Future of Broadband in AfricaChristoph Stork, Enrico Calandro, Ranmalee Gamage

Monday, 20 May 13

ApproachNationally representative household and individual surveys in 12 African countries (Census Sample Frame)Basket methodology for Fixed -wired and mobile broadband data prices

Monday, 20 May 13

Share of households with fixed-lines

South AfricaNamibiaEthiopia

GhanaKenya

TanzaniaNigeria 0.3%

0.4%

0.6%

1.8%

4.0%

11.5%

18.0%

0.9%

2.3%

2.6%

7.6%

17.4%

18.2%

2007/8 2011/12

Residential fixed-lines on the way out except Botswana, Cameroon, Uganda and Rwanda

BotswanaCameroon

UgandaRwanda 0.2%

1.5%

2.2%

15.0%

0.1%

0.3%

1.8%

11.0%

Monday, 20 May 13

Share of households with a working computer

South AfricaBotswana

NamibiaKenya

CameroonGhanaNigeria

UgandaRwandaTanzaniaEthiopia 0.7%

1.6%

2.0%

2.2%

6.6%

8.5%

8.6%

12.7%

14.7%

15.7%

24.5%

Share of households with a working Internet connection

South AfricaKenya

NamibiaBotswana

NigeriaGhana

CameroonUganda

TanzaniaRwandaEthiopia 0.5%

0.7%

0.8%

0.9%

1.3%

2.7%

3.4%

8.6%

11.5%

12.7%

19.7%

Less than a quarter of households have a computer and even fewer Internet access, but more households have Internet access

than have fixed-linesMonday, 20 May 13

!"!!

!5!!

!10!!

!15!!

!20!!

!25!!

!30!!

1996! 1997! 1998! 1999! 2000! 2001! 2002! 2003! 2004! 2005! 2006! 2007! 2008! 2009! 2010!

Botswana! Cameroon!Ethiopia! Ghana!Kenya! Mozambique!Namibia! Nigeria!Rwanda! South!Africa!Tanzania! Uganda!

ITU  data:  Percentage  of  individuals  using  the  Internet

Monday, 20 May 13

Ethiopia

Tanzania

Rwanda

Uganda

Ghana

Cameroon

Namibia

Nigeria

Kenya

Botswana

South Africa 15%

6%

15%

9%

13%

6%

2%

2%

2%

1% Internet use (15+)

more than doubled within 4

years

34%

29%

26%

18%

16%

14%

13%

8%

6%

4%

3%

2007/8 2011/12

Monday, 20 May 13

Internet Access ModelsOld Internet New

InternetHardware

Billing

Skill requirement

Electricity

Location

Computer / Laptop MobilePostpaid (monthly Internet

subscription) Prepaid

High (Windows + Internet explorer

+ Viruses)Low

electricity mostly required at location of Internet use

not required at home

Work, school, Internet cafe AnywhereMonday, 20 May 13

Where was the Internet used first?

Cameroon

Rwanda

Botswana

Ghana

Kenya

South Africa

Namibia

Tanzania

Nigeria

Ethiopia

Uganda 71.8%

66.7%

54.8%

54.2%

49.9%

34.9%

31.1%

29.5%

29.4%

29.2%

17.9%

28.2%

33.3%

45.2%

45.8%

50.1%

65.1%

68.9%

70.5%

70.6%

70.8%

82.1%

Computer Mobile phone

Monday, 20 May 13

Where the Internet was used in past 12 months C

amer

oon

Gha

na

Bots

wan

a

Sout

h Af

rica

Rwan

da

Tanz

ania

Nig

eria

Keny

a

Ethi

opia

Uga

nda

Nam

ibia

23%

74%

42%

72%

45%

63%50%

33%

58%85%

80%

36%51%

21%39%

20%24%31%

21%32%51%

20%

48%55%17%31%29%45%52%36%51%35%

10% 87%81%81%78%75%75%71%71%64%61%30%

Mobile phone Work Place of education Internet cafe

Monday, 20 May 13

Broadband PricingBaskets to analyze:

Monthly cost of 1 GB use per month with at least 256kbps connection for a period of 24 months (ITU basket)Monthly cost of 5 GB use per month with at least 256kbps connection for a period of 24 months.Monthly cost of uncapped use per month with at least 256kbps connection for a period of 24 months.

Monday, 20 May 13

BotswanaMozambique

CameroonSouth Africa

NamibiaGhanaKenya

UgandaEthiopiaTanzania

NigeriaRwanda 11.9

20.1

13.0

14.5

8.7

6.2

38.5

12.6

40.9

25.1

78.8

29.4

20.1

13.0

21.1

18.7

7.3

14.4

51.3

12.1

50.8

30.4

26.7

19.2

22.8

23.8

37.9

40.8

48.7

51.5

59.4

62.1

66.6

Fixed Mobile Postpaid Mobile prepaid

1 GB per month basket

Monday, 20 May 13

BotswanaMozambique

CameroonUganda

South AfricaNamibia

GhanaEthiopia

KenyaTanzania

NigeriaRwanda 25.8

51.8

16.2

34.1

36.1

143.7

21.9

40.8

100.5

57.3

29.4

51.8

16.2

7.3

64.3

36.1

51.3

26.6

37.8

50.8

68.0

133.5

19.2

37.9

39.8

40.8

48.7

51.5

53.7

59.4

62.1

133.3

Fixed Mobile Postpaid Mobile prepaid

5 GB per month basketBotswana prepaid mobile not displayed: 380 USD

Monday, 20 May 13

Ghana

South Africa

Cameroon

Namibia

Kenya

Tanzania

Rwanda

Uganda 37.8

29.4

22.6

7.3

122.9

50.8

32.8

19.2

37.9

48.7

59.4

64.9

103.4

Fixed Mobile Postpaid

uncapped GB per month basket

Monday, 20 May 13

Download Speed (kbps) Upload Speed (kbps) Latency (ms)

262216586

135

2,716

9,227

156863

4,753

FixedMobileFixed-wireless

South Africa:Broadband.co.za 75,000 measurements 2013

Monday, 20 May 13

Options for fixed-line incumbents?

The response of fixed-line incumbents is often to leave the sinking ship and start mobile services Other options exist that may be more profitableMore beneficial to broader economic development goals

Monday, 20 May 13

Focus on CorporateDevelopmentally, the least desirable option for African Leaves the residential market to mobile operators and hence to less competition and poorer quality of service offeringsA strategy already adopted by some incumbents but also by new kids on the block such a Neotel in South Africa

Monday, 20 May 13

Data flat rate pricing: voice free app

Focus on data only through flat rate pricing, and ignore traditional voice revenues altogetherConverting all existing fixed-lines into data lines would increase broadband penetration drastically in Botswana, Namibia and South AfricaFlat rate pricing also solves the billing problem, something mobile operators are good in and fixed-line incumbents are not

Monday, 20 May 13

Example NamibiaTelecom Namibia’s revenues by segment in million N$

2009 2010 2011

452417297

304029183204240

Post- paid services Pre- paid servicesData and IP services

Monday, 20 May 13

Data and voice flat rate simulation based on current users number

Technology

Current prices N$ 24 months

(Speedlink Business)

New Price N

$

Price drop

No of current Lines

New revenue in million N$

512kbps Speedlink Home1Mbps Speedlink Home4 Mbps Speedlink Business10 Mbps Speedlink BusinessTotal per monthTotal per Year

599 75 87% 20,000 1.5

699 150 79% 20,000 3.0

3099 350 89% 10,000 3.5

7499 650 91% 100,000 65.0

73876

* Based on10Mbps product of TN* Based on10Mbps product of TN* Based on10Mbps product of TN* Based on10Mbps product of TN* Based on10Mbps product of TNMonday, 20 May 13

Data and voice flat rate simulation assuming price elasticity

TechnologyCurrent

prices N$ 24 months

New Price N$

Price change Lines

Revenue in million

N$512kbps Speedlink Home1Mbps Speedlink Home4 Mbps Speedlink Business10 Mbps Speedlink BusinessTotal per monthTotal per Year

599 75 87% 37,496 2.8

699 150 79% 35,708 5.4

3099 350 89% 18,871 6.6

7499 650 91% 191,332 124.4

1391,670

* based on10Mbps product of TN* based on10Mbps product of TN* based on10Mbps product of TN* based on10Mbps product of TN* based on10Mbps product of TNMonday, 20 May 13

Triple Play - Premium TV contentAdd premium content TV and replace copper with fibreFibre to the home (FTTH) may be able to compete if it is able to match satellite TV content-wiseThe competition for premium TV content would also reduce prices, bringing them closer to European levels instead of the current USD 80+An average ARPU of USD50 still good enough for premium content and uncapped fast Internet

Botswana

Cameroon

Ethiopia

Ghana

Kenya

Mozambique

Namibia

Nigeria

Rwanda

South Africa

Tanzania

Uganda 88.3

83.5

72.0

78.0

69.8

72.0

63.4

84.6

84.4

78.0

78.0

68.1

DSTV Premium Package in USD per monthMonday, 20 May 13

Fixed lines = value add for ADSL, contrary to Europe were ADSL has been a reason not to cut the cordThe voice battle was lost by fixed-line in Africa in the last decade, the data battle may be lost soon as wellFixed-line operators mostly offer ADSL, which can no longer compete with mobile broadband speedsFixed-line operators need to invest into new technologies, VDSL or fibre to the home to stand a chance against mobile broadbandFleeing the sinking ship and start mobile services instead may not address longer term connectivity issues and may be not the most profitable option eitherThis should hence attract the attention of policy makers, who not seldomly represent state owned shares in fixed-line incumbents

Conclusion

Monday, 20 May 13

Regulatory initiativesCarrier pre-selection and local loop unbundling will not increase competition by much for most countriesWho wants to be part of a dying busies?Structural separation and making the national backbone and all end user leased lines a separate business based on open access principles may remove the biggest competitive bottle neck in Africa at present

Monday, 20 May 13