Partnering with CTO 4 ICT Investments

Investing in ICT’s in Emerging Markets 9-10 December 2009

Dr Ekwow Spio-Garbrah

Chief Executive Officer,

CTO

Impact of Economic Crisis on ICT Industry

• “Global growth has deteriorated for the past 15 months, as financial sector deleveraging has continued, and producer and consumer confidence has significantly fallen in the developed economies. However, the emerging economies have had a reduced impact on their growth rates" … states the IMF published on Dec 09.

• The ICT industry continues to face challenges:

• Access to capital is increasingly difficult and expensive

• Revenue growth is under threat and jeopardised by FX exposure

• Margins will face sustained pressure as costs increase

• Mobile telephony ARPU levels decreasing globally

• Competitive forces demand continued investment and innovation

• Investment required for value added content and applications

• Cutbacks/slowdowns on expansion, capex, HR recruitment/training

• Globally, cumulative ICT spending is estimated at US$3 Trillion

• Growing at an average of 8.9% per annum

• Representing 6.8% of Global GDP.

• ICT Growth has to be a part of any strategic plan to drive an economy in Info Age

• Essential part of Global Market Participation.

Economic Benefits of ICTs

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Investing in ICTs"Investment and trade — as opposed to aid and charity — must drive the transformation of our economies. In order to realize this much-needed economic revolution, we have to forge productive relationships between government and business," H.E. President Paul Kagame of Rwanda.(Connect Africa Summit, 2007)

Planned Additional Critical Investments in African Infrastructure (at 2007) • Private Sector Leading the way with USD50 Billion from GSM Operators by

2012International Community backing• EU Trust Fund for Africa – 100 million Euros in grants + 260 Million Euros for

loans for 2007 – 2008• World Bank – Doubling Commitment to African ICT to 1 Billion by 2012• African Development Bank – plans to increase its financing of infrastructure by

60% over the next 3 years • African Venture Capital Association reports numerous private deals• AsDB, CDB, Inter-American Dev Bank all focussed on infrastructure

Trends In Emerging Markets ICT Investments

• $100bn/year over next 5 years, World Bank report on 56 Emerging Markets • China investment in Infrastructure rose from 1 Billion in 2001 to 7 Billion in 2007• Exports from Africa to Asia have tripled in Last five years• Huawei’s provision of concessional finance for national back infrastructure and establishment

of 32 country offices from Cairo to J’burg• Zain $3.36 Billion acquisition of Celtel (2005)• MTN 5.5 $Billion takeover of Investcom (2006)• Vodafone $904 Million for 70% of Ghana Telecom• Saudi Telecom $908 Million for 26% of Kuwait 3rd Mobile License (2007)• Reliance and Bharti Consider $45 Billion acquisition of MTN (Ongoing)• Iraq Government Sells 3 15-year 3G Licences for $3.75 Billion • Nigerian, Zambian, Botswana and other national telcos for privatisation • Nigeria, Ghana and other Wimax 2.3-5G licenses to generate further investment• Over 1,000 FM and TV stations established in Africa in last decade alone• Software Development, IT Assembly, BPOs, Data Centres, etc, also growing slowly

Information = Investor Confidence

ICT Investment Distribution by Regions

Investment in telecommunications 2005

Investment in African Telecommunications is far behind all regions apart from Oceania

Africa – USD 12.9 per capita

Oceania – USD190.80 per capita

Challenges in Emerging markets

• Inadequacy of network infrastructure: national transmission backbone, Point of Interconnection (POI), Internet Exchange Points (IXP), etc.

• Unreliable and inadequate public electricity power supply

• Security of telecommunication network infrastructure and installations: vandalism, theft, etc posed a threat

• Difficulties in acquiring land and suitable buildings in rural areas

• Lack of adequate funding / Appropriate Budget allocation

• Inadequacy of experienced ICT manpower in rural areas

Mobile Subscribers Higher Growth Rate in Emerging Markets

Potential for Growth in Emerging Economies

Africa’s Digital Divide Dilemma (2008)

Rural Urban Total Teledensity

Mobile Phones 37m 327m 364 38.5

Fixed Lines 7.5m 24m 31.5 3.4

Broadband Connection 3m 62m 65 6.7

Total Population 634m 341m 975

Rural-Urban Digital Divide

• Mobile sector has had exponential growth –

• In many parts of the Commonwealth, Rural Teledensity still remains relatively low (<5%) for both Mobile telephony and even less for Internet/broadband connectivity

• 60-70% Population in Rural /Semi Urban Areas

• Convert `Universal Service Obligation’ into Universal Service Opportunity

• Cheetah-Pole-Vault in reaching the `unreached’ (CTO)

Improved ICT Policy / Legislation & Regulation Helps to Promote Capital Inflows

IMPLICATIONS

Converged services means converged regulatory authorities

Technologically neutral licensing increasingly the norm

Focus on Access, Service Quality, Affordability, not technology

Govts/Regulators working closer with the Private Sector thru USAFAs

Promoting Liberalisation, Competition, Privatisation

Making more spectrum available thru innovative frequency planning

Consumer protection, awareness and education

Models for Investing In Underserved Areas

• Competitive subsidy models • Provide operator(s) with subsidy to build and operate a network in currently

underserved areas of the country. Services provided in these areas on a non-discriminatory basis.

• Shared infrastructure/consortium models • Provide operators with incentive to cooperate in the development of backbone

infrastructure in currently undeserved areas of the country where infrastructure competition is not commercially viable; possibly through demand aggregation, off-take agreements; co-location

• Incentive-based private-sector models • Provide operators with an incentive to build networks in currently underserved

areas through reductions in USF contributions or sector levies.

ICT Investment Opportunities

Tremendous investment opportunities in ICT Sector* Privatisation of National Telcos * Opening of market for New Entrants

* Additional mobile licenses – at least >2 operators * licenses/frequencies for new wireless technologies

e.g. WiMax, Broadband, Rural, 3G* National fibre backbone development & investment• National e-Governance Development – G2G, G2B,

G2C in e-education, e-health e-commerce, e-agri * Liberalisation of Broadcasting sector – new entrants –* e-Applications / Local content development

Variety of Funding Sources

• Governments, through Ministries, Public Banks, SSF• Bilateral agencies (DfID, USAID, SIDA, DANIDA, etc)• Other Emerging Markets (mostly India, China, Mid-east)• Multilateral Banks/Agencies (IDA, IFC, WB, AfDB, DBSA, AsDB, EU)• Private Equity Investors & Venture Capitalists—both African and

globally, corporate, consortia and individual• Corporate Capex Investments and Corporate Social Responsibility • Structured Funds—Equity, Debt, Emerging Markets/African

Infrastructure, etc• Commercial Banks—HSBC, Barclays, Standard Chartered, Stanbic,

Zenith, UBA, Ecobank, etc• Investment/Merchant Bank—Goldman, Morgan Stanley, CSFB, etc• Vendor Financing—Huawei, Alcatel, Cisco, Nortel, Nokia, Sony, • New Sources—Grameen, Rural Banks, USAFAs, etc

Partnering with CTO 4 ICT Investments

• CTO, 100-year-old organization, owned by governments, ICT regulators, telephone and ICT operating companies, and ICT equipment manufacturers, vendors and stakeholders

• Capacity for Market and Sector Research—Nokia/NSN, Ericsson,

COMARCI Phases 1 & 2 (Nigeria, Ghana, Gambia, Sierra Leone)

• Provision of Consultancy and Advisory Services—

• e-NEPAD Commission, World Bank & UN agencies

• Training and Capacity Building Programmes and Courses—DfID/BDO

• Ability to assist with Investment Strategy Planning – Launch of `Commonwealth Telecom Development Fund’ (CTDF)

• Facilitation of Access to Key Decision-Makers

• Special knowledge of untapped rural markets of Africa/Asia

• Agile, flexible, business-like approach to operations

Conclusions• The World is in a Knowledge Age • Global ICT trends are leading to Convergence• Commonwealth Economies have improved over Last 20 years• Major Opportunities Continue To Exist for ICT Investment in

member countries • Liberalization, Privatization, Competition = Opportunities• New Equity, Debt and Venture Funds Available for Member

Countries; Imminent Launch of CTDF• ICT Sector Getting Highest Returns on Investment in the

Commonwealth Countries

CTO is working with Governments, Operators, Vendors, Investors, Funding agencies and others to help to bring about

Universal access / connectivity to enhance social and economic development

Thank You

Dr Ekwow Spio-Garbrah Chief Executive Officer

Commonwealth Telecom Organisation64-66 Glenthorne Road

London, W6 0LRe-mail: e.spio-garbrah@cto.int

Tel: +44 208 600 3801 www.cto.int

Working TowardsDeveloping ICT Common Wealth