Emerging Markets Communications Strategies

Analyzes the issues facing existing and new players who are looking for a share of growing mobile markets in over 30 developing countries, including the developing regions of Asia and Africa.

January 26, 2011 19:47 telliott

From a state of some talk and little action a few years ago, in the last month or so tower sharing has become hot in African mobile communications:

  • Millicom announced in December 2010 that its subsidiaries in the Democratic Republic of Congo and Tanzania will sell 729 and 1,020 towers, respectively, to local units of Helios Towers Africa. Millicom will get $125 million in cash. Earlier last year, Millicom sold 750 of its towers in Ghana to Helios Towers Ghana.
  • In Nigeria, CDMA operator Starcomm is selling 80% of its towers to Swap Technologies and Telecoms, a Nigerian co-location and managed services provider. 
  • MTN Ghana is divesting up to 1,876 towers to a new entity, TowerCo Ghana, 51% of which will be owned by American Tower, with MTN taking the other 49%. American Tower is paying $218 million for its interest. 

The trend is interesting, but even more interesting is one of the key players. Who is Helios Towers?

We're glad you asked. Helios Towers Africa (HTA) was created by Helios Investment Partners (HIP), a London-based private equity firm that invests in Africa. HIP has some serious money partnering with it in HTA:

  • The World Bank's International Finance Corporation (IFC) made $250 million available to Helios Towers Nigeria when it was starting up in 2005, and recently put another $25 million in equity into HTA.

  • In 2009 HTA got $350 million from Soros Strategic Partners, Albright Capital Management, and RIT Capital Partners, organizations with some fairly hefty global cred. Whatever you think of his politics, George Soros is no dope, and Madeleine Albright was one of the sharper knives in the State Department drawer. The R in RIT stands for "Rothschild" and over the last three centuries the Rothschilds have probably made more good decisions than bad. (Backing Wellington against Napoleon - smart!)

Helios looks to become a serious player in African telecomms infrastructure and related fields. HTA just hired Inder Bajaj as CEO; Bajaj was formerly CEO of Reliance Infratel, a major force in the Indian third-party infrastructure business. And among its other recent investments, HIP just acquired a controlling interest in Interswitch, a Nigerian electronic payments processor with a presence in mobile payments.

 

It may not need repeating, but maybe it does: the development of Africa is not just about aid. In communications, people who are a lot better with money than I am think it's about investment.

 

 

For more on the topic, see "Mobile Infrastructure Sharing in Emerging Markets" March 2010.


November 25, 2010 04:11 telliott

On the occasion of America’s great festival of consumption and the official start of the riot of gift buying it seems appropriate to pause for a moment to consider Sharing.

I’m not talking about the last piece of pecan pie or the game controller. I refer to network sharing, which is on my mind because of a couple of recent stories:

  • A Bloomberg report last week mooting interest on Ericsson’s part in owning networks and providing capacity to multiple operators, with Africa mentioned as a possible target area.
  • A report in the Business Daily (Nairobi) indicating that Kenya was planning not to issue LTE licenses to private operators but instead create a public-private partnership to own and operate the network, leasing capacity to all service providers.

Africa has had some experience with infrastructure sharing already, and the pace may be picking up: American Towers just purchased 3,200 towers from Cell C, intending to lease back tower capacity to Cell C and provide smaller operators access to a national footprint. But what Ericsson and the Kenyan government are talking about goes a step beyond that, into a business model where every operator is a MVNO. Worried about becoming a dumb pipe? – forget it. We’ll be the pipe.

This model has attractions for the developing world. For one thing, it gets around the difficulty that many operators have in disengaging from the expensive arms race of network coverage. And it would probably speed rural development.

But it doesn’t change the fact that it will cost a lot of money to provide Africa with mobile infrastructure, and it doesn’t create that money. Both the Ericsson and Kenya proposals – sketchy as they are at this point – include unnamed partners who are presumably putting up some or all of the capital: Valter D’Avino, Ericcson’s VP of managed services, characterized the endeavor as “Ericsson plus a financial company,” and the private half of Kenya’s “public-private partnership” is likely to be asked to put up some cash.

So the question then is – and I apologize for the lack of holiday spirit – “What’s in it for me if I’m the money guy?” Governments may be able to justify infrastructure investment on the basis of business development; Ericsson obviously would see ongoing revenue from network management and equipment sales. Making the case for private investment in African mobile infrastructure may be a bit more challenging.


January 7, 2010 21:01 telliott
Barely two months after the break-off with MTN, Bharti is on a shopping spree once again. This time, instead of looking for big buy outs like MTN, Bharti is aiming at a smaller target: a 70% stake in Warid Telecom, the #4 operator in Bangladesh, for US$ 300 million. Warid has around 2.7 million subscribers, which is roughly how many Bharti adds every month in India. So clearly the story here isn’t the impact on Bharti’s bottom line, but rather what the acquisition says about the company’s growth strategy.  After having its fingers burnt twice with MTN, (for details see our recent report “Bharti Airtel- Looking to Start Afresh”) Bharti has now realized that deals of that scale happen once in a blue moon. If it is not content to stay only in India – and why would it be, since it competes with 10 or 12 price-cutting rival for low margin business? – it makes more sense to concentrate on smaller markets with growth potential. Not bad thinking really from the management. I don’t think Bharti will benefit substantially in the near term by foraying into nearby markets like Sri Lanka and Bangladesh, but if nothing else it will give jitters to the other multinationals competing there, like Telenor (majority owner of Grameenphone), NTT DoCoMo, which just last year bought 30% of Aktel, and Axiata, which owns 85% of Dialog in Sri Lanka. After all, here is a well-funded operator with a lot of experience in low ARPU markets, hoping to push a low-ranking operator further up the chart. Bharti’s timing is good, too, beating out Viettel, which was also interested in Warid. So is it a shift in Bharti’s foreign (acquisition) policy to give up on megadeals? It’s not right to say that there is a shift in policy but it’s proper to say that Bharti has become much more aggressive and opportunistic in looking at easier deals to do if they make strategic sense. We also suspect other operators will focus more on incremental expansion. Orange just announced it was done with megadeals, and Bharti competitors like Telenor and Etisalat have always expanded their emerging market footprints slowly and steadily. Might a mature North American operator look at home market saturation and consider a small presence in Africa? Might Telefonica think outside Latin America and look to potentially game-changing investment in a #3 or #4 operator in Asia, like Sun Cellular in the Philippines? And where will Bharti turn next? We shouldn’t be surprised to hear about Bharti acquiring a stake in some smaller African country like Tanzania. So keep watching this space.   - Rahul Gupta

December 13, 2009 19:12 telliott
An end may be in sight to the long-running battle between partners Orascom and France Telecom over control of jointly owned Mobinil, the number one carrier in Egypt. But then, we’ve said that before. The dispute, which arose out of an arbitration claim filed by Orascom in 2007, seemed to have frozen into the status of trench warfare c. 1915, with France Telecom periodically upping its offer for the 49% shareholding not covered by the arbitrator’s ruling, and the Egyptian Financial Supervisory Authority slapping it down as inadequate. However, France Telecom's most recent offer of EGP 245 (US$ 44.71) per share seems to have broken the stalemate. The regulator has approved the offer, which represents about a 19% premium over Mobinil’s 10 December 2009 closing price. Orascom has not yet indicated what course of action it will pursue, but it seems likely that it will formally object. In losing its interest in Mobinil, it would suffer more than just the indignity of being tossed out of its home market. It would lose its second largest EBITDA contributor (after Djezzy in Algeria), and its presence in one of the faster growth markets in the region, particularly with 3G services just beginning to be rolled out.  Mobile Subscriptions With its investment in Canadian operator Globalive (Wind Mobile) at risk due to an adverse ruling by the Canadian regulator on foreign ownership, and its other operating companies requiring cash for expansion, Orascom could certainly use the money if it were forced to sell all its Mobinil holdings. However, our thinking is that Orascom would view the cash as decidedly a second-best outcome, and will probably vigorously pursue whatever legal options it finds. -Tom Elliott UPDATE: According to news reports today (14 December 2009), the Canadian authorities have decided that Globalive is Canadian enough to be granted an operating license, so that uncertainty is removed. However, Orascom still could use the money.