the last 12 months as a direct result of skills shortages (see Figure 6).

Figure 6: Delay strategic initiative due to shortage of talent Q: Have talent constraints impacted your company’s growth and profitability over the past 12 months where...you cancelled or delayed a key strategic initiative?

80 74%

70 64% 60

40 36%

30 24% 20

10 2% 0% 0 Yes No Don’t know/refused

All CEOs Communications CEOs

Base: All respondents (Total sample, 1,258; Communications, 42) Source: PwC’s 15th Annual Global CEO Survey

Communications Review 47 Cable car descending from the top of Table Mountain, Cape Town, South Africa. Mountain, Cape Town, the top of Table Cable car descending from

Perspectives Perspectives

The differences between telecom markets across Africa bring both challenges and opportunities to operators already there, as well as to those looking to invest. There are economic and technological variations, incredible linguistic diversity, and individual regimes and regulations from country to country, to name just a few. Managing to grow the business, improve customer relations and introduce innovative, useful services in one market – let alone multiple markets – can be a major undertaking for any telecom executive. Here, the CEOs from MTN in two different countries present their views on how they navigate this interesting and evolving market.

Communications Review 49 An interview with: Wim Vanhelleputte MTN Côte d’Ivoire

Côte d’Ivoire has a population of around 21m, and seven operators serve its mobile market. In such a competitive mobile environment, being part of a pan- African telecommunications group has its benefits. MTN Côte d’Ivoire is the country’s number one operator and is setting its sights on 3G mobile broadband services to fight off the increasing pressure from local and international operators. Here, Chief Executive Officer Wim Vanhelleputte shares his insights on the role of mobile banking in developed and developing countries; the symbiotic relationship of operators and regulators; and how transitioning to new operating models requires not just a smart approach, but also patience.

Wim Vanhelleputte joined MTN Group in 2008 and was appointed Chief Executive Officer of MTN Côte d’Ivoire in 2009. From 2003 to 2008, he was CEO at Chad Mobile, Imaginepartners Uganda and Sentel Senegal, successively. Prior to that, he was CEO of Telcel Gabon and held various positions within Siemens Atea. Wim is a graduate of the University of Brussels and Gand University, where he studied nuclear physics and power plant management. For more information, visit MTN Côte d’Ivoire’s web site at www.mtn.ci.

50 Perspectives: Wim Vanhelleputte Communications Review: using voice every day now. And that We’re investing in this fibre because it’s What’s your perspective on the role will be another revolution. Not just in the superior technology, and we can’t telecommunications has played in Africa peoples’ mind-sets, but also in allowing give ten million or 20 million Ivoirians in developing the economy, enhancing a certain level of economic growth, reliable access to the Internet via their knowledge and introducing new development and connectivity that, I handsets if we don’t have a reliable technologies? More specifically, what think, a few years ago nobody could fibre optic backbone behind it. The has been the impact in Côte d’Ivoire? even imagine because there wasn’t any technologies go hand in hand; it isn’t infrastructure capable of doing that. a question of one or the other. That Vanhelleputte: If you look back over said, will we deploy fibre to ten million the past 10 to 15 years, the telecoms Communications Review: In Africa, Ivoirian households over the next five industry – in particular, mobile telecoms the fixed-line infrastructure wasn’t years? No. Nobody can afford that kind – has played an enormous role in the that developed historically, for obvious of investment. It wouldn’t make any development of the continent. It’s one reasons. So mobile is playing a very economic sense, and also people have of the industries, or technologies if significant role there. How do you moved on from a fixed world to the you want, where we have closed the see the interconnection of those two mobile world. A combination of both gap between the first world and the technologies in the future? What will is what can give the superior quality third world, or any world. There’s no be the role of fixed line, and what will of service, and the investments will difference anymore. Today, if you’re be the role of mobile? And will this be done over time. in Côte d’Ivoire and getting an Internet relationship be different from what connection, it can be even better than it is in developed countries? Communications Review: How do the Internet connection you might have you think the interaction between in France or Switzerland or other parts Vanhelleputte: Technology wise, the operators and governments of the world. you can’t beat the cable [fibre]. That’s and the need to invest massively in what I always tell my people when we infrastructure – like fibre – will evolve? That tremendous leapfrog step that have discussions. Having a physical In Africa, every country is different, the industry has made in this part connection entering your house or your governmental issues are very specific of the world is really a major driver office will always be of superior quality and, of course, operators are seen as of development, which I think will compared to a wireless connection – big companies with a great capacity continue. Up in the most rural areas, that’s just how technology is. to contribute to the wealth of the MTN is present. And the impact of population and facilitate investment telecom services on the daily lives of Today, we’re not interested in putting and development. millions of people is just enormous: it any copper wires in the ground because allows people, including those in the we will lose them. There’s enough Vanhelleputte: Both government most remote areas one can imagine, history and enough bad experience and the operators must understand to connect with the global village. with the fixed-line operators that it that they need each other. No country just doesn’t work. Now, to bring fibre in the world can develop a 21st century From a psychological point of view, for to offices and to industrial areas, or to world economy – a knowledge-sharing the population – but also for economic connect the country by submarine cable and information technology economy, growth and development – mobile to the World Wide Web, obviously, fibre a service economy – without having telecoms has had an enormous impact optic is the technology you need. We’re the proper IT or ICT infrastructures in this part of the world. And that investing heavily in fibre because you in place. Taiwan, Singapore and continues, because we’re looking at can deploy 3G networks, and you can South Korea are all good examples mobile money, data connectivity, have the last mile connection between of the benefits of investing in this applications for mobile handsets and your mobile handset and the base infrastructure. Governments realised social networking. Although they station over the air, but once you’re 20 or 30 years ago that investing in still are used modestly in most of our in your base station you need solid this kind of undertaking alone is not markets, they will catch on. In another backbone transmission capacity. And a sustainable model. three or five years, our subscribers will that’s where fibre optic cable is the only be using their data applications even right solution. more intensely, the same way they’re

Communications Review 51 Don’t forget that the real success factor for the whole mobile industry in Africa was the concept of prepaid.

In Africa, you really feel a renaissance Communications Review: Everyone is Communications Review: driven by technology. If countries’ trying to build more network capacity, Across Africa, many operators are governments are truly interested in and probably not all the players have testing, trying to launch or even developing their economies, they been hit by the same situation that successfully launching various mobile know that they need communications you had here in Côte d’Ivoire with the banking offers. Kenya is a great success infrastructure. If operators like MTN find elections. What are your views on the story, partly because of what Vodafone a government in place that encourages future evolution of the communications did there. What’s your take on mobile us to invest and to be there for the long market in Côte d’Ivoire? banking and how it will evolve in Africa term, we will put money in the ground and Côte d’Ivoire? for these investments. The problems in Vanhelleputte: I think we’re moving the government of Côte d’Ivoire a year away from a situation where we didn’t Vanhelleputte: Let’s talk about Africa ago with the contested election caused have that much long-term visibility as a whole. The way I see it is like the MTN to freeze our investment plan for or a regulatory environment. The tax same thing that happened ten years six months. The risks were limited, but environment was a bit shaky because ago with the launch of prepaid mobile. we immediately stopped our investment. of the long-term political situation Don’t forget that the real success factor So government and operators go that actually didn’t allow for voting for the whole mobile industry in Africa together; one needs the other. on a new telecom act. We had telecom was the concept of prepaid. If we had laws that were outdated for the stuck with the postpaid model, we If we have to pay additional taxes, levies, current technology. would never have reached 5% of the whatever, then it’s a trade-off. At the subscribers we have today. There was end of the day, if by contributing more I believe that there’s political will to no alternative, because there were in taxes we’re helping indirectly to create regulatory transparency in the no fixed lines. build a better economy because of more telecoms sector. On the other hand, I investment, which causes more people also expect, and it’s already the case, The same is true today – mobile money to come to MTN and causes more people that we’ll be taxed more than before. is filling in a gap. If the 35m Kenyans to have more money to spend, then it’s Transparency, law and order and all all had their own bank accounts, wise spending by us. If the taxes really that come with a price, but ultimately mobile money wouldn’t exist in the develop the country, indirectly we’ll get I think investors prefer to work in a first place. It would be like in Europe, our money back tenfold. clear, transparent environment with a where mobile money isn’t called that bit of higher taxes than in an obscure and functions more like a mobile wallet So, when a government is serious, environment where they don’t have because the applications are secondary. knows what it’s doing and really to pay that much tax. I think we all Some applications allow paying for the wants to concentrate on growth, prefer the first option, because at least metro by flashing a phone in front of then obviously we have to be – and we know where we stand and we don’t an electrical eye and such, but those we are – partners in development. have unpleasant surprises popping up are minor applications. Europe has no in the morning. ‘killer’ mobile-banking applications because the necessity isn’t really there.

52 Perspectives: Wim Vanhelleputte In Africa, as a whole, I think the Vanhelleputte: In the coming Vanhelleputte: MTN is in 21 countries. latest studies show that there are 20 years, mobile data applications will We are in South Africa, Iran and times more mobile phone users than skyrocket. We’re launching 3G in a few Nigeria. Those three countries alone people who have bank accounts, so months’ time. It will allow millions of make up the lion’s share of MTN. Iran we’re filling a gap with a technology subscribers to play games and access and South Africa are more advanced, that is absolutely suited to banking Facebook over the handset. A lot of the more developed markets than most of because we have the security, the applications that are already being used the other 19 countries, so products and distribution footprint and the brand. in other parts of the world will follow services, new promotions and the like All the ingredients to fill in the gap here, because, at the end of the day, are all shared with us; we don’t have to exist. Now, to both fill the gap and we’re just in one big village now. reinvent anything because we’re part make money on mobile banking of a group. That’s the advantage of a presents a challenge. In Côte d’Ivoire, I don’t expect very many African- multinational compared to a single for example, historically speaking, specific applications that would create operator in just one country. The single the country has a ratio of people with huge revenue streams for us. What I operator doesn’t have the view of what’s bank accounts that’s much higher see happening more is that people will really happening in the rest of the world than in other parts of Africa. So the shift part of their monthly spending or in similar markets or more advanced necessity is less. In the countries with from voice to mobile applications, like markets, and that’s where MTN, with few banks or where the banking sector gaming, health, whatever it may be. 21 countries, makes the difference. is the least developed, that’s where There’s a wide range of applications to mobile money is picking up quickly. spend your money on, but I’m not really How did we launch mobile money here? sure whether one will jump out of the We got people from MTN Uganda, who We don’t offer mobile money with crowd and be a major differentiator launched six months before us, to come hopes of it being a standalone profit here if it isn’t already big in another here, and they did the whole launch for maker. For us, mobile money is really part of the world, be it Indonesia or us. There’s a lot of geographical sharing a retention tool. We know that the Brazil. Those kinds of markets are two of knowledge and experience in which loyalty of our customers when they’re or three years ahead of us. Everything the bigger, more advanced markets using the mobile-money services is that’s happening in Egypt or Tunisia are stimulating the growth of the less like ten times higher than the loyalty is going to happen two or three years advanced markets. That’s where we of non-users of mobile money, because later in this market. get our economies of scale. people can easily change SIM cards or change networks. But changing banks I’m not expecting any surprises. Communications Review: How do is not something they do overnight. Sometimes the beauty of working in you think operating in 21 countries There actually is a certain resistance this part of the world is that you usually is affecting competition in those for people changing banks quickly, know what will happen in the next two 21 markets or, specifically, in Côte and mobile money is our main way years just by looking at other countries d’Ivoire? In some countries, you still of creating retention among our and what’s happening there now. have local players, and those players subscriber base – not just to make may have difficulties reinventing profits out of transfers, which is Communications Review: As CEO themselves or covering the needs of secondary for us. for MTN Côte d’Ivoire, how are you the market to provide the services making the most of the MTN network that are expected. Do you think the Communications Review: If mobile of companies on the continent? What trend will be, to some extent, that the banking is more a retention tool than benefits are you taking out of the pan- big global players will have more and a big revenue stream, what types of African coverage? more of a footprint in those countries applications do you think are needed to and that local players will disappear? fill the gaps? Are they in health, social How do you see this evolving? networking or mobile advertising? What applications might appear that could make a big difference in the market in Africa and particularly in Côte d’Ivoire?

Communications Review 53 If countries’ governments are truly interested in developing their economies, they know that they need communications infrastructure.

Vanhelleputte: In Côte d’Ivoire, it’s Communications Review: How Communications Review: Another the big players that will squeeze the important are alternative business barrier – already being experienced smaller players; it’s already happening. models – sharing networks, service in developed countries and one that MTN, Airtel, Orange, Etisalat, Vodacom, platforms, outsourcing, shared service can’t be underestimated – is the impact Maroc Telecom – already those six centres – to MTN? They will evolve, but of different cultures and different players are taking 90% of the revenues at what pace and with what barriers? countries. Regulations may be but in most of the African countries. aren’t always similar among countries. Vanhelleputte: That absolutely The culture and languages of countries We all do our homework. The is going to happen and already is in Africa aren’t similar. Maybe the differences are in the details but we happening. It makes a lot of sense to differences in cultures and countries are all doing similar things in many try to run cross border as one company are a not-yet-visible issue, but are they of the same markets. If I want to with one set of procedures, one set a barrier there or not? And what is know what Orange is going to do of platforms. With so many overhead their impact? in six months’ time in Côte d’Ivoire, duplications, there’s a lot of room for I call my colleague from MTN rationalising, consolidating, sharing Vanhelleputte: Change is always Cameroon because Orange is in services, outsourcing, you name it. difficult and change impacts people. Cameroon. What it’s doing there If a machine is affected by change, it is what it will be doing here. Or I call The business will look completely won’t go on strike or complain. Nobody my friends in Senegal. I’m pretty sure different in two or three years’ time – the will tell you the opposite. I think there’s that at least one out of two promotions way we’ll be structured, the number of a general understanding today in Africa will be repeated a few months later people we’ll employ directly. One big that certain things can be done more here in Côte d’Ivoire, and vice versa. obstacle that has always complicated efficiently or better in another country. All the multinationals move along that this trend is interconnectivity. For example, if we tell the guys from same path of sharing knowledge and MTN Benin that we’re going to run doing similar promotions. If you have It’s very nice to say, I’m going to their switch from Côte d’Ivoire, I don’t smaller local players, those are the outsource my call centre to Chad think they’ll throw a party – but they ones suffering because they don’t have because the cost in Chad is half that will understand and perhaps say, OK, the leverage of a big multinational in Côte d’Ivoire. Yes, on paper it works. maybe I can get the position in Abidjan behind them. But in reality we need reliable fibre to work there and do part of the job. So, optic transmission capacity and huge people – especially the highly educated, Another big success factor for MTN, capacities between all these countries, our core people – have the mind-set whether in Côte d’Ivoire or the rest and that has been missing for a long that their field of interaction is no of Africa, has been our brand and time. Only now, with the arrival of longer limited to just their family, positioning the company as being the some additional submarine fibre optic their village or their town. true African success story. If we didn’t cables, plus the massive deployment have that story as a core part of our of fibre optic over land, are we all They’re also becoming players brand, our success would be different. getting interconnected through reliable, on a much wider, pan-African or I’m not saying that we wouldn’t be massive bandwidth connectivity. That’s international scale. They understand successful but that our success would be the necessary condition before we can much more than maybe ten years ago, different. If tomorrow MTN were bought think about anything else we want to do. and because of this trend, they see by Vodafone and it rebranded MTN as opportunities that otherwise wouldn’t Vodafone, I think we would be losing be there. Dealing with change won’t be a certain value, a certain extra that we easy, but I’m not too pessimistic about it. have that other players might not have.

54 Perspectives: Wim Vanhelleputte Communications Review: Customers To get the benefit from centralising or aren’t the same in every country. from outsourcing, a company must keep Although they’re part of this global in mind that certain local aspects will village, they may have a unique way have to be fine-tuned – that it’s not one of consuming, of behaving, of doing size fits all. You have to be smart about things. Do you think that affects how these kinds of things. Otherwise, you you have to manage this new business can make very silly mistakes that destroy model? From a cost perspective or value. And you can throw all the benefits an infrastructure perspective, the you think you’re gaining out the window model doesn’t have to account for that because you’re losing ten times more fact, but you may need to tailor your than what you’re gaining by centralising. marketing and services to differences You also have to accept that there might among customers. be limitations to the model. Using a bit of courage and imagination and a smart Vanhelleputte: This is a big issue, but approach, usually you get the benefit addressing it depends on how smart you more than the downside of it. can be when you implement changes. You can do it the simple, rough, basic way, for example: suppose we outsource our call centre to Nigeria and nobody sitting at the other end of the phone in Nigeria speaks French. Obviously, that wouldn’t work. I’m using an extreme example to stress the point that there are smart ways of moving forward while avoiding these kinds of problems.

A real example I can share is that for a long time internally at MTN Côte d’Ivoire there was resistance when we were told that we should work with an advertising agency that worked with MTN Ghana. The thought was, it will be a big disaster, it will never work. We’re French-speaking people, and they’re English-speaking people. Even the pictures will be a problem because the faces of the people from Ghana are so different from the ones in Côte d’Ivoire that anyone looking at the pictures will instantly recognise Ghanaians, not Ivoirians. If you put an English billboard in Abidjan, yes, a lot of people won’t understand it. But doing it the right way it works. We are using the agency from Ghana.

Communications Review 55 An interview with: Karel Pienaar MTN South Africa

When mobile penetration soars past 100%, operators need to focus more on developing innovative services and reevaluating their business models. MTN is no stranger to innovation – it pioneered prepaid mobile – and the company is embracing new technologies through its LTE Karel Pienaar has been the managing director and chief executive officer of MTN South pilots. It’s also investing in submarine cable to improve Africa (SA) since August 2009. Before this broadband capacity and support consumer demands. appointment, Karel had served as the chief technology and information officer of MTN Here, MTN South Africa’s Chief Executive Officer Karel Group since January 2005. His association with Pienaar talks about how MTN is exploring opportunities MTN Group started in 1991 when he directed the M-Net/Multichoice and later MTN’s thrust within the financial industry, the importance of telecoms to acquire the second GSM cellular telephone licence for South Africa. When the cellular in bridging the digital divide and the necessity of moving operator launched its services in 1994, Karel to shared-services models and partnering to deliver new was appointed group executive in charge of MTN’s network, a position he held for ten years. services and stay competitive. Before his long association with MTN Group came the South African pay-television company M-Net. There he developed new businesses and services, including Business TV, data broadcast services and corporate satellite-TV services. Prior to joining M-Net, Karel started up and managed the Communications Division of Cortech Ltd. The computer and communications equipment supply and support company provided data communication products and services to South African corporations. Born and educated in South Africa, Karel received a degree in electrical and electronic engineering from Rand Afrikaans University in 1982. He is a registered professional engineer and a member of the Institute of Electrical and Electronic Engineers. For more information, visit MTN-SA’s website at www.mtn.co.za.

56 Perspectives: Karel Pienaar Communications Review: Can you imagine the benefits of having Pienaar: I think it’s possible that telcos What’s your perspective on the role all our people connected to the World could get banking licences in the near telecoms has played in Africa and, Wide Web, as well as to ICT [information future as regulators come to understand more specifically, in South Africa? and communications technology] that telecom operators – mainly due to And where is that role headed? services and upstream applications like their network and distribution footprint mobile banking, e-learning, e-health and – are well placed to assist in bringing Pienaar: There is little doubt that e-government? Not to mention the many financial services to the unbanked. mobile, especially, has made a huge applications being developed that are Getting banking licences would open difference in South Africa and in Africa specific to South Africa or Africa? up the playing field in some way, as by providing everyone with a voice. telcos would be able to participate in I can’t think of any telecommunications the financial services space. When MTN started in 1994, change coming to South Africa that will there were about 4m fixed lines have a greater impact on our people One of the challenges in achieving connecting the ‘haves’ to each other. than this transition into full ICT for all. this is to change the mind-set of some Today, there are more than 53m MTN will be – and is already – a leader of the regulators who in the past have mobile connections linking all the in this space. protected their legacy institutions people of South Africa (and similarly from the entry of other participants. in the rest of Africa) together. How With available capacity increasing, The participation of telcos in the this has changed the ability of all our limits will no longer be a roadblock financial-services sector could lead to people – to communicate and to do to expanding services. A push to a ‘zero transaction fee’ environment business, to connect with their loved increase the volume of what’s offered due to differences in the respective ones and to have the benefit of the over the network infrastructure will business and cost models of the telco security and peace of mind of being become very important. The mobile in comparison to the banks. Telcos able to connect anywhere at an device will become everything for have the ability to leverage their instant – is immeasurable. everybody; it will be the equaliser existing infrastructure and cost base between the sophisticated and the and wouldn’t be constrained by legacy We’ve seen many World Bank and unsophisticated markets by bringing infrastructure drawbacks that may industry studies, such as those from the same applications and services that be prevalent in the banking industry. GSMA, which show that for every 10% are available in traditional urban areas Telcos would be able to embrace the of mobile penetration in a country, the to the more remote rural areas of South latest technology and start with a country’s GDP increases by 0.8%. In my Africa. This will contribute extensively clean sheet, making it possible to book, that’s an underestimation of the to bridging the digital/economic divide move rapidly into this market. real benefits of such connectivity. in the country. The majority of South Africans will have access to knowledge – In South Africa, 70% of the population As for the future, in South Africa we it will be at their fingertips. is banked. As a result the services have more than 100% penetration of offered here are not the same as in the mobile voice. Before 2020, I expect Communications Review: Mobile rest of Africa. For example, in Kenya, the same with the Internet to ensure banking is well established in many MPESA was so successful because connectivity to the broader masses. parts of Africa, especially in Kenya and the population of those banked is With the growth rates we’re starting to South Africa. What do you see as the significantly lower than in South Africa. see now, it’s a real possibility – subject next steps in taking the service forward to regulatory reality and business and expanding its application? Today, none of the mobile-banking smarts. Once that happens, I envisage services being offered addresses that all South Africans will have access segmented customers’ real needs to the Internet and enjoy the benefits effectively, including simplicity, cost that it offers from the perspectives and accessibility. That will change, of content, speed and functionality. because meeting those needs is directly Accessing the cloud and its applications linked to the distribution footprint of will become a reality for all connected. a telco and the penetration levels of the mobile device.

Communications Review 57 ICT players shouldn’t be focusing on becoming telcos themselves. They should be forming partnerships with the current telecom players that combine best-in-class offerings to create solutions focused on the customer.

Communications Review: What Communications Review: What other As partnerships go forward, we likely role do you believe the equipment mobile applications do you think will will see a number of them break up in manufacturers will play to help the drive revenues in Africa: mobile health, areas like banking. The cause will be the communications industry grow? social networking, mobile advertising? constraints of legacy issues, i.e. if one of the partners cannot adapt or change Pienaar: Before responding to the role Pienaar: The ones you mention, plus quickly enough because of conflicts of the equipment manufacturer, per se, insurance applications and e-learning between a new and an old business let’s first consider the ICT ecosystem. in all its forms. There is a big push from model, or conflicts between an old In this environment, customers, operators, handset manufacturers and technology system and implementing telecommunication networks, over-the-top providers like Google the latest and greatest on offer. equipment providers, regulators and to develop applications for our local application and content providers are environment and cultures. One attribute that telcos normally have all connected. None can be considered is knowledge about their customers’ in isolation from the others, especially The future telco model is one of needs and habits. The partnership when looking at how to bring new partnerships. Historically, when model will make even further use of services or products into the market. telcos were offering only voice-related such information. Each of the players has an important services and products, they really role to play in moving mobile banking didn’t need a lot of support from other We’re in a situation where operators and other similar services forward. players. Possible exceptions were can’t change quickly enough. So we the distributors and the distribution need to partner with an entity that has As for the equipment manufacturers, channel. The services being offered new skills and capabilities that will in particular, their role will be to make will expand with the introduction assist us in servicing the customer. sure that their product road maps – as of new applications. And we’ll see a defined by their value chain, meaning greater push for partnerships with Communications Review: MTN with the telcos and banks and other banks and insurance companies and already operates in several countries institutions – align better with the also between the integrators – for on the continent. How important is that customer and future customer needs. example, companies like Internet to your operations, and how do you get So, manufacturers will need to listen Solutions, Business Connexion and the best results from the network of to the telcos and their requests when Gijima in South Africa. MTN companies? How does this impact developing their road maps. competition in your market? I believe that, considering the scale We’re working very closely with of the current telco operators in South Pienaar: Telecommunications suppliers, such as Ericsson, in defining Africa and the scale required to establish is about scale. With the increase what we want. Our current initiatives a successful telecommunication in speed, reliability and latency of are focused mainly on ensuring that company, other ICT players shouldn’t be connectivity, telecom operators are we obtain the analytical and customer focusing on becoming telcos themselves. now getting to a level that supports a information required to service our They should be forming partnerships shared-services environment (or cloud customers better and offer a seamless, with the current telecom players that services, to use the latest buzzword). integrated approach. combine best-in-class offerings to create This means the telco of the future will solutions focused on the customer. consist of one network with scalable, These partnership models would further centralised services. require telco operators to collaborate more to share infrastructure.

58 Perspectives: Karel Pienaar MTN is in the perfect position, as Currently, MTN is considering a the number one operator and brand number of infrastructure-sharing in Africa and the Middle East, to initiatives especially within the network leverage this change. MTN can get to area and those initiatives will further the position where the infrastructure improve profitability. across all the territories in which we operate is connected, where MTN I believe that outsourcing is viable only becomes a content aggregator and under certain circumstances, which provides content to customers across need to be carefully considered prior to our footprint, i.e. delivering the entering into these arrangements. One cloud services of the future. such instance is when outsourcing is offered in areas that are considered to I believe this is a significant advantage be non-core to the business. Another is in the business model of the future. when a telco cannot itself provide the required service at world-class level Communications Review: How due to certain inhibiting factors, such important are alternative business as in-country legislative constraints models – such as sharing network (like labour legislation) or the culture and service platforms, outsourcing of the organisation. Additionally, if a or shared-services centres – to you? telco can’t achieve the scale necessary to deliver the required capabilities on Pienaar: Sharing networks and an efficient basis, outsourcing should service platforms is very important be considered. in the business model of the future. Operating a successful telco is all Implementing a shared-services business about scale and creating scalability. model is probably the biggest change We’re moving into an era of unlimited coming to our business in the medium capacity with the introduction of the term. With increased speeds, reliability latest fibre technologies. Therefore, and latency of connectivity, shared it is imperative that we leverage this services and the ability to provide capacity by offering additional services services on the back end (i.e. relating to over our network. It follows that for internal functions) and on the customer- each additional revenue-generating facing front end (i.e. cloud services) service we offer across our network, will become a necessity in leveraging the cost of operation decreases. and mining future efficiencies. Ultimately, better utilisation of our infrastructure will lead to more This won’t happen overnight. It’s customers, applications and revenue. going to take time to align business processes and to ensure proper change management throughout the process.

Communications Review 59 The following publications, authored by partners at PwC, provide thought-provoking and informative discussions of interest to various segments of the industry. To obtain PDF files or hard copies of the publications, please visit the websites listed below. We need to talk about capex Global capex levels in the telecommunications industry have soared from $50 billion to $325 billion, in real terms, over the last 30 years. This tremendous investment is not producing returns that telecom operators require. Based on our analysis of the financial performance of 78 fixed-line, mobile and cable telecoms operators around the world and a qualitative survey of senior telecoms executives, we developed an analysis and perspective of the situation. This paper explains the four key reasons telecom companies allocate capital inefficiently. It identifies 12 shared attributes of a well-designed capital management programme and is applicable to any type of organisation: fixed, mobile or cable, whether a new entrant to the market or an established major telecoms operator. To read or download the PDF file, please visit www.pwc.com/communications.

No wires attached: Changing trends in the North American wireless industry The accelerating pace of smartphone adoption and data usage, increasing capital expenditure driven by the transition to 4G networks, and declining mobile voice usage is creating significant pressures on existing revenue models and profitability for wireless carriers. And, as the industry continues to mature, prepaid and mobile broadband services will represent increasingly important revenue opportunities for operators. These trends and more are explored in the annual survey report for 2011. PwC surveyed US and Canadian wireless operators to analyze financial accounting and operations practices of the wireless telecommunications industry. The survey aims to inform wireless, telecom, and broadband industry participants of the current and emerging trends to empower them in decision making in this fast-changing environment. To read or download the PDF file, please visit www.pwc.com/communications.

Technology Forecast: Reshaping the workforce with the new analytics (2012, Issue 1) This issue explores the impact of the new analytics and a culture of inquiry enterprises can foster with the help of emerging data analysis tools and services. A new generation of data scientists have taken on the challenge of mining the social media data cloud, as well as the under-used data enterprises are collecting internally. What they’re finding can provide direction and momentum to a wide range of different organizational change strategies. To read or download the PDF file, please visit www.pwc.com/techforecast.

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