The Business Case for Mobile Broadband in Africa

AfricaNext, September 2008, Pages: 38

A part of our larger broadband review, this report delves into the economics and business model issues around mobile broadband in Africa, including ARPU evolution, Opex and Capex impact and overall 3G subscriber valuation.

While our analysis has been largely bullish on African mobile broadband, we see some risks that are inherent to the model itself. The problem with mobile data is that the more popular it becomes, the more downward pressure there will be on prices and the more upwards pressure there will be on costs. ARPU looks good, Capex is manageable, Opex doesn’t look pretty.

With mobile data, mobile operators are entering an environment in which margins are lower than that to which they have become accustomed. This doesn’t mean they should not do it; indeed, it is critical that they do, for this isn’t merely about increasing ARPUs. Our larger point is that investor return expectations will ultimately need to be re-adjusted, all the more so in African mobile markets where return expectations have become oversized.

Contents

List Of Exhibits 3
Companies Mentioned In This Report 4
List Of Abbreviations 7

Executive Summary 8
The Economics 8
The Business Model Issues 9

Section I The Rise Of African Broadband 10
1.1 Broadband: The Most Significant Opportunity Since The Mobile Voice Boom 10
1.2 Some Definitions And Preliminary Points 10
1.3 African Markets Are Not Created Equal: From Value To Volume Opportunities 11

Section II The Business Case For 3g In Africa 14
2.1 Is There Demand For 3g Services In Africa? 14
2.2 The Internet Revenue Opportunity 16
2.3 The Arpu Case: Solid 18
2.4 The Capex Case: Improving 18
2.5 The Opex Case: Not Pretty 20
2.6 Network Opex: The Main Drag On The Model 21
2.7 Subscriber Acquisition: To Subsidize Broadband Or Not To Subsidize, That Is The Question 22
2.8 The Future Of African Broadband: Through The Pc Or Through The Handset? 23
2.9 Pricing & Positioning Models: Prepaid, Bundles, And Cost Per Mb 25
2.10 Subscriber Valuation: Mobile Voice Vs. Mobile Data 29
2.11 The Perverse Economics Of Mobile Data: Over The Long Term, It May Not Be So Good 30

Section III Country focus: Nigeria & Starcomms 32
3.1 Country Broadband Focus: Nigeria & Starcomms 32

- Asustek
- Camtel
- Chinguitel
- Emtel
- Gateway Communications
- Globacom
- Global Connect
- Huawei
- Iburst
- Kanartel
- Kasapa
- Kenya Data Networks
- Lag Green/Rwandatel
- Main-1
- Malitel
- Maroc Telecom
- Mauritius Telecom
- Meditel
- Movicel Angola
- Mtc Namibia
- Mtml
- Mtn Nigeria
- Mtn Rwanda
- Mtn Sudan
- Mtn Uganda
- Multi-Links
- M-Web
- Neotel Sa
- Nokia-Siemens
- Orange
- Orange Mali
- Safaricom
- Seacom
- Skype
- Sonatel
- Sonitel
- Starcomms
- Sudani
- Sudatel
- Telkom Kenya
- Telkom Sa
- Twitter
- Ucom
- Verizon Usa
- Visafone
- Vodacom Sa
- Vodacom Tanzania
- Vodafone
- Wana Morocco
- Youtube
- Zain

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