By BuddeComm Senior Analyst Africa Peter Lange
Almost a year after it was tendered, the third mobile licence in Egypt was awarded to Etisalat of the UAE in July 2006 for close to US$3 billion, plus 6% of gross revenues. Prices of this magnitude remind us of the crazy summer of 2000 that sent the telecoms industry worldwide into a deep crisis when US$7.4 billion were paid on average by the German 3G licensees and even as much as US$10.9 billion in the UK. Putting the numbers into perspective, however, makes the Egyptian licence appear in a somewhat more favourable light, even though it is a world apart from the US$1 million annually that 3G licences cost at the other end of the continent, in South Africa.
First of all, the Egyptian licence includes a concession for both 2G and 3G services. The 3G component can be valued at about US$578 million – the price the two existing 2G operators in Egypt will have to pay to upgrade their licences to 3G. But even when adding the 2G and 3G components together, the licence fee represents ‘only’ about US$38 ‘per pop’ (per each of Egypt’s roughly 75 million citizens) and three times as much – US$116 – for each potential customer, considering that a third operator can naturally expect to reach about a third of the market eventually. Germany’s licensees paid US$90 per pop and a whopping US$540 per potential customer, given the fact that six licences were issued (even though only four licensees survived).
Furthermore, the 2G penetration in Germany and the UK was already close to 70% back in 2000 while Egypt stands at only 20% in 2006. Whether this is good or bad can be debated: On the one hand there is a lot more unexploited market potential, but on the other hand it is easier to migrate an existing customer base to 3G than acquiring new customers from scratch. And with a GDP per capita of only US$1,500 it will take Egypt much longer to reach the virtually 100% mobile penetration of Western Europe, if at all in the foreseeable future.
In any case, it will take the new Egyptian licence holder many years to recover the licence fee and infrastructure investment – possibly more than the 15-year term of the concession (the European 3G licences by the way have 20-year terms). With monthly APRU levels in Egypt now approaching US$10, and US$5 in many other African markets, it can only be done if the potential for the additional revenue streams that 3G offers, beyond traditional voice revenue, is fully developed and exploited. 3G customers in South Africa for example are currently spending four times as much as 2G customers.
And this is where the fundamental difference lies between Europe and Africa that may justify different valuation methods: In Africa with its poorly developed or often virtually non-existent fixed-line infrastructures, the mobile operators play a much bigger role in the provision of all kinds of communication services. 3G operators in Africa are well positioned to take over significant parts of the largely untapped broadband markets and possibly parts of the media and entertainment markets as well. Fixed-line penetration in Egypt is only 14% (compared to around 60% in Western Europe) and the country’s broadband penetration is still negligible.
3G operators in Africa will, however, be facing competition from other wireless broadband technologies eventually, in particular WiMAX, and will already have to keep the next step in mind, towards 4G.
NEW AFRICA REPORT
2006 Africa Telecoms Statistics – 234 tables report
Single-User Price US$1,595.00
This report comprises 234 statistical tables, with high-level and detailed data relating to fixed-line, mobile and Internet operations within Africa as a whole, and within its component countries. Broadband is not yet well enough established to have meaningful statistics. Data in this report is the latest available at the time of preparation and may not be for the current year.
Countries covered are: Angola, Algeria, Benin, Botswana, Burkina Faso, Cameroon, Chad, Democratic Republic of Congo, Côte d’Ivoire, Egypt, Ethiopia, Gambia, Ghana, Kenya, Lesotho, Libya, Madagascar, Malawi, Mauritius, Morocco, Mozambique, Namibia, Nigeria, Senegal, Sudan, Swaziland, Tanzania, Tunisia, Uganda, Zambia and Zimbabwe.
- Major statistics include:-
Key country indicators;
Subscriber numbers (Mobile, Internet – users/subscribers and hosts);
Annual change and penetration percentages;
Number of fixed lines in service and teledensity;
Major operator statistics;
Approx. number of pages: 121
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