Nina Triantis, Global Head of Telecommunications at Standard Bank believes that the current convergence between telecommunications, technology and media provides a new lens through which to understand Africa’s rapidly evolving growth - and future potential.
Communication has been fundamental to the growth of Africa and Standard Bank has been particularly well placed to observe this.
Over the last 20 years Standard Bank has gone from being an investor in cell technology and networks to, today, being a major funder of fibre and tower networks, raising private equity for game changing telecommunications and technology players.
Standard Bank’s combined debt issuance and loan syndication supporting Liquid Telecom’s ZAR6.55 billion acquisition of Neotel in South Africa has, for example, created a contiguous cross-border fibre network stretching from the north of Uganda to South Africa.
Liquid Telecom represents the extent of the spread and technological evolution of Africa’s telecommunications industry - in just 20 short years. Today, “as telecommunications, technology and media converge the potential for communication to innovate and drive growth in Africa looks even more promising,” says Ms Triantis.
Yet, ten years ago Africa’s communications revolution started small.
Companies like MTN built out basic mobile phone networks, bringing communications technology to customers, mostly for the first time. While the technology was not revolutionary from a global perspective, “having phones – and being able to communicate – where there were no phones before, transformed almost every aspect of African life – and business,” says Ms Triantis.
With the advance of technology and deeper penetration, African trends started to more closely match the developed world as Africans began using communication technology to perform other services.
But the continent was also innovating its own technology. Mpesa’s use of mobile to transfer money and make payments was a world first, evolved in Africa.
This evolution had clear legislative and governance implications as, for example, mobile companies began partnering with banks to deliver mobile money offerings. Strong partnerships with banks and regulatory changes are now allowing operators in Africa to distribute interest to mobile money customers. Beyond legislation, “across Africa, communication technology began influencing the expansion and growth of other sectors as mobile evolved from voice to other mobile phone-enabled services,” says Ms Triantis.
One such service is insurance. This is addressing a massive gap in sub-Saharan Africa where only a very small percentage of adults are able to purchase health and other insurance services. Examples like Safaricom’s Kilimo Salama “safe-farming” in Kenya are addressing Africa’s insurance gap by enabling farmers to buy the products they want to insure. Millicom's insurance products in Ghana - offered through BIMA, (a provider of mobile-delivered insurance and health services), allows customers to pay for health insurance, funeral services insurances, etc.
Outside South Africa there were few well-funded fixed line state-owned incumbents. As such, expansion was privately funded, market-driven, and rapid - creating an entirely new asset class and industry on the continent.
Importantly, most of this growth happened on privately owned mobile networks.
Today Africa’s growing appetite for data is seeing the acceleration of broadband as clients seeking higher bandwidth services - like video streaming - as media, increasingly, becomes part of the telecommunications offering.
Since these services need to be supported by fibre connection technology, mobile companies are increasingly investing in fibre as well as new generation mobile networks. The fact that broadband internet, fixed voice, mobile telephone and entertainment can all come down the same pipe means that operators can tie subscribers into a range of services in one bundle. “This has profound implications for the evolution of operators into multiple telecommunication, technology and media content businesses,” says Ms Triantis.
Africa’s digital transformation is also driving demand for hosting and colocation services and the emergence of multiple independent carrier-neutral data centre service providers (DCs), although fibre and IT services companies continue to invest heavily in data centres. Telcos have historically built their own fit for purpose DCs. While historically in Africa power supply and infrastructure challenges have limited the development of DCs, this is now changing.
In South Africa, Teraco is the largest independent carrier-neutral data centre services provider, operating sites in Johannesburg, Cape Town and Durban. Teraco runs NAPAfrica, an internet exchange and peering service with hundreds of members, including five of the largest global content providers.
“Demand for data centre colocation services is expected to increase significantly as, international carriers, internet and cloud providers require additional capacity to service the digital customer; corporates and banks look to increasingly outsource their IT service needs; and governments look to increased usage of digital solutions for transparency and in order to repatriate data held outside their borders,” says Ms Triantis.
As regulators seek to increase access to voice - at ever more competitive rates - voice margins are falling across the continent. Beyond looking to data for greater margins, “financial pressures are driving telecommunications companies to diversify revenue by building out Enterprise Services in areas with the stickiness to evolve deeper earnings going forward,” adds Ms Triantis.
In addition, telecommunication providers that built and operated their own tower networks, are leveraging private equity funded companies by selling their tower networks to tower operators – and then leasing them back. The model works as multiple mobile operators and others can colocate on the same tower. A new entrant no longer has to allocate capex to build out a tower network, they can instead lease capacity from an independent towerco. Existing mobile operators can also reduce their investment spend by having towerco’s build additional towers under built-to-suit programmes requiring a minimum of two tenants for each tower.
While investment in mobile in Africa is by no means dead, especially as the continent migrates to 3G and 4G, growth is currently spectrum-constrained as legislators seek to limit big-player dominance in domestic markets. Mobile operators compensate for this lack of spectrum by building ever-more private network.
As both mobile and other companies seek to add more services and revenue, content libraries – delivering music, video and television – will require greater data and network capabilities. While Africa is not there yet, “ever-more affordable smart phones are likely to create the market to sustain the development of affordable content libraries on the continent,” predicts Ms Triantis. This is likely to see a new wave of evolution as African telecommunication players emulate global trends – developing and building content and potentially buying media players.
Right now in Africa, however, telecommunications companies are less likely to build or buy, they are primarily looking to use their platform to carry content developed by others.
Since communication is fundamental to every individual, business and society, telecommunications is the enabling infrastructure supporting almost every human interaction - and transaction. Africa’s telecommunications industry has not been slow to recognise this fundamental - rapidly re-engineering itself to capitalise opportunities to develop new combinations of technologies through innovative convergence.
Standard Bank’s unique African footprint and access to global capital along with its telecommunications, technology and media expertise, “position us to assist African telecommunication providers raise the capital and develop the strategies to manage this evolution while sustaining earnings through effectively monetizing services,” says Ms Triantis.Back to all news
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