Africa Legal Insight. The future of telecoms in Africa. Andrew McMillan Christian Taylor Simmons & Simmons. 02 July 2012

Transcription

1 Africa Legal Insight The future of telecoms in Africa Andrew McMillan Christian Taylor Simmons & Simmons 02 July 2012

2 Infrastructure sharing Andrew McMillan Simmons & Simmons 02 July 2012

3 Telecommunications in Africa Mobile 16 million connections in 2000 rising to 620 million in 2011 (end Q3) 735 million connections forecast by end 2012 Fixed line Current average penetration rate: 1.4% Fixed line connections declining Current penetration rate: 62% Average price reduction : 18% 96% subscriptions pre-paid Voice services dominate Market: US$56 billion: 3.5% total GDP Other factors Increasing international connectivity Power 36% of Africans within 25 largest African mobile markets still have no access to mobile services 3 / Doc ID: L_LIVE_EMEA1: v1

4 What is network infrastructure sharing? Two or more network operators agree to share all or part of the infrastructure making up a network Passive / active infrastructure sharing Mobile Networks Fibre Core Networks Passive Sharing Masts, generators, air conditioning units Poles, ducts, power supplies Active Sharing Base stations, switches and other electronic infrastructure Lit fibre, access node switches, broadband remote access servers 4 / Doc ID: L_LIVE_EMEA1: v1

5 The wider context Infrastructure-based competition v. service-based competition Infrastructure-sharing: a help or hindrance to competition? Public ownership, subsidies and open access 5 / Doc ID: L_LIVE_EMEA1: v1

6 The structure of sharing Swap / barter arrangements Joint venture with other operator(s); or with independent party Managed network model infrastructure continues to be owned by operator; or infrastructure owned and operated by a third party 6 / Doc ID: L_LIVE_EMEA1: v1

7 Pros and Cons Pros Requirement / encouragement by regulators Increased innovation Increased ability to expand network into underdeveloped areas Cost and efficiency savings Cons Competitive advantage of network coverage Exposes established players to risk of market share loss Less ability to monitor network performance and quality Less control over network roll-out and equipment maintenance Ongoing need to upgrade existing infrastructure to cope with increased throughput 7 / Doc ID: L_LIVE_EMEA1: v1

8 Addressing the Cons Appropriate contract terms and governance structures Well-defined service level agreements Certainty of future network structure 8 / Doc ID: L_LIVE_EMEA1: v1

9 Tower-sharing deals in Africa Date Mobile operator Tower company No. of Towers Deal size (US$ m) Notes Mar-12 Warid, Uganda Eaton 400 N/A Nationwide coverage for Eaton Mar-12 Orange, Uganda Eaton 300 N/A 15-year lease agreement Dec-11 MTN, Uganda ATC Formation of Towerco Uganda JV (will build 280 new sites) Aug-11 Visafone, Nigeria IHS Network covers 170 towns in 24 states of Nigeria Dec-10 Millicom, DRC Helios Significant minority interest retained in Helios Towers DRC Dec-10 Starcomms, Nigeria Swap Tech year lease Dec-10 MTN, Ghana ATC Formation of Towerco Ghana JV (will build at least 400 new sites) Dec-10 Millicom, Tanzania Helios Helios granted licence to operate tower network by regulator in August 2011 Nov-10 Cell C, South Africa ATC ATC completed first greenfield construction in South Africa in 2012 Oct-10 Vodafone, Ghana Eaton 750 N/A 10-year agreement; US$80m investment planned Jan-10 Millicom, Ghana Helios Minority interest retained 9 / Doc ID: L_LIVE_EMEA1: v1

10 Country analysis Country Population Mobile penetration Active mobile operators DRC 71.7 million 17% 4 Ghana 24.9 million 70% 6 Nigeria million 58% 9 South Africa 49 million 99% 4 Tanzania million 57% 6 Uganda 34.6 million 34% 5 10 / Doc ID: L_LIVE_EMEA1: v1

11 Attractiveness for TowerCos Number of operators New licences to be issued? Network expansion? Tenancy ratios Rental prices Constraints in building new towers 11 / Doc ID: L_LIVE_EMEA1: v1

12 Challenges for TowerCos High capital requirement Regulatory clearances Operational cost optimisation Handling of local issues The future? 12 / Doc ID: L_LIVE_EMEA1: v1

13 The Indian Experience 2006: 100% operator-captive model 2010: 85% operator-independent model Drivers monetisation of assets focus on customer acquisition efficient capex utilisation Now OpCos focus on subscriber acquisition and customer service rather than tower infrastructure operations and management OpCos managed 25-35% EBITDA margin in 2010 TowerCos managed margins in excess of 50% Note of warning? 13 / Doc ID: L_LIVE_EMEA1: v1

14 Trends in M&A Christian Taylor Simmons & Simmons 02 July 2012

15 Top four trends (and risks) for African telecoms M&A Political uncertainty Regulatory intervention Increased competition between operators Rising costs 15 / Doc ID: L_LIVE_EMEA1: v1

16 Political uncertainty Political instability Benin Guinea Republic Mali Tunisia Zambia Trend 1 No one size fits all solution Use of local partner to mitigate risks Local counsel can have political connections 16 / Doc ID: L_LIVE_EMEA1: v1

17 Regulatory intervention Telecoms laws and regulations not always well drafted, leaving room for differing interpretations Likewise for telecoms licences (especially 2G) Trend 2 Deliberate misinterpretation Deep pockets syndrome 17 / Doc ID: L_LIVE_EMEA1: v1

18 Increased competition between operators Few markets with only two operators (Cameroon is a notable exception) Most markets highly competitive (e.g. Côte d Ivoire), sometimes even more so than Western Europe Trend 3 High penetration Declining ARPU 18 / Doc ID: L_LIVE_EMEA1: v1

19 Rising costs Significant investment in network (e.g capex spend by MTN Nigeria) Network quality fines Trend 4 Employee costs (restrictive labour laws in certain markets) Increased recourse to infrastructure sharing 19 / Doc ID: L_LIVE_EMEA1: v1

20 simmons-simmons.com elexica.com 20 / Doc ID: L_LIVE_EMEA1: v1