INTERNATIONAL. A fortnight ago, the South Africa-based MTN Group started what could be interpreted as a process to expand its dominance from Africa into the Middle East. It spent US$5.526 billion to acquire all of the shares of Investcom that were on offer (BI-ME, 02/05/06).

Investcom in itself is not a small operator. For the year ended 31 December 2005, It had a gross income of US$903 million and net income of US$196 million from operations in eight African and Middle East states. The operator has operations in Benin, Cyprus, Ghana, Guinea Bissau, Liberia, Sudan, Syria and Yemen with a total of 4.9 million subscribers.

Before the acquisition, the South African telecoms firm recorded approximately US$4.24 billion as income from its nine months, operations that ended 31 December 2005. The MTN Group now has a total subscriber base of 24.185 million. The operations are scattered in ten African countries of Botswana, Cameroon, Cote d'Ivoire, Nigeria, and Republic of Congo (Congo Brazzaville). The others are Rwanda, South Africa, Swaziland, Uganda and Zambia.

With the acquisition of Investcom, the MTN Group would now have operations in 18 countries in Africa and the Middle East. MTN is also expecting a further 1.5 million subscribers from its new Iran business, ready for launch in August. It has obtained the second GSM licence in Iran.

The story of Kuwait's MTC is almost the same. As at 31 March 2006, the group had 15.63 million subscribers in Africa and the Middle East. It earned consolidated revenues of US$751.09 million and a net income of US$199.40 million. It has operations in six Middle East countries of Bahrain, Iraq, Jordan, Kuwait, Lebanon and Sudan with 7.834 million subscribers. Its African operations span Burkina Faso, Chad, Congo Brazzaville, Democratic Republic of Congo, Gabon and Kenya. MTC through Celtel also operates in Madagascar, Malawi, Niger, and Sierra Leone. The remaining countries are Tanzania, Uganda and Zambia. Together, these contribute 7.793 million subscribers to the group's operations. The total number of countries where it operates is today 15.

On 17 April 2006, just after it had finished its 2006 first quarter operations. MTC announced that it had acquired 65% of the Nigerian operator Vmobile for US$1.2 billion. That takes its total subscriber base to a little over 20 million subscribers and with operations in 16 countries.

Creating a broader market space

These two, MTN and MTC, with 28 million and 20 million subscribers respectively, have created a situation where it is now very late, and expensive, for other operators to enter Africa or the less-developed markets of the Middle East. International investors have been rallying to gain access to Africa's rapidly expanding, mainly mobile, telecoms market. Poor access to fixed line services has resulted in strong uptake for mobile telecoms.

Among the other major operators on the African continent there is South Africa-based Vodacom, which as at September 2005 earned US$2.532 billion) in five African countries. Vodacom's 19.1 million subscribers (it just announced the 20th million subscriber on 10 May) are spread across South Africa, Tanzania, Lesotho, Democratic Republic of Congo and Mozambique.

There is also Egypt's Orascom Telecom Holding, which operates in seven countries in Africa and the Middle East. These markets include Algeria, Pakistan, Egypt and Tunisia. It also operates GSM networks in Iraq, Bangladesh and Zimbabwe. As at 31 December 2005, Orascom had a total of 30.4 million subscribers. Its revenue for the period was US$3.226 billion.

On the question of why operators now want to take space in both Middle East and Africa as opposed to just one region, the former CEO of Startech Connections, Anne Bresnahan, said the trend is quite logical linking Africa and Middle East since both regions are developing and with high population and growing markets.

Tope Fashedemi, Head of Solutions, Netcom Africa, said the trans-regional operations might be as a result of telecom operators realising that these markets (Africa and Middle East) are the places to obtain the highest margins and growth. He commented that the telecom business is a game of numbers: you either have very high ARPUs (Average Revenue Per User) or you have very large subscriber numbers. "With their oil-wealth and consequent high per capita incomes, the Middle East countries obviously allow telcos to get high ARPUs, while Africa has the potential to deliver the huge subscriber numbers. In the case of Nigeria, the operators have been enjoying both high ARPUs (and) ever increasing subscriber numbers," he explained.

He said the issue is not just about belonging to a powerful telecom bloc, it is about getting access to huge capital to deploy in order to build a network to accommodate as many subscribers as are available and at a reasonable Quality of Service (QoS).

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