Ericsson loses another senior exec

Ericsson lifer Rafiah Ibrahim, currently its Head of Market Area Middle East & Africa, is calling it a day after 23 years at the company.

To be precise Ibrahim is going to step down from her current position, which she has held for a couple of years, at the end of August and assume the new role of ‘Advisor to the CEO’. But since all precedent under the current CEO Börje Ekholm is that ‘Advisor’ is just a euphemism for ‘gardening leave’, we’d be surprised if Ibrahim was still with the company in 2020.

“Rafiah has been a very important leader in our sales and delivery organization,” said Ekholm. “In her latest assignment she successfully led the merger of two important markets, Middle East & Africa, increasing customer value and securing scale and efficiency as well as implementing a robust operational structure. In addition, Rafiah has built strong customer relationships across the region not least visible in the recently announced 5G contracts. Rafiah has been a valued member of the Executive Team and I look forward to continuing to work with her in her new role.”

The workload of Ericsson’s executive recruitment team is starting to mount up. We still don’t know who is going to replace Helena Norrman to head up the marketing and there seems to have been a steady trickle of senior departures since Ekholm took over. No doubt this is all part of the grand plan, which seems to be going OK, but it does make you wonder about morale at the top table and we must assume Ibrahim was still happy with everything when this corporate vid was published towards the end of last year.

 

Vodafone blames accounting change for €800mn revenue decline

Vodafone has unveiled its quarterly results for the period ending December 31, and while a year-on-year decline of €800 million might worry some, it’s not as bad as you think.

The team claims it has performed pretty much in-line with expectations and the same period of 2017, however a shift over to the IFRS15 accounting standard, the sale of the Qatar business and FX headwinds caused the decline. In other words, it’s all the fault of the bean counters.

“We have executed at pace this quarter and have improved the consistency of our commercial performance,” said Group CEO Nick Read. “Lower mobile contract churn across our markets and improved customer trends in Italy and Spain are encouraging, however these have not yet translated into our financial results, with a similar revenue trend in Europe to Q2.

“We enjoyed good growth across our emerging markets with the exception of South Africa, which was impacted by our pricing transformation initiatives and a challenging macroeconomic environment. Overall, this performance underpins our confidence in our full year guidance.”

Addressing the elephant in the room, the €800 million decline. While suggesting a change in accounting standards is a primary cause might sound flimsy, it certainly will have contributed. IFRS15 dictates a business cannot recognise all revenues up-front; if a contract has been signed, revenue can only be recognised in the financials when it is collected. For example, if your customer has agreed terms to pay at the end of the contract, once conditions have been fully satisfied, this revenue cannot be reported until that point. In other words, Vodafone cannot claim it has the money until customers have actually paid it.

While this is a perfectly reasonable explanation of why revenues might have declined, it is also important to recognise Vodafone is under pressure in numerous markets. The team have claimed success across the European markets, with improving customer and financial trends in Italy, retail growth in Germany and reduced churn in Spain, but year-on-year revenues were down 1.1%. Again, there will be multiple factors contributing to this decline, but it would be foolish to suggest everything is rosy at Vodafone.

A couple of weeks back, RBC Capital Markets released an investment note suggesting Vodafone is not only in a slightly precarious position because of competition pressures (in Europe, Africa and India), but upcoming auctions as well. Depending on how aggressively spectrum prices continue to inflate, Vodafone could fit itself footing a bill between €4.5 billion and €12 billion.

Looking at the performance in the markets, if you ignore the difficult one’s things are going great. European service revenues declined 2% to €7.496 billion (using a consistent accounting standard), with the Spanish, Italian and UK markets all reporting drops. Germany and the ‘other’ European markets reported year-on-year increases of 1.1% and 4.1% respectively. In Italy, the team has faced the uncomfortable entry of the disruptive Iliad, while the impact of handset financing was the cause in the UK. In Spain, the team restructured various offerings to make the brand more competitive. In theory, all of these markets should stabilise over the coming months.

Across Africa, Vodacom revenues grew by 1.5%, though growth was dampened by the South African market. Here, service revenue declined by 0.9% down to the pricing transformation strategy. The aim here was to reduce exposure to out-of-bundle revenues and improve the performance of more generous promotional summer offers. Over the period, South Africa added 86,000 contract customers, primarily from the business unit.

The other tricky market is India, but we’ll have to wait for a while to see the lay of the land there. Vodafone Idea will report its third quarter results in February, though as the integration of these two businesses is a work-in-progress any results will have to be taken with a pinch of salt. Reliance Jio is running the show in India as it stands, but the Vodafone Idea merger will have to be given time to create a competitive offering.

Overall, these are results which we should have expected. Vodafone is reacting to pressure in various markets, but it is not in the most comfortable position. In the vast majority of its markets, Vodafone would be considered more of a challenger than a leader. There are certainly dominant positions in some of the African markets, but it Europe it is fighting for attention.

The business is not nose-diving, but it certainly isn’t thriving. However, there are proactive measures taking place across the world to cultivate success. The fixed broadband offering in the UK should make an effective convergence business, Vodafone Idea could challenge the momentum of Reliance Jio, while more competitive tariffs in markets such as Spain and Italy should put it is a better position moving forward.

Vodafone is making some interesting, and encouraging, decisions but it is starting to fight bloody battles on a lot of fronts.

Helios Towers expands footprint into South Africa

Helios Towers has entered into a partnership with Vulatel to form a joint venture to build out wireless and fixed line open-access infrastructure in South Africa.

Helios will take a 66% slice of the venture as the firm readies itself for the 5G revolution. While it might seem strange to talk about 5G on a continent which has constantly struggled to bridge the enormous digital divide, South Africa is certainly a different landscape than what would be expected as the norm.

“I am thrilled to announce our entry into South Africa, which delivers against our stated strategy of providing MNOs with open-access infrastructure to meet the growing demands of their customers in Africa for fast, stable and available networks,” said Kash Pandya, CEO of Helios Towers. “We are delighted to be partnering with Vulatel, a business with impeccable telco sector expertise and deep local credentials in South Africa.”

For Helios, expansion into the South African market makes perfect sense and partnering with a local business will provide suitable foundation. Helios’ footprint currently covers four markets across the African continent, while Vulatel came to existence in 2017 on the back of acquiring Dimension Data’s fibre and wireless division. Helios brings the international experience and capital, while Vulatel holds its own with contacts and relationships in the South African market.

“There is a significant infrastructure gap in South Africa today, which means the demand in data services is not being met,” said Tlhabeli Ralebitso, CEO of Vulatel.

“We are convinced this provides an unrivalled opportunity to build a leading open-access infrastructure platform to address that gap. Our vision has always been to establish a nationwide service network before entering into the open-access telecoms infrastructure market on the back of our trusted relationships with the telecoms operators in South Africa.”

Looking at the South African market, this is a country which is expected to lead the 5G euphoria on the African continent proving this is a good time for Helios to make its move. With 6,500 towers in four markets (Tanzania, Democratic Republic of Congo and Congo Brazzaville), contracted revenues of $3.1 billion and average contract life of 8.4 years remaining across the group, it is certainly in a stable position to make such a bet.

Bharti Airtel exploring acquisition of Telkom Kenya – report

Indian telco Bharti Airtel is reportedly in discussions to expand its presence in the Kenyan market through the acquisition of Telkom Kenya.

According to Reuters, the under-pressure Indian telco is meeting with Telkom Kenya executives to acquire the business, merging the number two (its own brand Airtel) and three players in the country. This is not the first time such a transaction has been discussed, though it is claimed London-based Helios Investment, which owns 60% of the business, is attempting to cash-out of the market.

While agriculture still remains the leading sector across the country, Kenya’s growth has been steady and diversifying in recent years. The country is the economic, financial, and transport hub of East Africa, and real GDP growth has averaged over 5% for the last decade, according to statistics from the CIA World Factbook. Mobile growth in the country is growing quickly, while the economy is increasingly looking mobile-first. This could be a very useful acquisition for Bharti Airtel.

In terms of market share, this is a country which is heading the right direction for Bharti Airtel. Safaricom is the market leader with a 67% share but declining, according to Ovum’s WCIS, Airtel has 23% market share and increasing while Telkom Kenya currently has 9% but is also increasing, albeit at a slower rate than Airtel. Supplementing the gathering Airtel momentum in Kenya with the Telkom Kenya footprint would certainly be a sensible business strategy to tackle the dominant Safaricom.

Another interesting factor to this deal would be the fixed line business. As it stands, Airtel does not have a fixed line offering in Kenya while Telkom Kenya does, and this is a segment which has been targeted for growth by the government. The National Broadband Strategy intends to deliver reliable fixed line broadband to as many as 30% of the Kenyan population, though you should always remember this is a mobile-first country. Fixed line might be a useful addition, but with mobile money dominating the economy (48% of Kenya’s GDP was processed over M-PESA between July 2016 and July 2017), this is very much a mobile-first society.

For Bharti Airtel, the team needs a win to report back to investors before too long. The emergence, and continued success, of Reliance Jio has been a nightmare for the former market leader, while an end to the misery seems unforeseeable right now. Profits at the firm have been impacted, subscriptions are going south, and the newly-merged Vodafone Idea business might cause more upset as it readies its own attempt at market disruption. Bharti doesn’t seem to have done much to combat the threat at home, though it does have a successful African business to bolster the numbers.

Looking at the most recent financial results, revenues across the group grew by a miserly 0.5%, though the revenue decline in India (which accounts for roughly 66% of the group total) was 3.6%. Africa on the other hand contributed 10.8% revenue growth and almost three million net additions in subscribers. The consolidated East Africa region brought in an additional 1.2 million customers over the period, while revenues in both voice and data have been steadily increasing over the last year. This is a stark contrast to the failures at home.

Bharti Airtel has lost the number one spot in India thanks to the Vodafone Idea merger, and should trends continue, it won’t hold onto number two for very long either. Catalysing the promising African market is certainly a sensible way forward, but onlookers should not be distracted from the chaos in Bharti’s domestic market.

Speak to the right people and Africa is about much more than just the digital divide

Yesteryear’s conversation in Africa was all about balancing the commercial realities of bridging the digital divide, but this year’s AfricaCom has showcased the bigger ambitions of South Africa.

Perhaps we haven’t been giving the right people the podium in the past, but the conversation in Africa has always been focused on the same thing. How do you deliver connectivity to the masses on a continent which has significantly lower ARPU than more developed regions? While this is still a priority, this year’s AfricaCom conference is demonstrating there are bigger ambitions than simply enhancing coverage.

Yesterday we heard MTN’s ambitions to create a more agile organization which operates in the OTT space and can be branded as a digital services beast, and this morning’s presentations had a smart city twist. It might seem odd that we’re discussing such advanced ideas when basic connectivity is an issue, but why not? If Africa is going to compete in the digital era these conversations need to happen now, and these individuals need to be given their time in the limelight. The smart city segment in South Africa is an excellent example.

Looking at Cape Town, Omeshnee Naidoo, the city’s Director of Information Systems, told the audience the city has a fibre spine 1000km long but the project is still at the starting gate. The infrastructure rollout is set to finish in 2021, while the team has recently signed a memorandum of understanding with Google to provide public wifi. The next step is figuring out how the initiative can now incorporate the citizens.

Johannesburg is in a similar position. Lawrence Boya, the smart city Director, said the city also has a fibre spine 1000km long, and currently more than 1500 public wifi spots. The challenge now is optimising the infrastructure and making sure government services are making use of the assets not going down the private route. Boya also highlighted the team are trying to figure out how to take the concept of smart cities down to a personal level for the citizens.

In both of these examples, steady progress is being made and the idea of the smart city might not be that far away. More government help is needed, both from a policy side as Boya highlighted South Africa currently lacks the framework to make smart cities sustainable, but also collaboration. Naidoo suggested public sector across the board in South Africa is far too siloed. To be fair to some local governments however, data sets have been opened up to the general public, providing the fuel for these new ideas.

It shouldn’t come as a surprise to be honest, but perhaps we are guilty of pigeon holing Africa. Too many people, and admittedly Telecoms.com does this too often, suggest the only challenges in Africa are focused on expanding the connectivity footprint. This is patronising and ignores the excellent work which is happening further up the stack. It’s not the case that these initiatives are difficult to find, but maybe we need to give them more airtime instead of taking the easy ‘Africa needs to improve connectivity’ angle.

Google’s Loon is actually starting to look like a genuine business

The idea of using balloons floating 20km above the earth to provide connectivity quite frankly sounds bat-sh*t, but Google’s Loon is actually starting to look like a feasible business.

Google is a company which certainly attracts criticism, but you cannot argue with the creativity which is nurtured. The company has a knack of taking an idea which no-one has much commercial faith in and running with it.

Take Google Maps as an excellent example. For years it was nothing more than a helpful tool for users, but now it is turning into a commercial success. And Loon might just be the next moonshot to make waves. Speaking at AfricaCom, Alastair Westgarth, CEO of Loon, gave some insight into progress being made at the business, but also some of the challenges faced when attempting to use balloons to deliver the internet to some of the worlds digital baron lands.

Loon started life as ‘Project Loon’, one of the freewheeling ideas to come out of the mysterious X labs at Google. The idea was initially conceived in 2012 as a means to connect the five billion people around the world who are still without the internet, and named so purely because of the audacity of the concept. Last year, with the team gathering pace, the ‘Project’ part of the name was dropped and the company spun out into its own separate company. Justification for the confidence came soon after, with the team signing its first commercial customer in Telecom Kenya.

“Something which we’re really excited to announce today is that we have all our necessary regulatory approval in Kenya for our operations,” said Westgarth.

“It took a long time, it took partnership with government, partnerships with regulators as well as the MNO you’re working with. As we went on that journey we’ve been working with Liquid Telecom, Nokia, working with Telecom Kenya to install ground stations to connect the balloons, and that process is almost complete. Also we’ve been making sure we have the interconnection between where the Telecom Kenya ground infrastructure is and where our ground infrastructure is, so when someone finally connects to a balloon the signal goes all the way through from our balloon to Telecom Kenya.”

What Westgarth pointed out is this is not a substitute for traditional infrastructure, but an opportunity to enhance coverage. With each balloon capable of delivering a 5000 square km cone of LTE connectivity, this is an opportunity for those countries who deal with hostile environments to deliver the internet and bridge the digital divide in areas where traditional infrastructure is a no go. Westgarth pointed out around 50-60% of the world’s land mass is yet to receive the connectivity euphoria.

With the technology and concept validated, the challenge now is to make Loon a viable business.

“As much as we want to do good things in the world, we also want to be a profitable business,” said Westgarth.

The technology has more than proved its value after launches in Peru following an earthquake which decimated Telefonica’s network, as well as Puerto Rico following Hurricane Maria. These were ventures which justified the six years of struggles attempting to keep a balloon the size of a tennis court in the air for more than a month, while also keeping it juiced up and automating the steering.

This was a challenge which took ages according to Westgarth, as engineers had to learn how to read wind forecasts, before applying that to the balloons logistics, and then automating the process. It turns out getting a balloon to stay in the same place is a tricky task, as is getting it up in the air in the first place. The engineers had to design a completely custom launch system which, again, has been automated. Then you have to figure out how to monitor the health of the asset, as well as bring it down safely, in the right place and collect all the equipment.

The issue now is on the commercial side. The team are talking to various operators around the world, with particular enthusiasm from Africa and South America, though business is being massaged as the team search for the right balance between CAPEX and OPEX investments from the operators. Right now the balloons operate on an as-a-Service model, though you have to remember this is still early days, a business which is very much taking the first steps of its journey.

The focus will continue to be on Telecom Kenya for the moment, it is important to nail the first project or the business will never be a success, though Westgarth hopes to have more customers in 2019. Africa is seemingly the best opportunity for Loon, though having done most of the testing in South America, there is interest from the operators, while certain Asian markets fit the bill as well.

The balloons are now up there, and staying up, the boring commercial side has to be figured out now. However, this is just another example of how Google’s bold and adventurous attitude can reap rewards; it’s not an accident Google is one of the most influential companies on earth. And now even 20km above it…