SADC telecoms readies for brighter future
Telecommunications in Africa is seeing a great deal of liberalisation, and many companies are involved in projects to roll-out infrastructure. However, there is less action in the Southern African Development Community.
Everywhere in Africa, a fresh wind is blowing through the corridors of musty old State-owned telecommunications monopolies. Privatisation, new licences and foreign direct investment are the order of the day in countries where teledensity figures of well below 1% are the legacy of the inefficient incumbents.
In the Southern African Development Community (SADC), however, things are noticeably different.
Teledensity is generally higher: about half of SADC`s members have fixed- and cellular-line penetration of between two and 12 telephones per 100 people, according to figures supplied by Siemens. SA, of course, stands out among the crowd with 13.5% fixed-line and over 20% cellular penetration. Tiny Mauritius is the exception: for every 100 inhabitants, there are 23 fixed- and 14 cellular-lines, making it the best connected of all SADC region countries.
The lure of green fields
An interesting phenomenon occurs when one talks to telecommunications companies about their involvement in SADC countries. Almost without exception, they relate their successes in African countries outside of SADC.
As one might expect, one of the key reasons for this enthusiasm about central and east Africa is revenue.
With few exceptions, we haven`t been in SADC because basic infrastructure is in place and there isn`t much scope for further services.Shaun Liebenberg, MD, Plessey
For example, Plessey, a telecommunications equipment vendor, derives 90% of its African revenue from non-SADC countries, according to MD Shaun Liebenberg.
Ericsson South Africa has been following MTN across the Limpopo, and is equally likely to tell of its network roll-outs in Rwanda, Uganda and Cameroon.
Siemens learnt much of its skill in rolling out infrastructure from its own experience in Uganda. It built an entire network in SA, put it in crates and shipped the whole lot up in an Antonov. "They were up in weeks after that," says Paul McKibbin, MD of Siemens Carrier Solutions.
The reason why Africa is so much more popular than SADC, for many telecommunications companies, is the lure of green fields. Most of these countries are only now liberalising their industries, and much new infrastructure is required.
"With few exceptions, we haven`t been in SADC because basic infrastructure is in place and there isn`t much scope for further services," says Liebenberg. "The markets are pretty small, and I`m not sure there`s much demand at this stage for First World services."
The picture that emerges is one of stable SADC countries, like Namibia, Botswana, Mauritius and - although this is changing rapidly - Zimbabwe, that have substantial infrastructure on the ground, and don`t need much more. Exceptions are Angola and Mozambique. Both are cited as less advanced in their telecommunications infrastructure, although Angola Telecoms is in the process of upgrading its network.
SADC projects much easier than the rest of Africa
Ericsson South Africa is involved with several networks in the SADC region. Its involvement started with the awarding of a cellular licence to Econet in Zimbabwe. Ericsson won the contract to supply switching gear, and followed the company into Botswana, where it won a licence trading as Mascom.
A second company called Vista also received a Botswana licence, and Ericsson won a turnkey switching contract for this network too. Ericsson also supplied Botswana Telecoms, which operates the only fully digital fixed-line network in Africa.
This makes Botswana not only one of the most sophisticated countries in terms of telecommunications in Africa, but also a jewel in Ericsson`s SADC crown.
In SADC, we don`t even have to apply the lessons we`ve learnt in the rest of Africa.Gary Dewing, operations director, Ericsson SA
Gary Dewing, the company`s director of operations, says it is much easier to do business in SADC than elsewhere in Africa.
"SADC is so different to the rest of Africa: it`s a little bit more in line with SA," he says. "Zimbabwe is an issue because of the government. If things change, it will get easier to do business there. Botswana is a dream. Ditto Namibia - it`s easy to get equipment in and out. Mozambique is a little more difficult, but nowhere near like the rest of Africa."
Edwin Thompson, technical director of UUNet SA, ranks SADC countries similarly.
"SA leads," he says, although this statement will be qualified later, "followed by Namibia, with good infrastructure in busier districts and announcements of satellite infrastructure in under-serviced areas. Botswana has reasonable networks in the cities, although rural coverage is as much of a problem here as in the rest of Africa. Mozambique is sketchy. Zimbabwe is better than Mozambique, infrastructure-wise, but not the greatest. It could use some work. There is a need in Malawi. Mauritius is a difficult place to get cables to, but the small size of the country makes it an easy environment. People have left Angola well alone. There is caution even in Zimbabwe because of the high levels of unrest.
"But in SADC," says Dewing, "we don`t even have to apply the lessons we`ve learnt in the rest of Africa."
Land issues more complex than most
The usual problems cited for network roll-outs in Africa are the difficulty of getting equipment through customs, legal and regulatory red tape, inhospitable terrain, and corruption.
In SADC, however, many of these problems are less acute. "If you go in cold, you`ve had it," says McKibbin of Siemens.
If you go in cold, you`ve had it.Paul McKibbin, MD, Siemens Carrier Solutions
Plessey`s Liebenberg says the trick is to go in with partners. His company has a system in place that qualifies partners over time, depending on their performance. This way, companies that prove repeatedly reliable gradually gain status, and win bigger deals. This process solves many of the usual problems, by working with companies that know the local business conditions well.
According to Liebenberg, the most difficult element of operating in this region is land ownership.
"Figuring out land ownership to obtain leases for sites is tricky," he says. "Often, there are many layers of leases, requiring one to follow a trail of sub-lessors to find the primary lessor."
He says that otherwise, government and regulatory issues are not particularly restrictive.
McKibbin says financing is his company`s biggest concern in SADC. "None of these countries have money," he laments. "Typically, the equipment vendor has to supply both equipment and financing, since banks apply international credit ratings to loans, which makes them exorbitantly expensive. Sometimes, vendors have to self-finance infrastructure to get the ball rolling and start generating revenue. While this isn`t a big problem for established operators like Vodacom or MTN, the incumbent telecoms operators in the respective countries have more trouble.
Liebenberg says Plessey has experienced a reduced risk, and has found that many countries - because of their low financial reputations - approach merchant bankers. "So we deal via merchant banking companies, which guarantees us payment. We`ve done three deals this way, in Lesotho, Angola and Namibia. This is a good trend, that raises the confidence level of doing business in SADC countries from one in 10 two years ago, and two in 10 one year ago, to almost four in 10 now."
Days of dumping are numbered
In the bad old days, when the markets in SADC countries were tightly regulated and controlled by monopoly State-run telcos, dumping was a big problem.
"Foreign `aid`," Ericsson`s Dewing says, "would come in and dump inadequate equipment that couldn`t be sold elsewhere, or that had been decommissioned. Now, with deregulation happening everywhere, you have operators coming in and making a system work to make money out of it."
Liebenberg says that while one would assume vendors do try to dump equipment, operators nowadays simply don`t accept it. "Operators are astute. They take only the latest and the best. All of them go for fibre, for example."
Equipment suppliers are really cutting into profitability and margins in an effort to win deals and dominate markets.Shaun Liebenberg, MD, Plessey
McKibbin says the biggest reason why dumping no longer happens - aside from the move away from under-funded monopoly operators and restrictive soft loans - is that older equipment is difficult to maintain.
"The danger is support afterwards and pricing on support," he explains. "Secondly, today`s technology is software-driven. When new software versions are released, operators have to upgrade or risk losing vendor support on `obsolete` software."
"What one does find, however, is that equipment suppliers are really cutting into profitability and margins in an effort to win deals and dominate markets," says Liebenberg.
Is satellite making inroads? Yes and no
Satellite can, in some cases, make a difference in the region. UUNet`s Thompson says his company`s vision is to distribute services across the continent, using satellite as a carrier.
However, others aren`t so sure satellite is the way to go. McKibbin doesn`t believe satellite is making a significant difference. "Even if you take all the regulators away, there is still a cost involved, and it`s limiting in terms of the kinds of equipment that can be deployed," he says.
We want to create an IP network in the sky in Africa.Edwin Thompson, technical director, UUNet SA
Although Plessey, through Hughes Network Systems, is the main supplier of VSAT technology to Telkom, and Liebenberg points out the benefits of rapid deployment, he agrees that satellite is not growing as fast as it should be. "Microwave radio is growing faster," he says.
Thompson says that covering more than one country with the same network gives satellite the economies of scale it needs.
"We`re going satellite, with the idea that anywhere-to-anywhere communication will be possible through a single satellite network, to avoid the delays incurred by more `hops`," he says. "There are lots of satellite deployment initiatives. Currently, we use geostationary satellites, but they`re too far away so delay is a problem. Lower-orbit satellites require fuel to remain geostationary, and low earth orbit satellites get `sand-blasted`, so their life-span is short."
He says UUNet will probably deploy IP networks across the continent using medium-orbit satellite, using cellular-style handovers to counter the motion of the satellites.
"We want to create an IP network in the sky in Africa," he enthuses.
But there are a lot of lessons to be learnt. "A lot of telcos are quite scared of IP," Thompson says, "without considering that it generates a bigger market too. In a bigger market there`s increased competition, and they`re also concerned about losing direct control of their customers."
Infrastructure key to attract foreign investment
The availability of reliable telecommunications is one of the key criteria for South African companies to do business in the rest of the SADC region.
"It`s becoming more and more crucial that there is a good infrastructure," says Ericsson`s Dewing. "All companies are working more on electronic B2B models now, and the better the infrastructure, the easier it is."
What`s harming their national industries more than equipment dumping is the need to move with technology and move away from paper.Mark Schech, market development officer, TradeRoot
Liebenberg agrees: "You`ll get regions of Africa that are developed, and that`s where the business will be. Lack of infrastructure is why some have struggled to get foreign investment."
"Tanzania is seeing much foreign investment on the back of telecommunications," confirms McKibbin.
TradeRoot is a technology company specialising in building bank switching and payment gateways. Its market development officer, Mark Schech, says wireless and satellite infrastructure are the technology drivers that make it possible for companies like his to do business in Africa.
"We found it is impossible to provide copper or fibre optics. It took six months to discover that wireless was the way to go."
He says that for any of the countries north of the Limpopo to lay the kind of infrastructure we enjoy in SA is too costly, too time-consuming and prone to right-of-way, theft and other obstacles.
However, he says the biggest issue in developing countries is that "90% of the banking environment is still paper-based".
Says Schech: "I`d say what`s harming their national industries more than equipment dumping is the need to move with technology and move away from paper. That`s why we`re offering these electronic alternatives."
So while telecommunications infrastructure attracts business, business drives infrastructure in return, creating a self-fulfilling cycle that can only benefit the SADC region.