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.

June 22, 2010 22:06 telliott

For all the talk of mergers and buy-outs, entrances and exits, little has actually changed recently in mobile communications in North Africa.

The rancorous struggle between France Telecom and Orascom for control of Mobinil seemed destined to end in one party or the other beating an ignominious retreat from Egypt. Instead, after closed door meetings and $300 million changing hands, the two will continue to share control of Mobinil. Business goes on exactly as before.

  • No, I tell a lie: FT can consolidate 100% of Mobinil’s revenues, versus 70% before the deal, which would have added 1% to operating revenues in 2009. Orascom has an option to sell out in a year or so, but then FT once had a court order to buy them out and look how far that got them.
  • Elsewhere in Egypt, Vodafone indicated that its 55% stake in Vodafone Egypt might be available. This aroused interest from Telecom Egypt, the state-controlled wireline operator that owns the other 45%, but it turns out they only wanted to get a controlling interest, not take the whole thing off Vodafone’s hands. Talks terminated.
  • ­But not to worry. Others were interested. Like Orascom. That’s right – the Orascom that still owns a big chunk of Vodafone Egypt’s largest competitor. Even a liberal interpretation of anti-trust might have some issues with that deal, but it had a certain superficial plausibility, particularly if Orascom left Mobinil and wanted to do something productive with all the cash it was to get from MTN for the sale of Djezzy in Algeria.
  • Not so fast!, says the Algerian government, already miffed at Orascom. (See “Orascom: Growing, Shrinking, or Becoming Something Different.”) “Algeria refuses to continue being a market where other countries sell their products” according to a member of the governing FLN party. So South African MTN isn’t welcome. If Djezzy is sold, it will be to the Algerian government. Just don’t expect that to happen quickly or to produce mountains of cash for Orascom to buy out Vodafone Egypt.

Beyond the obvious – “it ain’t over til it’s over” – what’s the message here? With a population of 162 million, relatively high personal incomes, and a subscription penetration around 80%, North Africa’s mobile markets are worth fighting over. We expect continued interest and eventually some done deals. After all, Orange Tunisie finally launched as Tunisia’s third operator, after quietly plugging away for a year or so.

October 26, 2009 22:10 telliott
The hyper-optimism of the African mobile “gold rush” seems to have calmed down. This is due partly to the global financial situation, but more to the realization that while Africa may in fact be the last place where lots of people don’t yet have mobile phones, that doesn’t mean it’s going to be easy or profitable to try to put them in their hands. This realization is inevitably leading to entrances and exits from the continent. A lot of press attention recently has been given to some of the more colorful of these possible re-alignments, notably the prospective sale of some or all of Zain to … well, to someone, and the twice-failed merger of MTN and Bharti. (On the former see “Zain: Leaving Africa So Soon?” and on the latter, see “MTN: Sticking to Africa After Failed Bharti Deal?” two recent publications from Strategy Analytics’ Emerging Markets Communications Strategies service.) Meantime, somewhat more quietly, Vodafone has established a strong presence in Africa, both directly and through its 65% interest in South Africa’s Vodacom. We would not be at all surprised if Vodafone in the next year or two takes advantage of a down market to acquire some new properties in Africa. Currently, the major regional market conspicuously absent from its portfolio is Nigeria, where Vodacom passed up an opportunity to enter the market in 2004. Vodafone CEO Vittorio Colao has recently expressed interest in Nigeria, describing it as “a prized and valuable market that we will be glad to operate in." In short, we should be looking for more red on the African map.
Tom Elliott

October 1, 2009 15:10 telliott
It was one of the most eagerly awaited telecom mergers of two of the world’s largest telecom giants- MTN and Bharti Airtel. In the end, the merger couldn’t materialise even after six month long discussions and efforts and involvements of the governments of two countries. The apparent stumbling block that played a major role in this deal being called off is the protectionist stance of South Africa, which pushed for retention of MTN management in South Africa, and for a “dual listing” structure for the new entity, which would preserve MTN to some extent as a separate South African company with its own set of shareholders. Bharti said that ‘the South African government is not ready to accept the deal in current form so they have mutually decided to call-off the deal. However they are open to reengage in talks if the South African government changes its stance’. This statement literally means that South African government played a spoilsport in this possible mega-merger as all other entities (PLC and the Mikati family- the two biggest shareholders in MTN with 23% and 9% stake respectively -and Bharti shareholders) have already given the nod for the deal to go through. This was in complete contrast to what happened last year when the deal was called off because shareholders didn’t agree to the deal. This time even the Indian government was in favour of going through with the deal. The importance of this deal can be gauged from the fact the Prime Ministers of both India and South Africa discussed the deal at G20 Summit recently and wanted it to go through. MTN shares fell 3% today after the announcement that the deal was called off. The statement that the South African government didn’t allow the deal to go through has to some extent tarnished the image of that government and has put it in a bad light.   I think that this deal can still happen. All it needs is an active participation between the governments of both the countries. Operators just need to persuade their respective governments. -Rahul Gupta