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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
2 Copyright 14 November 2013 © Mobile Telephone Networks. All rights reserved.
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
3 Copyright 14 November 2013 © Mobile Telephone Networks. All rights reserved.
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
4 Copyright 14 November 2013 © Mobile Telephone Networks. All rights reserved.
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, %
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HOW DOES AFRICA FARE INTERNATIONALLY ON NETWORK AND CONNECTIVITY
Fixed line declining internationally
1.5 1.4
Africa Arab States Asia Pacific CIS Europe Americas
% Fixed line penetration by region (2005 – 2013)
Source: ITU, %
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HOW DOES AFRICA FARE INTERNATIONALLY ON NETWORK AND CONNECTIVITY
Africa’s broadband subscription has
stagnated
0.3
Africa Arab States Asia Pacific CIS Europe Americas
% Fixed broadband subscriptions (2005 – 2013)
Source: ITU, %
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HOW DOES AFRICA FARE INTERNATIONALLY ON NETWORK AND CONNECTIVITY
Africa is behind in mobile broadband
1.8
10.9
Africa Arab States Asia Pacific CIS Europe Americas
% Mobile broadband subscriptions (2010 – 2013)
2010 2011 2012 2013
Source: ITU, %
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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
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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
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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
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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
12 Copyright 14 November 2013 © Mobile Telephone Networks. All rights reserved.
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
13 Copyright 14 November 2013 © Mobile Telephone Networks. All rights reserved.
WHAT IS HOLDING AFRICA BACK – REAL CHALLENGES?
The size of Africa
14 Copyright 14 November 2013 © Mobile Telephone Networks. All rights reserved.
TIME – Labour intensive
TIME / COST – Terrain
COST – Heavy machinery
WHAT IS HOLDING AFRICA BACK – REAL CHALLENGES?
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WHAT IS HOLDING AFRICA BACK ?
Funding
Regulatory challenges
Historically limited infrastructure expansion
Support and Incentives for infrastructural rollout
Spectrum allocation bottlenecks
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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
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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 ?
18 Copyright 14 November 2013 © Mobile Telephone Networks. All rights reserved.
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
19 Copyright 14 November 2013 © Mobile Telephone Networks. All rights reserved.
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)
20 Copyright 14 November 2013 © Mobile Telephone Networks. All rights reserved.
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
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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
22 Copyright 14 November 2013 © Mobile Telephone Networks. All rights reserved.
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)
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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
• c. 12 000 sites with 2x15 MHz
• c. 10 000 sites with 2x20 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
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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
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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
26 Copyright 14 November 2013 © Mobile Telephone Networks. All rights reserved.
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
27 Copyright 14 November 2013 © Mobile Telephone Networks. All rights reserved.
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
28 Copyright 14 November 2013 © Mobile Telephone Networks. All rights reserved.
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
29 Copyright 14 November 2013 © Mobile Telephone Networks. All rights reserved.
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
30 Copyright 14 November 2013 © Mobile Telephone Networks. All rights reserved.
“MTN’S NEW SMART DEVICE – CONNECTING THE UNCONNECTED”
Affordable Most affordable Smartphone in SA, R499
Performance Qualcomm Snapdragon
Training Extensive training and tutorial videos to get started
6TH SENSE UI Simple, easy & comfortable to use Unique contextual Ad Banner
Great Apps Exclusive pre-loads
Service Data Free social, email and internet for 3 months
31 Copyright 14 November 2013 © Mobile Telephone Networks. All rights reserved.
THANK YOU
Questions?
31