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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;
  Growth indications;
  Historical data.

Approx. number of pages: 121

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While Unbundled Local Loop service were economic unviable for voice service, it provided the right platform for semi-infrastructure based broadband competition. Several telcos and ISPs are now installing their own DSLAM infrastructure and by early 2006 more than tens of thousands of DSLAMS were either installed or commissioned. ADSL2+ became available over the first installed DSLAMs in late 2003 and this development is going to lead to a broadband capacity explosion over the rest of this decade, with triple play business models delivering VoIP and IPTV as well as high speed Internet access.

Duration: 14 minutes

Download: Broadband – moving up to higher speeds

For further information see:

• Australia – Broadband
• Global – Broadband
• Broadband Technology

This is a BuddeComm MP3 podcast. BuddeComm is an international telecommunications research company and produces over 2,000 research reports, covering 170 countries, 500 companies and over 200 technologies and application. Topics include telecommunications, mobile, Internet, broadband, convergence, digital media and content. These reports are available on the net as well as in pdf and printed formats. For more information visit us on our website www.budde.com.au.

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Participating in the Telstra Debate Down Under sometimes gives you the feeling that many of our observers and decision-makers do, indeed, live on an island. But I am sure this article also applies to many other countries.

The interesting thing is that telecoms is a very international business and, to be honest, that sometimes makes my life a lot easier. Operating an international research business covering 170 countries, and having some 45 senior analysts and researchers involved, gives me the luxury of being able to compare and analyse.

And what happens with mobile content in Europe does impact on what happens in Australia – how government policies in Asia affect infrastructure investments over there provides us with lessons to be learned in North America; wireless pioneering in New Zealand can be used in analysing and forecasting developments in Europe; and so on …..

But, back to Telstra, the arguments that Telstra is putting forward in relation to regulations and infrastructure investments are also being used in other parts of the world. In Europe the incumbents are using similar arguments in order to obtain regulatory holidays on their FttH investments and, like Australia, most governments are not giving in.

The incumbents in Germany and France have sympathetic governments, but even there the concessions in relation to competition are still significantly better than the current situation in Australia. Look for example at local loop unbundling in France, they are leading the world here. Perhaps the odd one out is the USA, but if one looks at how low the US international broadband and mobile penetration rankings are one would have to question the success of US telecoms policies.

Most countries in Europe are far less willing to give in to incumbent demands. Regulators in Britain and the Netherlands are very hard-line, and it is in these countries that we are seeing the most progress towards competition and innovation. Interestingly, it is in those countries also that significant new investments are made in new infrastructure, particularly in the Netherlands.

Countries where governments show real vision and hands-on involvement in infrastructure development show by far the highest level of new investments. Classic examples here are Korea, Japan, Hong Kong, Singapore and Taiwan, and I am sure that, in a few years’ time, China will follow this trend also. Financial analysts have told me that public infrastructure investments are often a prerequisite for private investments.

The Connect Australia initiatives from the Australian government has seen a number of proposals put forward to the government that will see at least a matching of investments once these projects are underway.

The financial market is victim to a great deal of uncertainty and misinformation regarding technologies and regulations, and many are getting cold feet when it comes to investing in such an environment.

Public investments can show the way forward, making the environment perhaps a bit more predictable, although it is argued in some quarters that public funding should be avoided, the view being that the market should lead new investments.

The reality is that infrastructure in whatever format will always involve some government participation – whether it is in policies, regulations or funding. So it is unrealistic to act as though this will suddenly go away just because we are talking, for example, about an FttH network. True, if you give the incumbents a monopoly and a 20%-25% return on that investment there might be no need to seek public funds. However, if we want a solution for home care for the ageing; quality education in regional areas; improvements in lifestyle; e-government applications and, perhaps just as important, a first-class infrastructure for the e-economy, the question is whether that is best achieved through such high ROIs for a monopolist.

It is now well-recognised that the benefits of FttH are not simply economic. They are also most important for the social infrastructure of the country. And more and more countries are coming to recognise this.

Interestingly, because of the enormous conflict in Australia between the government and Telstra, the Australian government has been forced to analyse what its role has to be. They can no longer simply hide behind promises from Telstra – that it would look after the country’s interests. Telstra has made it very clear that it will not do this and, as a consequence, the Australian government is suddenly propelled into a leadership role.

We are fortunate to have a Minister who is driving this process, and slowly but surely she seems to be succeeding in persuading her colleagues to share with her the important role that the government has to play here.

I receive regular requests from the international media, asking for an explanation as to what is happening Down Under in respect if these new government policies, these certainly are attracting international interest.

Paul Budde

See also: Industry Analyses Australia

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