Research Press Release (Doc #prCEMA40902516 / Jan 7, 2016)
Profitability Concerns Spark a Rethink Among Global Telcos in Africa

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Lagos, November 11, 2015 – Africa may well be the next frontier for growth and expansion for global telecom operators, but a number of major players have encountered serious challenges around the profitability of their investments in trying to establish a sustainable and economically viable footprint on the continent. And, according to global technology research and consulting firm International Data Corporation (IDC), these challenges have led some global telcos to reconsider their plans for the region

Etisalat Group, for example, entered into an agreement in 2014 that saw Maroc Telecom acquire its subsidiaries operating under the Moov brand in Francophone West Africa (i.e., Benin, Central African Republic, Gabon, Ivory Coast, Niger, and Togo). The deal also included Prestige Telecom, a company based in the Ivory Coast that provided IT services to Etisalat's operations in the six aforementioned countries. The move was spurred by the steadily declining revenues that Etisalat was pulling in from its international subsidiaries, with all of its West African operations (including Nigeria) contributing just 7% to its overall revenues in 2014.

Elsewhere, Bharti Airtel entered 15 African markets in 2010 after acquiring Zain's subsidiaries on the continent, and has since expanded into two more markets. However, after five years of operations, the telco is considering selling some of its African subsidiaries, largely due to concerns around sustainability and profitability. Indeed, Orange is currently in talks with Bharti Airtel to acquire four subsidiaries in Francophone and Anglophone Africa (i.e., Burkina Faso, Chad, Congo Brazzaville, and Sierra Leone).

"The poor level of infrastructure – particularly in relation to electricity supply – is one of the key challenges that telcos encounter when it comes to deploying and maintaining top-quality network operations in Africa," says Paul Black, director of IDC's telecoms program for the Middle East, Africa, and Turkey. "This issue has consistently affected the profitability of telcos due to the increased levels of capital and operational expenditure they must undertake in building and maintaining a passive telecom infrastructure. Some global telcos have also failed to adapt and implement strategies that have succeeded in other regions. Indeed, the majority of global telcos have been unable to localize their global strategies to suit the unique operating environments of the African market."

"The operational challenges facing telcos in Africa have driven growth in the continent's third-party telecommunications infrastructure management business, and IDC expects the pressing need for telcos to reduce their costs and increase their levels of control to sustain growth in this space," continues Black. "In order to increase the likelihood of success, telcos wishing to pursue growth and expansion in the African market must focus on developing enterprise products and services that appeal directly to the wants and needs of the local market, and to small and medium-sized businesses in particular. Telcos looking to enter Africa should tailor strategies that have succeeded in other regions to the specific operating environments they encounter in Africa, while the mobile virtual network operator (MVNO) route should also be considered as a potential entry strategy."

For more information about IDC's telecommunications and media services research in Middle East and Africa, please contact Paul Black at pblack@idc.com or on +971 55 902 3399.

About IDC

International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. More than 1,000 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries worldwide. For more than 50 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. You can learn more about IDC by visiting www.idc.com .

IDC in the Middle East, Africa, and Turkey

For the Middle East, Africa, and Turkey region, IDC retains a coordinated network of offices in Riyadh, Casablanca, Nairobi, Lagos, Johannesburg, and Istanbul, with a regional center in Dubai. Our coverage couples local insight with an international perspective to provide a comprehensive understanding of markets in these dynamic regions. Our market intelligence services are unparalleled in depth, consistency, scope, and accuracy. IDC Middle East, Africa, and Turkey currently fields over 125 analysts, consultants, and conference associates across the region.

 
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