While the expansion of mobile markets in many countries across Africa is an undeniable opportunity, both private and public sectors are still looking for the magic formula to make it work for the benefit of all parties.
Ghana is a case in point. Although Glo Mobile (Globacom of Nigeria) is stating that its network is ready and has a number reservation campaign started since late January, this is not what was promised last year. So why is the reality not quite meeting expectations?
As has been seen elsewhere on the continent, progressive privatisation is not a simple process, especially when the present market has been effectively saturated with major incumbents. This was – and still is – an issue for Cell C in South Africa, going up against Vodacom and MTN. In Ghana, the major players are multiple, including MTN (Scancom), Millicom, Airtel and Vodafone.
Although Globacom seems like a good fit for the market in Ghana, being also Anglophone and from near-neighbour Nigeria, the launch of its services is not happening at quite the pace expected.
This is not because it lacks infrastructure. The company claims an investment of some USD 750 million in 1,600 base stations; has landed the Glo 1 cable that links to Europe and, by dedicated extension, to the US in Ghana; and potential capacity for 10 million lines.
Parallels with Globacom’s home territory in Nigeria abound. There are similar issues with logistics and geography and a similarity of focus between the two regulatory authorities, NCA of Ghana and the NCC of Nigeria.
So the cautious approach of Globacom in Ghana – whether made by choice or not – raises some questions as to why apparently expanding markets are not providing all the potential for new MNOs and increased competition.
To use South Africa as a comparison, it has to be pointed out that private and public sector interests are not as smoothly aligned as they might seem.
The step-by-step process of privatising telecoms in South Africa, often delayed and significantly behind its original schedule, was referred to as “managed privatisation”. It was also based on some assumptions regarding consumer choice and market growth that might now be seen as perhaps over-optimistic. This regulatory approach falls between two chairs: it may not allow the freedom that the private sector wants and it certainly will not happen at a pace driven by consumer demand. As it evolves with the goal of creating a market fair for all competitors it will, again, not move at a private-sector pace.
There is then a problem at both ends of the equation when calculating risks in new mobile projects. Despite the miracle of widespread adoption of mobile technology in Africa, the political realities run counter to the more fluid privatisation seen previously in the UK or Australia, to name two textbook examples. At the other end, the actual number of users is hard to establish and predictions based on any such assumptions can have major error margins.
In general, governments are not rapidly or heedlessly going to relinquish control of cash-cow telecoms. Hence, the concept of ‘managed privatisation’ which, cynics might say, really isn’t a free-market process.
As for market size, potential growth and defining saturation in any one country, the real figures are opaque at best. For example, South Africa has a population of about 50 million – twice that of Ghana or one third that of Nigeria. Current, reasonable figures suggest that about 84% of South Africans have a mobile phone or access to one. Figures for South Africa based on different criteria indicate over 100% market penetration but let’s stay with the most conservative numbers. Ghana’s mobile penetration is estimated at some 81% while Nigeria’s is around 55%. Check out Business Monitior’s ‘Ghana Telecommunications Report’ or Hot Telecoms’ Africa Statistics and Forecasts 2006-2015 for a current update.
Now look at per capita GDP. South Africa leads with over $10,000 per annum. Nigeria is at about $2,500 and Ghana about $3,300.
The one thing that drives consumer choices in mobile telecoms is novelty and the inevitable disaffection with existing operators. After that come the more mundane choices based on coverage, QoS, service offerings and, of course, price. It is certainly a risk, however calculated, for a new MNO to move into a nearly saturated market and hope to win over customers. Ghana is not as affluent as South Africa and Cell C has battled to gain market share even there. It is tempting to predict the same future for Globacom in Ghana.
No doubt, there is also an exit strategy. Assets can be sold off to other companies if the project fails. A quick look at a flurry of recent deals to unbundle and sell infrastructure in various parts of Africa shows that there is always such potential.
Despite the doubts, Globacom’s decision to launch in Ghana seems practical in terms of its regional presence, infrastructure and past experience. It was rated as the best network in Nigeria a few years ago, although recent figures would tell a different story, with Etisalat now the flavour of the month according to the NCC.
However, a very simplistic calculation based on stated figures gives this result: $750 million invested for a maximum consumer base of 10 million translates to an ARPU of $75 to break even. That seems achievable, until you factor in the likely slow adoption curve, based on Globacom’s reliance on disaffected customers migrating from the dominant two operators. If only one million migrate, the break-even is $750 or a fifth of the annual per-capita GDP. That looks less achievable.
Realistically, if Globacom can win five million customers within five years, its Ghana operation starts to look doable.
Whether it can do that remains a question that only time can answer.
The other question that cannot be answered without the test of time is just how much impact data services will have.
The pattern elsewhere in Africa is still for voice and text to dominate. Mobile-targeted services like Twitter have lower usage than in other parts of the world. A current survey shows South Africa has the highest Twitter usage, followed by Kenya and Nigeria. Ghana ranked 20 out of the 20 countries in the study.But one key point in that study is that young people (21 to 29) are driving mobile Twitter usage. Another is that, based on Opera usage, Nigeria is the fifth-largest mobile internet user in the world.That bodes well for MNOs throughout Africa, as the market moves to data services. Whether that could save Globacom’s Ghana initiative remains to be seen.
Roy Johnson
This article has been extracted from the 2 February 2012 issue of ‘Africa & Middle East Telecom-Week’ and was authored by Roy Johnson. Roy is a writer specialising in IT and business topics, who has regularly contributed to PC Magazine and Inter@ctiv Week, as well as editing TechNet Magazine for Microsoft. Roy was formerly editor of CommsAfrica and contributing editor for Intelligence magazine.
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