Exclusive interview: Angola’s Isabel dos Santos on Unitel’s plans to expand into other African countries and the lack of a level playing field in her home market
22 November 2019
Love or hate her, Isabel dos Santos has carved herself out a significant business empire that stretches across telecoms, broadcast, retail and banking. Russell Southwood spoke to her at AfricaCom about what she’s planning and how she sees the future.
Q: How did you come to launch Unitel?
A: I was the founder of the second mobile provider Unitel and (pay TV provider) Zap. Unitel started with a very small network. The differences between us (and Movicel) were the technology we chose, the go to market strategy, the customer experience and the relevance to the customer in terms of the products we were providing.
My involvement in Unitel started because I used to do Motorola relay radio systems. We used to be a big provider of a “walkie talkie” radios. We migrated to building telecoms networks. There were a couple of networks that were designed by myself with a couple of other engineers: we designed the Luanda network, the Benguela network and the Huila network so quite a few networks.
That was a very good experience because we did the relevant work in terms of choice of technology. We chose the right standards so we had a standard that was higher than our competition. We wanted to make sure the quality of the network was higher than was ever expected by customers. Ericsson was our key partner in those days.
Q: What was it like in those early years at Unitel?
A: The initial years were very difficult because access to finance, especially through a banking system was just not there. Angola was just coming out of war the civil war (which ended in 2002). There was little or no access to hard currency. We obviously started with a very small operation, only 50,000 customers.
We re-invested every single penny we made in the company and there were no dividends for the shareholders. The infrastructure of the country in terms of telecoms was inadequate and definitely fell very short in terms of capacity. It was very difficult because in those days both regulators and governments felt that telecoms infrastructure was a government “thing”. Everything had to be done by Government.
I studied in the UK. I did my A levels at St Pauls Girls School and I did engineering at University at Kings’ and I was very exposed obviously to the Western business environment and I realized the potential that it had. The transforming of the economy was a lot bigger than we actually understood. So one of the things I tried to do when I came back to Angola was in fact to use what I had seen elsewhere in terms of business drive and initiative in the private sector.
Twenty years ago the influence of public investment was huge. Even when people looked at resolving Africa’s problems they always thought about it in terms of Government. It was like let’s give Government money and make sure Government makes all the decisions. There was no room for the private sector.
Twenty years ago you wouldn’t hear of African business leaders or African entrepreneurs. The companies just didn’t exist so when I started working at in the private sector it was because I didn’t want to go into the public sector. I didn’t want to go into politics. I didn’t really see the difference for my community that would come through policy. I wanted to provide economic opportunities.
Q: So how did you get from Unitel to Zap?
A: Once Unitel started growing I quickly understood something. Once of things I do is a lot of forward thinking. One thing I like to do is understand what the world is going to be like in 20-30 years time. For example one thing that I’m very certain of is that we’re probably not going to have mobile phones. We’re going to have computers that we talk to (laughs). So twenty years ago I was trying to think of the world of the future.
One thing I understood is even though Unitel was a mobile company, there was a world beyond mobile and an Africa beyond mobile and that mobile was a very, very limited service. Beyond that, it would be the fintechs, the content, and there would be the training platform.
So I went and invested in those three areas. I invested in banking (Banco BIC) fourteen years ago with a view of one day to building digital banking. It’s now Angola’s fourth largest bank and it’s also present in a few other geographies. I also invested in retail in the supermarket chain Candando.
It’s a hypermarket chain similar to a large Shoprite and that was because I believed that the trade would become digital trade, e-commerce. It will make a massive difference in the future. A lot of telecoms business will be driven by e-commerce and through e-commerce trade. That’s obviously linked to banking and banking facilities. So a lot of my investments are driven by making sense of all this, by bringing technologies to innovate in those fields.
When we look at the top 10 IT companies in the world, they are content providers. When you look at the market cap of a company like Netflix it’s huge and you have all these new content players that are becoming so dominant. In fact if you just stay in the infrastructure business, you almost run the risk of becoming irrelevant (laughs). So Zap is a content provider.
Q: You only have infrastructure to do things?
A: Yes. So very much my initiatives in investing in these businesses was always driven on whether we could bring technological innovation to those businesses. And we have innovated. For example, with the Zap platform we brought three very relevant innovations. One was HD. We were the first HD distributor in Angola with HD channels.
The second innovation was the payment method. So we allowed pre-paid scratch cards, a very easy method to pay, with an easy way of transferring funds from one account to another. So I could pay a little bit for you to watch a couple of weeks of TV. We also innovated through the way we actually deliver the service to communities. So we went and covered the whole country. We went back to the traditional things like door-to-door sales, where you engage with the community and explain to them the service you’re providing and you help set up the service.
DStv was the leading (pay TV) champion that had been there since 1992. We beat DStv. When we started DStv already had quarter of a million homes. Today they have around half a million homes and we now have 1.5 million homes. We did that purely through technological innovation. Obviously we needed to make the content relevant, we need to understand they want to see the life that they see.
Q: Do you invest in content?
A: Absolutely. We invested into 2 TV channels, who are the leading TV channels in Angola: Zap Viva, which this year we have taken international so it’s now also visible in Europe on different platforms. The second TV channel is Zap Novellas: it has soap operas and live stories.
We’re very careful to choose stories that are relevant for our society. We stay away from things like heavy violence or things that we feel are probably not positive content. We try as much as possible to have content that is inspiring and shows success stories to get people’s lives to become better.
The channel’s extraordinary. People love it. We invest about US$20 million a year along with having built a very, very significant production studio in which we invested about US$15 million to produce local content.
Q: Zap has a subsidiary in Mozambique?
A; We entered the Mozambican market and again it was a difficult market because it was very occupied by DStv and StarTimes from China is also present. It’s very, very competitive. We are perceived to be a premium brand in Mozambique so people associate us with good quality.
Q: Are you a market leader there?
A: No, we’re second. DStv is first in the market. It’s also a market that we believe has a lot of potential and a lot of it will have to come through innovation. We need to find ways to innovate in that particular market.
Q: All of this content is Lusophone. It’s all in Portuguese so where do you go…
A:…from the Portuguese world to the rest of the world?
Q: To Brazil?
A: It’s a good question and I’ve thought of this question very often but at the end of the day companies are people. They’re not machines and they’re not brands. And people work well when they communicate well and they communicate in Portuguese. Nowadays language is becoming less and less of a barrier.
For example, in Unitel we’ve introduced Unitel Academy where we have more than 50,000 hours of training and one of the things we do is English language. It’s the same for our retail store Candando.
We have an academy called CER which is a retail academy and we’re training people in English language but also IT solutions for things like stock management, SAP, etc and this really makes a difference. Because once you start getting the people in your company ready and they’re confident in their language and their communication in that market then you can become international.
So we’ve already taken a few of these companies international. Unitel is one of them (it announced plans in 2018 to open in Zambia) – and it has a strong potential to become international. Zap is going now into Europe as I mentioned and we’ve done the same with the bank.
Q: Where would Unitel go if it went international?
A: Well I think we definitely have room in the (African) countries where the standards are still not as high as ours. I’ve been to a few African countries where I feel the standard is lower than what it could be in terms of quality of networks.
There’s a lot of under-invested networks so any entry that we can think of would have to go through acquisition because building a greenfield project today is probably quite challenging, especially with new financial requirements for things like 4G and 5G, which are very expensive. I think there will be opportunities for more robust players with a stronger balance sheet to come in and to partner with other existing networks. That could really make a difference for Unitel in the next 5-10 years. I can see ourselves playing that role.
Q: As things go online…social media is huge in Angola…news media is now largely online…what of that is in your field of interest? You talked about a digital bank. Is that going to become a reality?
A: We’re already doing quite a lot of online banking. Visa payment is still not as good as we would envision it to be. We’re looking very strongly at some payment solutions. People say that you’re a little bit behind on the mobile payment systems and I’d like to think that we’re not behind.
For me a very important change was the penetration of smartphones because I want mobile payment systems and financial services to be smart and a full experience. I don’t want to be just something that you pay your water with, I want it to be a full service so from planning your expenses, to having your relationship with your banker in order to be able to get some credit or trade credit for your business and to be able to address issues like payroll for instance.
Today we could deliver this but five years ago because of the infrastructure we have and the penetration of smartphones being so low, it wasn’t quite right. Now I believe it’s right.
Q: It’s also about behavior and that takes a longer time than just introducing the technology.
A: Yes, it needs knowledge. You also asked me about media and I think there is immense potential in that sector. We have very little local content produced, whether it’s news content, entertainment, sports coverage, there’s still very little of it. The media sector could grow a lot in Angola but also for Africa in general.
People always say we want to buy content produced in Africa, do you have a soap? Do you have African TV series? Do you have African stars? Little by little, they’re popping up. I’ve seen something in Kenya and also in Ghana and Nigeria. Angola itself also produces some very nice novelas: they’ve won an Emmy award.
They’re small initiatives and now it’s a question of whether there will be investment. That investment could obviously come from telecoms and the fact that they need to create more traffic and they need to monetize their platforms.
Q: You’ve also got music streaming of course…
A: Yes and I think music is very important. They want to see whatever they want to see whenever they want to see it (laughs). They want to choose the TV series.
Q: Angola has come through a transition. Your father stopped being the President and therefore the world changed.
A: I think the biggest change for Angola has been the economic crisis. We have been into deep recession for the last two to three years. For me, that’s what’s been the hardest thing for us as a business, for me personally as an entrepreneur as I’m one of Angola’s biggest investors. We invested in many different fields from banking to industry to real estate. We’re one of Angola’s largest private employers so we deliver more than 30,000 jobs.
Today for companies to survive in this economic environment it’s very, very challenging.
Q: But also you have changes coming with telecoms regulation? There will be two more licensed mobile operators. And I assume the state will slowly divest itself of MS Telecom.
A: We hope so. The Government has decided to divest from the telecoms sector and I think that’s a positive change. It could attract more investment. The Government has to play a smaller role. I think it’s going to be difficult to have two (new) networks being built at the same time.
I don’t know if you’re aware that the third licence was awarded…I won’t say awarded but given to Angola Telecom without a tender. And this is for me as a telecoms player is a little bit concerning because on the one hand you have people tendering and trying to pay for a licence, putting together a transparent bid and on the other hand you have a fast track to a licence with no bid being given to a private partner (Orascom) to launch Angorascom. I think that’s a little bit difficult for the telecom environment.
Q: And the Fourth licence awarded was withdrawn?
A: Withdrawn and put out to tender again and it’s running now. I think the difficulty is that the level playing field will not be level. My worry is that you have two entrants coming in at the same time with different levels of investment, will the playing field be level? That’s the big issue. I any industry you want the industry to be as transparent as possible.
For years at Unitel we had the problem that the Government was a key investor in Movicel and it received hundreds of millions in public investment funds that it never had to pay back. At the same time at Unitel we were investing private funds, we were seeking private financing with very high interest rates and having to deliver a system. In a way it was unfair competition.
We were fortunate that we were able to become market leader because when you’re private sector, you’re probably more hungry and more driven. (laughs). What I’d like to see is for everybody in the industry to have the same rules, which is not the case right now.
Another big regulatory problem we have is that our tariffs are dictated by Government so Angola’s telecoms market is not a free telecoms market. Zap is the same. It does not decide how much it charges for its TV packages. We feel that’s not very good for investors, business and competition. Ultimately Government’s role should be to encourage competition, to bring in investors and through competition, drive the prices down.
Q: If we were to have this conversation in 2-3 years time what would you be telling me then?
A: I’d love to tell you the story of economic recovery in Angola. But unfortunately I feel that the next three years is going to be extremely tough for all Angolan businesses. I think that will also have a negative impact on the political scene. Undoubtedly there will be political issues very much driven by the level of unemployment – which is rising – and purchasing power which has dropped to a third because of currency devaluation was 300% in the last 24 months.
Public expenditure has been cut because it has gone from 60% to 90% so these are the things that create an extremely difficult environment. We’re going to have to adjust as businesses and have plans to survive. We’re going to have to be inventive. Obviously we’re going to have to look for other markets and use our know-how and the knowledge we have today to enter African markets or markets further afield.