Investments in african telecommunications market on the increase

Fezekile Mashinini

The African continent continues to attract substantial investments into its telecommunications markets. Both continental and overseas investors still see value and potential in this market as evidenced by the billions of investments that continue to flow into the sector.

The combined fixed and mobile cumulative capex for Africa since the Year 2000 is expected to grow from US$76.1 billion in 2008 to US$141.1 billion by 2013, adding cumulative investments of US$68.0 billion in the period. An estimated 68.5% (US$98.8 billion) of all cumulative investment will be attributable to the mobile sector as fixed-mobile substitution continues and mobile operators drive infrastructure investments to keep on track with increasing customer numbers. Africa recorded a year-on-year growth of 31.1%, reaching an estimated 405 million subscribers, with the fixed networks accounting for 7.5%. The mobile network’s unprecedented growth over the past few years continued, with an estimated 94 million new subscribers being added. BMI-T's forecast for the combined fixed and mobile subscriber market in Africa has placed the total number of subscribers at 782 million by 2013, representing a 14.1% CAGR.

Which regions is the money flowing to?

Africa can be said to have two distinct telecommunications markets, those that are on a growth path and those that have matured. Most of the regions fall on the former classification while two markets; the Northern region and South Africa can be classified as being mature markets. For the year 2008, the mature markets accounted for 34% of all new Telecoms investments and this ratio is forecast to marginally decrease to 31% by 2013.

By end 2010 Nigeria as a country will have overtaken South Africa in terms of fixed-line and mobile cumulative investments. As at end 2008 Nigeria with a population of 153 million had an estimated mobile penetration rate of 41% leaving room for growth going forward. An estimated US$3.7 billion was pumped into the telecoms sector during the year 2008 alone.

The Southern region will witness massive investment growth mainly driven by Angola. The formerly war ravaged country is on an economic growth path driven by the minerals, especially oil it possesses. Economic growth is a stimulus for telecommunications services demand and this has led the Angolan government to commit US$ billions for network infrastructure renewal and upgrades.

In the Western region Ghana is leading the charge and has licensed new operators who are spending millions of dollars rolling out networks. Meanwhile, operators in the other regions are also committing millions of US dollars on a myriad of telecommunications infrastructure projects.

Another stimulus for the additional infrastructure investments will be due to the number of submarine fibre-optic cables that are being landed in different parts of the continent. 2009 has seen the launch of cables such as SEACOM, a 13,700km long cable connecting South Africa and East Africa to Europe and India which was ready for service in August. SEACOM has a capacity of 1,280 Gbps. Another newly launched cable is Low Indian Ocean Network (LION), a submarine optic fibre cable funded by Orange Madagascar, France Telecom and Mauritius Telecom. The 1,800km broadband cable links with the existing SAT3/WASC and SAFE cable and has a capacity of 1.3Tbps. It also connects Madagascar with the Islands of Reunion and Mauritius. The East African Marine System (TEAMS), a 5000km fibre optic undersea cable with a capacity of 1.2 Tbps, linking Kenya via Port Sudan to the United Arab Emirates was also landed in June 2009. The most recent cable to land in September 2009 was Globacom's 9,800 km cable dubbed "Glo-1" which extends from Bude in the UK to Lagos Nigeria, and also links Nigeria to the rest of West Africa. The expected spending by operators on terrestrial links to bring the bandwidth inland is expected to run into millions of dollars.