The long, slow death of mobile competition in selected Africa markets – finding a way out of this dead end

5 August 2022

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Several decades ago competition was introduced to the new African mobile markets. Competition was supposed to deliver three things: cheaper prices, better service and innovation. Several decades later Russell Southwood looks at how ideas of competition have stalled in key African markets.

When first launched, the unstated assumption about competition was as follows. If there were two competing mobile operators, they would tend to copy each other’s price offers and the market would stay the same. Initially there was some support for two-company competition. When MTN entered Uganda it bought innovative pricing (pre-pay) and quickly expanded the market. But this was the exception rather than the rule.

So it was then a question of whether three operators or four of them produced the magic configuration that delivered the three prizes of competition (price reductions, better service and innovation). The challenge now is that across Sub-Saharan Africa’s key markets, the third or fourth operators are hanging on by their fingernails. In every market, there is a ‘problem child’ operator that does not have enough market share to invest to keep ‘playing the game.”

But it’s also the case that what was a business that was just about mobile voice and SMS services is now a portfolio business including among others: mobile money, digital services and Fibre-To-The Home.

The introduction of Unified licensing makes all of these markets part of what MNOs can do. So it’s no surprise that those who have 50% of mobile voice and SMS go on to dominate these new markets. So for example, Kenya is a good example. Safaricom is the dominant mobile money operator but the Government is disinclined to do anything about. It’s seen as a ‘poster child’ success and the Government reaps the dividends from its significant shareholding.

What follows below is a quick overview of ‘stuck competition’ in six key mobile markets: South Africa, Nigeria, Ghana, Kenya, Senegal and Gambia. Circumstances differ between countries but the end point is the same: ‘stuck competition’ in key areas that are important for digital transformation.

However, one common theme is that external investors are not likely to be interested in the ailing third or fourth operator by market share. Cell C has limped from its initial launch. No-one has had the required investment and it has built up significant amounts of debt. The two ‘big gorillas’ are MTN and Vodacom. The former wants to buy fourth operator Telkom (Formerly state-owned) but the Competition Commission is looking into it. You can see their point: once Telkom is out of the game, Cell C is next on the block. Telkom reinforces MTN’s entry into broadband and fibre to the home.

In Nigeria, the weak party in market terms is 9Mobile (6.14% of mobile voice market). It may have been taken over by a foreign investor but shows no sign yet of creating a turnaround. MTN’s dominance of wholesale fibre networks nationally is almost invisible to the eye but it’s there.

Ghana has already gone through a process of consolidation, Encouraged by the Government, Tigo and Airtel merged. Again Expresso and Glo Mobile (2% share, end 2021) are almost invisible in the market. Vodafone Ghana is up for sale as its parent sees it as too small for its portfolio. The regulator has a hold on the bid for it from Telecel as it believes it will reduce competition in the market.

Kenya’s regulator CA does not break down the market share of operators: discretion is the better part of valor. But independent analysts put its market share at around 63%. It protests that any effort to address this dominant position would be to punish them for their success. As ever, it’s more complicated and it’s close relationship with Government plays a big part. Airtel wanted to buy former public telco Telkom Kenya but regulator CA has put the transaction on hold.

In Senegal, Sonatel (which like Kenya has a significant Government shareholding) has increased its market share from 53% in 2021 to 55.69% in 2021. The other two operators are well back in the field: Free (25.33%) and the declining Expresso (18.48%). It has made some effort to make the market more diverse by encouraging local 4G operators but it has not really made a dent in Sonatel’s dominant position.

In Gambia, there are four operators (in descending order): Africell, QCell, Gamcel and Comium. Monty Mobile attempted to dig Comium out of its financial hole but it was unable to reach agreement with the owner.

Every one of these country stories contains one or more operators that are in financial and investment terms marginal. To allow them to be pushed out of the market would significantly reduce competition down often to just two operators. So now is the moment for Government, regulators, operators and investors to rethink how markets work.

The attraction of the original mobile markets was that there was sufficiently few operators for everyone to get high levels of return. However, over time dominant operators are increasingly the only game in town. Unless regulators address this strategic issue they will be left with a top-level strategic choice. Either let one operator take all the ‘financial cream’ in market or find ways of encouraging competitors in new markets like mobile money or FTTH and/or put regulatory controls on the dominant operator.

In brief

Ghana: MTN Ghana has reiterated its commitment to investing USD1 billion by 2025 in order to address network challenges across the country, especially in rural communities. Speaking at the operator’s Media and Stakeholder Forum 2022, Eli Hini, CEO of MTN Mobile Money, highlighted the investment formed part of the telco’s efforts to transform its network and support Ghana’s digital drive by ensuring new rural telephony sites and coverage extensions are deployed. Noting MTN Ghana’s 4G network now covers all 260 districts of the country, Mr Hini said the company plans to deploy 400 new sites in rural areas and upgrade 746 sites to 4G.

MIGA has issued guarantees covering a $200 million investment into companies providing digital financial services under the Airtel Money brand in 12 African countries. These companies provide access to financial services through mobile phones in a region where most people lack access to formal bank accounts. The guarantees were issued to The Rise Fund II Aurora S.à r.l. (The Rise Fund), which is making its investments through a parent company, Airtel Mobile Commerce B.V., into Airtel Money operating companies in Chad, the Republic of Congo, the Democratic Republic of Congo, Gabon, Kenya, Madagascar, Malawi, Niger, Rwanda, Seychelles, Uganda, and Zambia. MIGA’s guarantees provide coverage against the risks of war and civil disturbance, expropriation, and transfer restriction and inconvertibility, for up to five years. MIGA anticipates providing additional guarantees for The Rise Fund’s investments in Airtel Money Nigeria and Tanzania in the near-to-medium term.

Nigeria: MTN Nigeria announced its unaudited results for the half-year ended on 30th June 2022 wherein they saw their mobile subscribers increase by 7.6%.

The ECOWAS Commission within the framework of the Organised Crime: West African Response on Cybersecurity and fight against Cybercrime” (OCWAR-C) project and in collaboration with the Council of Europe and INTERPOL held an E-Evidence and First Responders Training of Trainers workshop in Praia, Cabo Verde from 25 – 29 July 2022.

Nigeria: statement released by the Nigerian Communications Commission (NCC) stated that Orange sent a six-person team from its Middle East and Africa division led by non-executive Victoria Adefala to scout the Nigerian market for expansion opportunities. Speaking on the expansion, Adefala said, “We are here to ensure steady investment for the long term. We also want to support the vision of NCC in driving broadband penetration for a robust digital economy and leveraging local content development initiatives.”

South Africa: Teraco Data Environments, the provider of colocation data centres and interconnection platforms in Africa, announced the successful completion of the previously announced agreement by Digital Realty, the global provider of cloud and carrier-neutral data centre, colocation and interconnection solutions, to acquire a majority interest in Teraco from a consortium of investors, including Berkshire Partners and Permira.

Mauritius: Mauritian fixed voice, broadband and mobile operator Emtel announced the launch last Thursday of its new 5G broadband fixed wireless access (BFWA) service, dubbed ‘Airbox 5G’, covering 40% of the population. While coverage is initially focused on the capital Port-Louis as well as northern, western and central areas of the country at launch, the company plans to extend availability nationwide over the next two or three years under a phased deployment. Emtel is marketing a range of three subscriptions, offering download speeds of 40Mbps for MUR1,200 (USD25.6) per month, 100Mbps for MUR1,600 and 190Mbps costing MUR1,800.

Start-ups: Seedstars, a seed-stage venture fund is to invest in 100 pre-seed and seed-stage companies across Asia, Africa, MENA, and LATAM in the next 3 years.

Botswana: State-owned infrastructure company, Botswana Fibre Networks (BoFiNet), has contracted Ribbon Communications to upgrade and enhance its national backbone network. Ribbon is providing BoFiNet with a multi-terabit optical network that combines DWDM transport and OTN switching.