Archive for May, 2016

Burundi’s mobile subscriber base shows strong growth in 2015

Tuesday, May 31st, 2016

Burundi remains one of the most attractive telecom markets in Africa for investors. The country has a high population density with relatively low, yet fast growing, mobile market penetration. This provides considerable potential for revenue growth in coming years. Nevertheless, investor reticence is still evident given the country’s low economic output and the fact that outside the main urban areas fixed-line infrastructure remains poor. To overcome these difficulties, the government, supported by the Word Bank, has backed a joint venture with a number of prominent telcos to build a national fibre backbone network, offering onward connectivity to submarine cable infrastructure landings in Kenya and Tanzania. The first sections of this network were switched on in early 2014.

Since 2012 Burundi has had improved access to international cables, thus ending its dependence on expensive satellite connections. The higher international bandwidth made available has resulted in lower retail prices for consumers.

Market limitations have delayed the launch of services among some players: in late 2012 two GSM licensees had their licenses withdrawn after having failed to launch services. Two of the remaining mobile operators have launched 3G mobile services to capitalise on the growing demand for internet services. The number of mobile subscribers has grown rapidly in recent years, with penetration approaching 50% by early 2016. Nevertheless, this remains low by regional standards, suggesting considerable room for further growth. A new player, Viettel Group, which received a licence to provide mobile services in early 2014, launched 2G and 3G services in June 2015 and claimed to have signed up 600,000 subscribers within the first month. This placed the operator as the third largest in the country. Trading as Lumitel, Viettel aims to become the largest operator in Burundi, and to complement its mobile operations with fixed-line services. These developments, coupled with the relatively take-up of telecom services thus far, make Burundi is one of the most attractive growth markets in Africa, despite the limited size of the population.

The long-established plans to privatise the national telco Onatel (which also operates one of the mobile networks), have been delayed several times, but the government since 2013 has made efforts to kick-start the process.

For detailed information, table of contents and pricing see: Burundi – Telecoms, Mobile and Broadband – Statistics and Analyses

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Is 5G over-hyped?

Tuesday, May 31st, 2016

It probably is because we are so good at doing that in our industry. We start with over-promising and under-delivering and then in following years we fix it. So why would 5G be different?

Our admirable technology companies are telling us that 5G will be 100x faster than 4G and that it will have 50x lower latency. But my more independent technology colleagues tell me ‘it all depends’. I have no doubt that the quality of 5G will be up to standard. The vendors and operators have done a terrific job of getting us to where we are now and there is no reason to believe that this will be any different. However there are other variables that will affect the service.

In my view the promises above are, typically, the best possible case scenarios.

For example, it depends on what frequency bands are used – 6GHz, 28GHz, 27 GHZ. The higher the frequency the more fibre you need closer to the user in order to deliver those higher speeds. Currently less than 50% of mobile towers are connected to fibre, and the rollout of fibre can’t keep up with the rapid deployment of mobile broadband. 5G means more mobile towers so it is unlikely that all of these towers will be linked to fibre in the near future.

In relation to latency issues, here the ‘it all depends’ includes distances involved between network elements and also the actual quality and capabilities of the devices connected to the network (be aware of the blame game between network operators and device vendors).

Other issues that can affect the performance of 5G (but are not unique to it) includes the number of users connected to the same cell, the actual applications used, whether it is used in a mobile situation as the speed of moving will have an effect, and, last but not least, weather conditions. All of this will need to be considered when selecting the right infrastructure for the right application.

Others that are looking at M2M and are shopping around have also been told by their mobile operators that their LTE networks (with a range of different flavours) will become commercially attractive for certain M2M applications by early 2017. So, from a mobile network perspective, over the next five years or so LTE will take an important share of this market and unless these services are migrated to 5G at no extra cost and at a time when these networks are stable enough for such application, 5G will take a back seat.

So, yes, in theory 5G can deliver on those promises but better to check out if that will be the case in the particular 5G services that your operator provides you with. And also check the backhaul issue. Is there fibre or enough capacity in the microwave backhaul network to support that particular application?

On the positive side – something we have been talking about for a long time – 5G will drive fibre deeper and deeper into the network and that will also benefit the business model for FttH.

Another promise: the vendors let us believe is that 5G is ideal for M2M applications (machine-to-machine or IoT internet of things) as it will allow for 100x the number of devices to be connected to such a network. That might be true, but what about the affordability? There is no indication that prices will match the current costs of linking IoT devices to LPWS (low-powered wireless networks), 2G networks, mesh networks. The reality of IoT or M2M networks is that the sensors and devices connected to such networks don’t change for a decade or more, so it is not anticipated that there will be a rush to migration by those operating such applications at the moment. Furthermore 5G is a new technology and very few M2M users would want to be the guinea pigs for this.

Also, to make 5G cost-effective significant investments will be required in the network by the network operator in order to optimise the network, so that application devices (radio modules) need less technology and are therefore competitively priced against the technology used in the devices employed on other M2M networks.

For starters, I am sure there will be some niche market applications that will be ideally suited for 5G and those who want to operate this will be willing to pay a premium for the use of the 5G networks. And over time – depending on how all of the other alternative infrastructure develops – there will also be a market for 5G M2M and IoT applications.

In the meantime expect a great deal of hype. There will be 4 ½ G and early 5G offerings but there will also be standards and compatibility issues. It will miraculously support driverless cars (imagine the variability of problems when the car suddenly stops); it will spur robotics and virtual reality; yes, it will allow pigs to fly; and it will make your perfect cup of coffee :-).

Paul Budde

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High competition in the mobile and digital advertising sectors

Monday, May 30th, 2016

Mobile advertising has quickly become a key target growth area for marketers who are establishing strategies and capabilities in this area in order to remain competitive. Companies which rely on digital advertising for their survival, such as Alphabet (Google) and Facebook are already dominating the market.

Alphabet has traditionally made most of its advertising revenue off the back of its search engine and it has led the global search engine sector for many years.  However advertising linked to search functions may not translate to mobile as well as other services such as social media. Facebook, for example, has one core advantage over Alphabet, with its social media presence already well established on mobile and millions of users. Consumers are more likely to linger on social media on mobile devices rather than a search engine – and this creates further opportunities for advertisers.

Alphabet is quickly turning its attention to its own strengths however with a renewed focus on mobile advertising opportunities linked to its app store and YouTube.

Other growth areas in the advertising sector include mobile in-game advertising, mobile video advertising, digital ad exchanges and Smart TV advertising.

Utilising consumer data and Big Data analytics is a key focus as well. Marketers are looking for any angle which will give them an advantage. Companies like Facebook are well placed in this case as well, with the vast array of information it holds on millions of people around the globe.

Kylie Wansink

Senior Analyst – Global and Middle East Markets

For related information, see separate report: Global Digital Media – Mobile Advertising and Digital Marketing – Key Trends and Statistics.

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Nicaragua – Movistar extends its LTE network

Saturday, May 28th, 2016

Nicaragua is the largest and least densely populated country in Central America. The country’s significant GDP growth since 2010 belies the low economic base, given that it has the lowest GDP per capita in the region, with some 60% of the population living below the poverty line. As a result, much of the economic drive has been the result of international assistance, particularly from the World Bank and other agencies.

The efforts underway to build a canal between the Pacific and Caribbean, largely with Chinese funding, which will incorporate deep-water ports, an oil pipeline, railroad and international airport, is an ambitious attempt to bring to deliver greater economic benefits, though the business case for the project remains uncertain.

Nicaragua’s telecoms market has mirrored the poor economic achievements, with fixed-line teledensity and mobile penetration also the lowest in Central America. The broadband market remains nascent, with population penetration at about 1.2%. Most internet users are concentrated in the largest cities because the rural and marginal areas lack access to the most basic telecom infrastructure. A number of internet cafés provide public access to internet and email services, but these are also restricted to the larger population centres.

América Móvil’s Claro has a clear lead in all of Nicaragua’s telecom sectors, including fixed-line, mobile, broadband, and pay TV. Mobile subscribers overtook the country’s main lines in early 2002, and now make up the significant majority of all lines.

Telefónica’s Movistar is the only company competing with Claro in the fixed-line and mobile market. In the mobile sector, Movistar holds almost one third of the market, but in the fixed-line sector, it has only about 10% of the country’s fixed lines in service.

Due to a weak regulatory structure and bureaucratic delays, further liberalisation has been slow to be implemented. The duopoly situation has dampened the competitive drive, and as a result there has been less effort than in neighbouring countries to improve quality and lower prices. However, other companies operating in the market include the Russian state corporation Rostejnologuii, Yota Mobile and IWB Holding.

The fixed-line market will probably continue to be stable, leaving growth principally in the mobile and broadband sectors. Competition in the mobile sector is expected to improve from late 2014 with the introduction of a new China-based operator following the auction of spectrum in the 1800MHz band. The broadband sector will be the main growth engine given the extremely low existing penetration rate coupled with consumer demand for services. In this regard, the longer-term prospect is promising.

For detailed information, table of contents and pricing see: Nicaragua – Telecoms, Mobile, Broadband and Digital Media – Statistics and Analyses

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Radical changes for electricity utilities

Friday, May 27th, 2016

There is no doubt that the current business model of most electricity utilities around the world is under enormous pressure.

From many different directions – political, environmental and economical – the industry is under pressure and it has no choice but to change. This, of course, is far more easily said than done. Unlike the telecoms industry, which faced significant changes a few decades ago, there is no new product on its way for the electricity companies to tap into. The telcos developed mobile, broadband and ICT services, but it is much harder for the utilities to come up with replacement services.

While one obvious direction is to develop new businesses around renewable energy, micro-grids, smart street lights, EV, etc, the problem will be that once such models become successful the question will arise as to whether they should be delivered through the monopoly model of the utilities or through the market. We already see in some of the European countries that the regulator has stepped in on the request of other market parties and ruled that, for example, the operation of EV loading stations should be left to the market.

An option is to look at the utilities in a totally different way. If we look at the current business model it is hard to see the utilities surviving in their current form, and perhaps as early as the next decade serious structural industry failures will start to occur. Sure, the current models can be propped up through government regulations (eg, forced price increases for consumers), but this will be unpopular and unsustainable moving ahead. There is no doubt that the current value of the utilities for their shareholders is diminishing.

On the other hand, the utilities are well-positioned to build new energy companies along the lines mentioned above; but for regulatory reasons these new ventures will need to be developed separately from their monopoly business and, they will need different shareholding constructions.

However the overall total value of these new businesses could easily surpass the value of the dwindling incumbent business.

Both the social and economic benefits will be very significant as these new businesses will add new jobs; will save consumers money (energy efficiency); will be environmental friendly; and will be far more sustainable longer-term. This future energy model will also be a key driver for much broader innovation and will be a key infrastructure element for the emerging smart cities.

Paul Budde

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