The outside world has long lusted after the riches of Africa, with the modern history of the continent inextricably linked to the exploitation of its people and resources. But this time around African consumers could be the winners when the telecommunication sector's 'everybody-wins' scramble in the region gets under way. By flooding the continent with cheap, high quality mobile networks, the companies can gain hundreds of millions of new customers while consumers get access to one of history's most transformative technologies.
Anywhere that does not have mobile coverage inevitably will. People who do not own a mobile are considered customers-in-waiting. With China and India adopting the technology as fast as physically possible, Africa is the last frontier of the mobile world. This means that bringing mobiles to the people of the continent has become a three-way race between the world's fast-growing telecommunications companies.
MTN, the market leader, has emerged from South Africa to take strong positions across the continent. Zain of Kuwait and the UAE's Etisalat have used vast pools of cash from high-margin domestic businesses, combined with easy financing, to make a series of smart investments and acquisitions across Africa. The two companies, emblematic of the rising economic clout of the Gulf, are engaged in direct competition in markets across the continent. From its poorest country, Niger, where people exist on average annual incomes of less than US$300 (Dh1,100), to some of its richest nations, Etisalat and Zain are fighting a tough, long-term battle for customers.
According to detailed first-half results released this week, Zain is winning the fight. In every market where the two companies compete, Zain has a clear lead, and it is the market leader in 13 of the 20 countries where it operates. The Kuwaiti company has proven to be smart at acquiring assets, and a fiercely competitive market player. Its three major African buys - the regional operator CelTel, Nigeria's VMobile and Sudan's Mobitel - cost the company $5 billion; the assets are now valued at more than $12bn by analysts at Morgan Stanley.
It has rapidly expanded the "One Network" innovation pioneered by CelTel, where customers can roam across different national networks paying local tariffs in each country. Zain has now unified the networks of 15 countries in Africa and the Middle East, effectively creating a single network zone stretching from Iraq to the Atlantic coast of West Africa. The concept has proven hugely popular, and is quickly being replicated by both MTN and Etisalat, along with other international operators. The company is busily building up a war chest of funding for future expansion. This month it will raise its capital by $4.4bn through a stock sale, and Dr Barrak has said it will launch a $5bn initial public offering (IPO) on the London Stock Exchange next year.
"If there is water on Mars, we will go to Mars and set up an operation there," Saad al Barrak, the Zain chief executive, recently told the South African newspaper Business Day. "Our ambition is unlimited." Etisalat's push into Africa has been no less ambitious, but is yet to reap the rewards garnered by Zain. While Nigeria now accounts for 22 per cent of Zain's revenues and the continent is home to more than three-fifths of its customers, Etisalat's international operations are still largely in their infancy.
Its West African businesses - acquired from the regional operator Atlantique Telecom - were sold to Atlantique in 2005 by Orascom Telecom, the Cairo-based operator. When the company faced a liquidity crisis, it hurriedly exited from underperforming sub-Saharan African units, choosing to refocus on core markets in North Africa and East Asia. Etisalat's reporting on the performance of its African operations is opaque, and it does not reveal subscriber numbers or financial details of overseas units. But in a detailed first half results report issued this week, Zain demonstrated how hard Etisalat will have to work if it wants to displace its Kuwaiti rival in African markets.
The two companies compete head to head in five African countries: Sudan, Tanzania, Gabon, Niger and Burkina Faso. Zain leads Etisalat in all of them, and it is the overall market leader in four of the five. The sixth front of this continental battle - and the most important - will open later this year, when Etisalat launches its services in Nigeria, Africa's largest telecommunications market. Nigeria has become Zain's largest revenue source, overtaking its home market of Kuwait. In the last year, the company became the country's second largest operator, moving up from third place a year ago.
Of the 13 million Nigerians who became mobile customers for the first time in the last year, 6.8 million chose Zain, giving it a clear lead in the fight for new customers. Zain's frontal assault on the market looks set to continue. Bayo Ligali, the chief executive of its Nigerian business, has said the company will invest $1bn per year until 2011 in its quest to become the country's largest operator.
Etisalat has invested at least $1bn entering Nigeria, after the Mubadala Development Company, an investment fund operated by the Government of Abu Dhabi, acquired a telecommunications license there last year. The company has recruited staff and rolled out a network that covers a number of population centres. It was making test calls on the network in March this year and hoped to start operations within months, but has yet to announce a launch date.
"Nigeria will be an extremely important operation for us," said Jamal Jarwan, the chief executive of Etisalat's international business in April. "We will compete on both price and quality, because a good network can deliver both these things. Our experience in Egypt has shown this." Egypt is home to Etisalat's most successful operation on the African continent. Unlike many of its networks, which were acquired from existing operators, Etisalat started its Egypt business from scratch, as it is doing in Nigeria.
The company rolled out Egypt's first high-speed 3G mobile network and positioned itself as both hi-tech and better value for money. It attracted one million customers in its first three months, and is now believed to have four to five million subscribers there. "One benefit of starting a new operation is that you have control over everything right from the beginning," said Mr Jarwan. "You can do it your way."
@Email:tgara@thenational.ae
