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…

MTN unveils its first OTT service and roadmap for digital fortunes

MTN has announced the acquisition of music streaming platform Simfy at AfricaCom and outlined the future of the telco, which doesn’t look very much like a telco anymore.

This is of course a slightly unfair statement, as the mission of connecting the unconnected millions across Africa will continue to be a top priority for the business, though CEO Rob Shuter highlighted the team have much bigger ambitions when it comes to maintaining relevance in the digital economy. The Simfy acquisition is just one step in the quest to morph MTN into a digital services business.

Speaking during the keynote sessions at AfricaCom, Shuter highlighted there are still major challenges when it comes to connectivity in Africa, though telcos need to look deeper into how these challenges can be solved. The most simple roadblock is a lack of connectivity across the continent, but when networks are being deployed, telcos need to understand how consumers are engaging with the connected world. A good place to look first and foremost is China.

“Our mission is not just about connecting people, but understanding what the users want to use the internet for, so we can build networks properly,” said Shuter. “When we look at China today, that will be Africa in the next two to three years.”

Looking at how consumers use connectivity in China starts to paint a picture. Media takes up 17% of time of devices, while communications and social media takes up 33%. Shopping and payments account for 16%, and gaming takes up 11%. For MTN to be relevant in the future, Shuter has ambitions to create a presence in each of these segments.

To capitalise on payments and shopping, the mobile money offering will be revamped and launched in South Africa during Q1 2019. Nigeria has also just changed its regulatory regime when it comes to mobile money, and Shuter said the team would be applying for a payments service license over the next month, with plans to launch a mobile money offering in Q2 2019. This is a big moment for MTN, as while the mobile money offering has been present for some time, this is the first venture into its two largest markets.

For Shuter, creating a digital services company has two components. Using connectivity as a platform, a comprehensive partnerships programme has been launched in four main verticals (communications, rich media services, mobile financial services and eCommerce) with the team working with various established players in the ecosystem, but MTN also have to push itself further up the value chain and offer its own competitive products. This is where Simfy fits in.

As a music subscription product, customers will be able to merge both connectivity and music payments onto the same bill, but Simfy will not be incorporated into the greater MTN business from an operational perspective. Simfy will continue to operate a separate entity, allowing it to maintain the OTT environment. Shuter highlighted he would not want the corporate and operational structure of a telco, completely unsuited to the OTT landscape, to impact Simfy’s operations.

On the financial services side, the team will make use of MTN’s scale to establish a more prominent footprint. With a user base of 24 million already, this number seems to be doubling every 18 months. The significantly larger mobile subscription base can be used to springboard the mobile money business north, as Shuter highlighted the distribution network is key. When customers come to top-up their airtime or data allowance, they can also deposit cash into digital wallets. It is convergence at its finest, though leaning on Orange’s ambitions to diversify out of the traditional telco playground.

There are still huge challenges from a connectivity perspective across the African continent, but MTN seems to recognise there is more to be excited about than simply collecting subscriptions. If the Simfy acquisition is to be taken as evidence of MTN’s future roadmap, this looks like it could be a case of convergence done right, not allowing the cumbersome, archaic telco machine to muddy the OTT waters.

Telco competitors aren’t other telcos anymore

It might seem like an unusual statement to make, but if the fortunes of the fourth industrial revolution are going to be realised, telcos need to stop bickering between themselves.

The new competitive landscape seems like a very counter-intuitive one. The status quo for years has been to capture as many subscriptions as possible, building profits on top of connectivity, though the digital economy is so much more. This might seem like a very obvious statement to make, though the dangers are seemingly more apparent on the African continent, with the OTTs and cloud players a larger threat to a telco than other telcos.

This was a fear which emerged during the opening panel sessions at the AfricaCom 2018 show in Cape Town. Connectivity is not enough, especially on a continent where ARPU can be as low as $4 a month. There is of course demand for more data connectivity, but where is the value when you actually deploy data networks? According to Hind Elbashir, Group Chief Strategy Officer at Sudetal, not in the connectivity business.

“The OTTs have spread their wings, while we are continuing to compete in a very small place,” said Elbashir.

While the telcos are laying the foundations for the digital economy in Africa, they are continuing to focus efforts on traditional business models focused around connectivity and subscriptions. This is a limited section of the value chain, becoming increasingly crowded, and built on the race to the bottom. Value will become increasingly difficult to find and profitability will erode as the telcos fight for customers on pricing. However, the fourth industrial revolution is creating value elsewhere in the ecosystem.

Nic Rudnick, CEO of Liquid Telecom, echoed Elbashir’s point. While the African telcos are building the networks and spending all their time on securing more subscriptions, foreign players in Silicon Valley or China are swooping in to collect the more lucrative rewards at the top of the digital value chain. The OTTs are capitalising on the vast expenditures outlaid by the telcos and stealing the new value which is being created through enhanced connectivity.

But why is this more of a risk in Africa than anywhere else? That is a very simple question to answer; Africa does not have anywhere near the same scale or penetration of connectivity infrastructure as in the developed markets, while ARPUs are significantly lower, adding more pressure to the bottom line. With African telcos having to spend more CAPEX to deploy infrastructure to realise the digital economy than European or North American counterparts, while simultaneously collecting smaller tariffs off customers, it cannot afford to lose the added value created in other areas of the ecosystem.

This is a change in the industry’s landscape which has been coming for years, but the telcos seem to be struggling to capitalise on. The rules are shifting with the cloud and OTT players securing the lion’s share of newly created revenues without assuming the risk and vast expenditure of network deployment. Not only will the telcos have to transform culture and operations to reverse this trend, but also create new relationships with competitors.

Elbashir pointed to joint investments in infrastructure to reduce financial exposure and allow telcos to spread CAPEX further. Multiple joint ventures would allow for quicker expansion of network infrastructure, increasing the connectivity footprint of the telcos, but also allow talent to focus on creating strategies and products to capitalise on the created value in the digital ecosystem.

Collaboration is a key word, though we all know how difficult it can be to create. However, telcos should recognise the greatest threat is not from other telcos who are fighting for subscriptions, but the OTTs and cloud players who so easily secure revenues in segments of the ecosystem the telcos are struggling to exploit. The threat from the OTTs is a simple one, but if it is not addressed, growth is going to be impossible.

This is a new market dynamic, and while the OTTs might be a threat to all telcos around the world, it seems to be more pronounced in Africa.