From: "Rex Brown" <email@example.com>
To: "Swazinews" <firstname.lastname@example.org>
Subject: SWAZINEWS: MTN forges further into Africa with Nigeria move
Date: Thu, 24 Jun 1999 09:08:17 +0200
MTN forges further into Africa with Nigeria move. Provider wants to develop regional networks
By Claire Pickard-Cambridge, 24 June 1999
CELLULAR phone company MTN, which has a bullish expansion strategy in Africa, is in the final stages of securing a licence to operate mobile and international services in Nigeria.
MTN and its partners launched commercial operations in Uganda, Rwanda and Swaziland last year, where they already have investments totalling $110m, and MTN is making the fastest inroads into Uganda where it has acquired 35000 customers.
Ross Macdonald, group executive for international business development, says MTN would like to make a "large investment" in Nigeria. The company expects to announce a deal shortly, but first wishes to ensure this is satisfactorily reviewed by the panel appointed by new Nigerian President Olusegun Obasanjo following his announcement of a review of government contracts stretching back to 1976.
Macdonald, who is responsible for MTN's Africa strategy, is optimistic about the potential of the populous Nigerian market, but says MTN, once given the go-ahead, will start with a limited roll-out until it is more sure of the political risks.
MTN is involved with Telia of Sweden as well as local partners in a $70m investment in Uganda, where it has a licence for mobile, fixed and international services. Telephone penetration has doubled in Uganda since MTN's arrival last year, indicating that its presence also has the potential to galvanise competitors. "When we started in October last year Uganda Telecoms had 45000 customers, and cellular operator Celtel had 6000 to 7000. Today MTN has a customer base of more than 35000, Celtel has close to 20000 and Uganda Telecoms has close to 50000," he says.
MTN has a $20m investment with local partners, including Rwandatel, in Rwanda, which permits only one cellphone operator. MTN has about 7000 customers there and expects the customer base to expand now the service has been extended to more towns outside the capital Kigali. It has found the Rwandan government, which badly needs foreign investment, supportive and finds its overall economic policies sympathetic to business.
In the Swazi market, MTN and its main local partner, Swazi Postal and Telecommunications, have the only operating mobile licence and have invested about $20m.
Other countries which MTN is considering include Tanzania, Kenya and Ivory Coast. Its roaming eye is also being cast as far afield as Ghana and Senegal, although it has no activities in place yet.
Macdonald prefaces a discussion about MTN's strategy in Africa on the catalytic effect of telecommunications on economies, arguing this is crucial to boosting the interlinked fortunes of states. "In order for SA to work Africa has to work. Africa represents huge market potential for SA and MTN believes its activities can help these African markets to realise their full potential."
However, many of these markets are small in comparison to SA, where MTN has about 1,5-million subscribers. The company has therefore opted for a regional strategy in building the critical mass needed to make projects viable. For instance, Swaziland fits in with SA in the southern African region, and MTN is looking to build a wider presence in the east African-Great Lakes region and another in west Africa.
"There are a number of ways to reduce costs," he says, and one has been to keep branding the same in each company. Thus they are known as MTN Uganda, MTN Swaziland and MTN Rwanda."
Savings are also made on infrastructural costs with pricing improved by the bulk purchase of equipment for these areas.
The company is also positioning itself to benefit from future co-operation between countries leading to the lowering of regional trade barriers. "Down the line we may be able to have regional networks, such as the three east African countries - Tanzania, Kenya and Uganda - forming part of an interest in the Great Lakes region."
The company is bidding with a local partner for a licence in Tanzania - as is rival SA operator Vodacom - and is considering a partnership with Telia in Kenya where a second GSM licence is expected to be awarded this year. In the meantime MTN's network has already linked Uganda to Rwanda, and in five years' time it believes a greater east African network could be forged.
West Africa is being approached from a similar perspective, although MTN lost out to French interests in Cameroon after bidding for a second mobile licence. However, it is seeking an opportunity in Ivory Coast, and is considering tackling Ghana and Senegal.
Macdonald points out that in the past the French colonial masters retained an iron grip on African economies with international calls between former colonies being routed via Paris or Brussels. "We want to reduce the cost of doing business in these markets so it follows that these countries need to be linked either terrestrially or via satellite to one another."
Discussions about MTN inevitably lead to questions about Vodacom. Vodacom group executive corporate affairs, Joan Joffe, says Vodacom's African interests outside SA lie in Lesotho where it has acquired 6500 customers since 1996. It is also bidding to secure other licences in Africa.
However, Joffe points out that Vodafone UK, a 30% shareholder in Vodacom, has several licences in Africa and "we do not bid in competition with them. However, we will bid if a licence would be economically viable."
While Africa's teledensity of less than 1% of the population - against Europe's 70% - offers opportunities, it is a market which also presents challenges, warns Macdonald. These range from finding appropriate expatriate staff to work there, to finding suitably qualified local staff. Poor infrastructure also makes it challenging to roll out networks, and a lack of economic data on income distribution compels companies to do their own primary research to gauge market size.
"Getting equipment in and out of the countries is not too hard but it can be expensive in landlocked countries like Uganda and Rwanda where everything had to be flown in. Ports and railway lines need to be fixed up to make business less expensive."
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