Download - Guaranteeing quality connectivity across the Africa continent

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1 Copyright 14 November 2013 © Mobile Telephone Networks. All rights reserved.

GUARANTEEING QUALITY

CONNECTIVITY ACROSS

THE AFRICA CONTINENT

Kanagaratnam Lambotharan

Chief Enterprise Business Officer at MTN

14 November 2013


How does Africa fare internationally on network and connectivity?

What is holding Africa back?

What is required for Africa to become a world-class contender

Recommended solutions that should be explored

CONTENT






CONTENT


HOW DOES AFRICA FARE INTERNATIONALLY ON NETWORK AND CONNECTIVITY

12.4

63.5

Africa Arab States Asia Pacific CIS Europe Americas

% Mobile penetration by region (2005 – 2013)

Source: ITU, %



Fixed line declining internationally

1.5 1.4


% Fixed line penetration by region (2005 – 2013)

Source: ITU, %



Africa’s broadband subscription has

stagnated

0.3


% Fixed broadband subscriptions (2005 – 2013)

Source: ITU, %



Africa is behind in mobile broadband

1.8

10.9


% Mobile broadband subscriptions (2010 – 2013)

2010 2011 2012 2013

Source: ITU, %


AFRICA SUBMARINE TRANSFORMATION

Significant opportunities presented to nations, governments and operators with this change

Key benefit should be boost to economic growth via improved access to information, commerce, services and education

Beneficial connection of West Africa to the digital age requires that outstanding challenges be addressed

2008 2013


AVAILABILITY OF DEVICES, NETWORK GROWTH – SMARTPHONES

Africa is one such market

Varying estimates of smartphone penetration, from 3% to 17%, all agree penetration is increasing

Samsung estimates that it now stands at 7%, up from 5% percent last year

(HumanIPO)

Basic phones (2G) Feature phones (2G) Smartphones(2G / 3G)

Super smartphones(3G / LTE)

2010 2013 2016


AN INTERNATIONAL PERSPECTIVE

Source: Assessment of Economic Impact of Wireless Broadband in Nigeria 2009 – Analysis Mason Final Report for GSM (2011) GDP per Capita US$

23

32

3

22

9

0.1

6

8

1

8

2

6.0

4

12

0.1 1

11

0.1

Nigeria Brazil Russia India China SA

BRICS countries and Nigeria broadband and wireless penetration by access

technology(%)

Wireline Fixed broadband - wireline

Wireless broadband & 3G Fixed broadband - wireless

Global competition for inward investment, jobs and e-skills

Fast, pervasive BB is increasingly seen as a critical piece of economic

infrastructure

To remain globally competitive, Africa’s challenge is to build a pervasive

Broadband Access network, fast

Africa is well positioned in the BB race thanks to substantial mobile

network investment

~100 Billion USD new investment needs to flow to maintain this

position

1 230 8 214 8 675 1 111 3 678 5 827


KEY DRIVERS FOR AFRICA’S GROWTH IN BROADBAND

Africa’s urbanising

population

A larger, younger, more

affluent population

Africa is leapfrogging

through technology

Africa’s commodity

wealth

Africa’s expansion of its

financial sector






CONTENT


WHAT IS HOLDING AFRICA BACK – REAL CHALLENGES?

The size of Africa


TIME – Labour intensive

TIME / COST – Terrain

COST – Heavy machinery

WHAT IS HOLDING AFRICA BACK – REAL CHALLENGES?


WHAT IS HOLDING AFRICA BACK ?

Funding

Regulatory challenges

Historically limited infrastructure expansion

Support and Incentives for infrastructural rollout

Spectrum allocation bottlenecks


WHAT IS REQUIRED FOR AFRICA TO BECOME A WORLD-CLASS CONTENDER IN TOP BROADBAND & TELECOMS?

Mobile and wireless

will dominate broadband

1bn people but sparse population

Fibre investment is key but shared infrastructure models due to

high costs

ANGOLA

BOTSWANA

CAMEROON

COTE

D`IVOIRE

GH

AN

A

KENYA

MALAWI

NAMIBIA

NIGERIA

TANZANIA

UGANDA

ZAMBIA

ZIMBABWE

ETHIOPIA

BURKINA

FASO

BURUNDI

BE

NIN

DEMOCRATIC

REPUBLIC

OF THE CONGO

(ZAIRE)

CENTRAL AFRICAN

REPUBLIC

DJUBOUTI

ALGERIA

EGYPT

GABON

THE GAMBIA

GUINEA

EQUATORIAL

GUINEA

GUINEA-BISSAU

LESOTHO

LIBYA

MALI

MAURITANIA

MAURITIUS

NIGER

RWANDA

SUDAN

SIERRA LEONE

SENEGAL

SAO TOME

AND PRINCIPE

CHAD

TO

GO

TUNISIA

SOUTH

AFRICA

LIBERIA

WESTERN

SAHARA

ERITREA

CAPE VERDE

SEYCHELLES

MTN Business delivery of services

SWAZILAND


WHAT IS HOLDING AFRICA BACK – DEVICES ADOPTION?

4 key challenges

Distribution OEMs have limited resources in Africa

Import Costs Duties and customs need refinement

Education Consumer education and adoption

Socialite US$100- US$200

Mainstream US$200- US$300

Basic US$50- US$80

Flagship US$300- US$450

Hero US$450- US$600

Iconic US$600+

Underlying Costs Operator driven initiatives are key but

what about other private sectors ?






CONTENT


UNDERSTANDING THE ROLE OF PRIVATE SECTOR VS GOVERNMENT (II)

100% access target

Con

trib

uti

on

to t

he t

arg

et

Private sector

•Risk capital

•Market knowledge

• Technology & distribution know-how

• Innovation & platform competition

•Scale & efficiency

•Competitive “trial & error”

•Optimum network configuration (sharing) & market structure

Government

• Policy & regulatory framework (eg. spectrum licensing, access regulation, investment certainty, IT-literacy)

• Local regulations (planning, environmental laws, …)

•Smart subsidies

• Long-term market support (supply/demand-side subsidies)


POLICIES THAT HAVE A DIRECT IMPACT ON BROADBAND INVESTMENT AND TAKE-UP

97

174

2007 2008 2009 2010 2011 2012 2013

Index 2

007 =

100

Wireless CAPEX in Europe vs USA

1.7

18.9

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42014

LTE connections (% of total) Europe vs USA

USA

• Large scale operators

• Significant consolidation activity

around fibre and spectrum assets

• Early and large blocks of LTE

spectrum allocated

Europe

• Highly fragmented markets

• Severe and continuous price

interventions (LLU, MTRs, roaming)

• Cautious approach to consolidation

Source: GMSA


Requires ongoing support

True access

gap

After one time subsidy, will

become commercially

feasible

Smart subsidy

zone

POLICIES THAT ENABLE PRIVATE SECTOR VS GOVERNMENT

Source: Initial concept in telecommunication & information services for the poor: towards a strategy for universal access by J. Navas-Sabater, A. Dymond, N. Juntunen, 2000 – modified by Intelecon

Given the right policies, many of

the objectives can be realised via the

market

Private and public partnership are key

to drive under-serviced areas

USAASA Fund to be leveraged by

operators to bid for access to fulfil the rural development

objectives Geographical reach

Low

in

com

e h

ou

seh

old

s

Commercially feasible reach

Market efficiency gap

100% geographical coverage

Current network reach

and access

Hig

h i

ncom

e h

ou

seh

old

s


ALL PLATFORMS HAVE A ROLE DELIVERING BROADBAND TO AFRICA

Although mobile technology is likely to be prime delivery mechanism for BB coverage.

Ubiquitous coverage will require a patchwork of fit-for-purpose platforms and pragmatic network sharing / integration arrangements (eg. fibre backhaul + mobile access; spectrum pooling / RAN sharing in rural areas…).

Very rural Rural Suburban Urban Dense Urban

100% coverage

Cost per pop (US$)

Satellite

Mobile

Fibre

In urban areas, population and income density supports multi-platform / multi-

player competition (incl. fibre, copper,

Wimax,…)

Mobile is expected to be the most economic platform for a large part of

Africa

With mobile coverage costs

increasing exponentially for

the last 10% coverage, Satellite is the likely in-fill

BB coverage cost per platform (stylized)


FRAGMENTING SPECTRUM TO ALLOW FOR ENTRY COULD INCREASE NETWORK COSTS BY A FACTOR

Fragmenting spectrum to allow for multiple new entries increases networks costs exponentially,

leading to higher end-user prices

Source: Ofcom, Second consultation on assessment of future mobile competition and proposals for the award of 800 MHz and 2.6 GHz spectrum and related issues, Jan 2012. Annex 6: Revised Competition Assessment. The LTE network modelled here operates in the1800MHz band

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2 4 6 8 10 12

Num

ber

of sites

Required capacity

(relative number of simultaneous users)

Number of sites needed to deliver specified capacity: 2Mbps, 90% coverage

5Mhz 10Mhz 15Mhz 20Mhz

Radio sites required to deliver

2Mbps to 4 simultaneous users

• Can’t be done with 2x5MHz

• c. 20 000 sites with 2x10 MHz



It costs twice as much to deliver the

required capacity with 2x10MHz than

2x20MHz

Typical awards (Europe) are

• 2x 15-20MHz in 2.6GHz; and

• 2x 10-15MHz in sub-1GHz band

NB: Lack of pervasive backhaul

infrastructure in Africa may require even

larger blocks to support adequate QoS


COST TO CONNECT 10M SA HOUSEHOLDS WITH FIBRE – R150BN TO R200BN

Approximately R15 000 to R20 000 per household

R150bn to R200bn

MTN SA invests R1.5bn to R2bn a year on Transmission/Transport network

Will take 100 operator years (25 years with 4 operators)

Without considering overbuild

COSTS FOR FIBRE CONNECTION Target 10m of 14.5m households

78% formal dwellings

65% urbanisation

88% mobile phones

<10% multi-tenant dwellings


INFRASTRUCTURE INVESTMENT – HOW TO CONNECT 10 MILLION HOUSEHOLDS ?

4 years for National Fibre networks of over 3 000km – Way leaves, Permitting process, Inconsistency in Local Approvals

MTN – R1.5 BN TO R 2BN investment pa on transmission = 100 operator years to reach goal

Lack of coordination increases time to reach goal

Price pressure, regulatory intervention = Reduction in investment

Unbundling, OTT players, continuous subsidies for smaller players = Reduction in investment






CONTENT


THE AFRICAN BROADBAND AGENDA – KEY QUESTIONS

128 kbps, 10 Mbps, 100 Mbps or more

Densely populated areas Remote areas

10Mbps everywhere = >US$100bn 100Mbs everywhere = US$$$ bn

Private sector vs Public sector Leveraging government, utilities, education

Attracting BB investment Smart USO mechanisms Other incentives

Regulated open access vs need for profit

Spectrum Consolidation & network sharing Rights of way


CONCLUSION: POSSIBLE SOLUTIONS

• Mobile is key to delivering a gigantic share of broadband (but fibre is needed in backhaul and backbone)

• Don’t fragment spectrum allocations: this increases costs

• Leverage incumbents investment capacity / existing infrastructure

• Encourage competition through service-neutral licensing

• Delicate mix between infrastructure and service-based competition, incumbents and network sharing in rural areas likely to be key to deliver Broadband in Africa

• Remove special taxes & duties on ICT equipment and services, to bring down prices, grow services and general tax base

• Free up ,release and coordinate critical spectrum for wireless broadband use, through competitive evaluation and allocation of spectrum

• Reduce costs & prevent unnecessary duplication through incentivising infrastructure-sharing

• Use existing unused USAF levies to build out network into underserved areas, through reverse-bidding to service areas & in support of demand stimulation strategies including e-skills development

• Focus SOEs on delivering support infrastructure in rural areas (fibre backhaul)

• Subsidies for rural access and capacity expansion

• Incentives for innovation


DIGITAL PARTICIPATION CURVE

Source: World Wide Worx

Average Internet user needs to be

online for 5 years or more before

engaging actively with high-level

applications – online retail and interactive

Requires experience, comfort, confidence

and trust

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Internet user base vs Digital participation curve

Internet users in SA 5 year participation curve

Internet Access in SA 2012, World Wide Worx


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THANK YOU

Questions?

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