The Cell Phone Megatrend: The Battle for Africa

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The Cell Phone Megatrend: The Battle for Africa
星期五, 五月 16, 2008 08:41:59

by *Nicholas A. Vardy*

With 70% penetration in the United States and more than 100% in some European markets, a growing number of global cell phone companies are shifting their attention to fast-growth emerging markets. That's a big change. When the Internet bubble popped in 2000, emerging markets accounted for only about 10% of cell phone users worldwide. Today, that same number is well over 60%. Just last month alone, India, the world's fastest-growing market, added 10 million users. That's more users than the entire population of New York City. China Mobile had already overtaken the United Kingdom's Vodafone as the world's largest cell phone operator by number of subscribers sometime in 2006. And just last month, Bharti Airtel, India's largest cell phone company, reportedly overtook AT&T in number of subscribers. The Cell Phone Megatrend: Emerging Markets Mean Big Profits The initial foray into emerging markets was led by a handful of nimble cell phone players that focused on niche markets. Luxembourg-based Millicom International (MICC), the "Indiana Jones" of the cell phone operators, offers prepaid cell phone services across 16 countries in Central and South America; Africa; south and Southeast Asia. Ireland's Digicel first set up in Jamaica in April 2001, and since then has established a presence in 22 markets in the Caribbean region to amass some five million customers. Russia's Vimpelcom has steadily expanded into neighboring countries that were once part of the Soviet Union.

With growth slowing in its core markets a few years ago, U.K. cell phone giant Vodafone (VOD) began to prospect for acquisition targets in Africa, Europe, and Asia. Initially, Vodafone's board greeted CEO Arun Sarun's focus on less developed markets with skepticism. Since then, Sarun has won his board over with a string of purchases in fast-growing markets such as India, Turkey and Eastern Europe, which have helped offset sluggish growth in Vodafone's mature markets. Vodafone's recent deals have included a $4.7 billion acquisition of Telsim in Turkey and an $11.1-billion takeover of Hutchison Essar, India's fourth-biggest mobile phone operator. Vodafone continues to be on the lookout for opportunities as they may arise. The company recently even opened an office in Hanoi to keep its finger on the pulse of Vietnam's cell phone market. The Cell Phone Megatrend: Africa, The Final Frontier That's why it came as little surprise when this past Sunday, Vodafone announced that it is considering a bid for a majority stake in MTN, Africa's largest cell phone operator. MTN came into play last week after it revealed that it is in talks to sell a majority stake to Bharti Airtel of India. Reliance Communications, the Indian group controlled by the industrialist billionaire Anil Ambani, and China Mobile may also follow Vodafone's lead in throwing their own hats into the acquisition ring. As MTN's newfound popularity confirms, global players suddenly have realized Africa's untapped potential. Cell phone penetration across Africa's population of 900 million is only 14%, the lowest in the world. And with little in terms of fixed-line infrastructure to serve as competition, Africa's cell phone subscriber base is expected to reach 378 million by 2011. The competitive landscape also is favorable to new entrants. Most African nations have only one or two operators, versus an average of four in more developed markets. Africa also represents a unique opportunity in terms of specialized, value-added services. Because many Africans don't have bank accounts, cell phone operators also are introducing "mobile banking" services such as money transfers and payment.

The Cell Phone Megatrend: Indian Companies Step Up Bharti Airtel's bid for MTN is yet another bold move by an Indian company willing to step on to the global stage. If successful, Bharti Airtel's bid for a majority stake in MTN, valuing the company at about $37 billion, would mark the largest overseas expansion ever by an Indian firm. This transaction alone would amount to more than seven times the amount India invested directly in the whole of Africa from 1995 to 2004 and dwarf the $11.3 billion that Tata Steel paid in 2007 for Corus, an Anglo-Dutch steelmaker. At the stroke of a pen, Bharti Airtel would transform itself from India's biggest cell phone company to an emerging markets powerhouse that would rival Latin American giant America Movil in number of subscribers. No one can accuse Bharti Airtel of lacking chutzpah. With a portfolio spanning 21 countries in Africa and the Middle East, MTN has about 68 million subscribers. That's more than Bharti Airtel's 62 million subscribers in India. MTN also boasts higher profits than Bharti Airtel: $4.5 billion in 2007, before interest, taxes and depreciation, compared with Bharti Airtel's $2.8 billion for its fiscal year ending March 2008. For Vodafone, the acquisition of MTN would greatly increase its exposure to emerging markets, and complement Vodafone's existing investment in Vodacom in South Africa. Yet in many ways, Bharti Airtel would be a better fit for MTN than the more established U.K. giant. Vodafone and Bharti Airtel do business in very different ways. Most notably, monthly "average revenue per user" (ARPU), a key industry measure, is miniscule for those used to working in developed market. While Bharti Airtel's average ARPU is $8.80 per user in India, in Western Europe and the United States, the comparable number is closer to $40. MTN's profile is closer to India than the United Kingdom, with ARPUs ranging from $24 in Congo-Brazzaville to about $8 in Sudan, with an average of $17.50 across all of Africa. That means that to be successful on such razor-thin margins in both the African and Indian markets, cell phone operators must sign up subscribers cheaply and quickly, making money on tiny, pre-paid services for a few minutes of calls at a time. Marketing to these low ARPU customers is precisely Bharti Airtel's specialty. But at least Vodafone is still in the game. Major U.S. and Western operators are conspicuous in their absence in the bidding wars for lucrative emerging market opportunities. AT&T, Germany's Deutsche Telekom, and France Telecom have each denied having any interest in MTN. The future, it seems, belongs to the nimbler players willing to embrace opportunities in places such as Africa where others fear to tread.
文章来源：MoneyShowAsia.cn