Thinking Big

At US$1.05 billion, the offer is not cheap, though the potential of the Nigerian market is obvious. Since the end of 2001 when the new regime of GSM licensees began operating, over 20 million mobile subscribers have been added to the country’s networks.

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By  Tawanda Chihota Published  April 19, 2006

|~||~||~|MTC Group’s move into Nigeria through Celtel International’s conditional offer for a 65% stake in V-Mobile is potentially a defining moment for the Middle East operator’s strategy in Africa. Having swallowed Celtel whole last year, and thereby gaining access to mobile networks across 13 African countries at the time, MTC’s indirect move into Nigeria would see the operator build some serious credibility as an African investor given the West African country is the continent’s most populous. At US$1.05 billion, the offer is not cheap, though the potential of the Nigerian market is obvious. Since the end of 2001 when the new regime of GSM licensees began operating, over 20 million mobile subscribers have been added to the country’s networks, representing a penetration rate of less than 20%. Average revenue per subscriber in Nigeria is significantly higher than in other parts of the continent, and once political and operational risks are mitigated, Nigeria stands out as one of the most lucrative investment opportunities around. MTC has also made it quite clear that it is determined to win the third GSM licence in Egypt, another one of Africa’s key markets. Like other interested parties, MTC would have no doubt been a little frustrated by word from the National Telecommunication Regulatory Authority of Egypt that the deadline for submission of proposals for the licence have been extended to May 4 from April 17. The winner is therefore also set to be announced later and this is now only likely to occur towards the end of the third quarter. Should MTC prove triumphant in Egypt and should Celtel be able to ratify its acquisition of a majority stake in V-Mobile, the MTC family of companies would be present in two of Africa’s three most significant economic markets, only lacking a presence in South Africa. This is formidable progress to have made in a relatively short period of time, and MTC’s option to allow Celtel to continue operating as a separate entity appears to have been the appropriate one to follow. In South Africa itself, the mobile landscape is set to undergo some significant movement of its own through the entry of UK-based mobile virtual network operator Virgin Mobile next month. Last December Virgin Mobile and South Africa’s third-placed mobile network operator Cell C announced that they had concluded agreements to establish a 50/50 joint venture in South Africa to create a new service provider in the mobile market. In terms of the agreements, the joint venture will utilise the Virgin Mobile brand and operate as an independent service provider on the Cell C network, trading as Virgin Mobile South Africa. The combination appears ideal. The offer of virtual services had previously been illegal in South Africa, though following the amendment to the Telecommunications Act effective in 2005, the provision of such services was legalised. Virgin is a well-recognised aspirational brand in South Africa, and already has a presence there through Virgin Active sports clubs, Virgin Cola and Virgin Atlantic. The development of this type of deal on the African continent is indicative of the growing sophistication of telecoms markets across the region in both their scope of services as well as in terms of the investment opportunities they now offer. However, caution should remain the order of the day. In Nigeria, other outside investors have attempted without success to gain a foothold in V-Mobile. Vodacom’s forced exit from its short association with V-Mobile in 2004 stands as stark warning that Celtel needs to proceed carefully, particularly in light of notoriously litigious V-Mobile shareholder Econet Wireless International. Should the deal be ratified though, it offers a great opportunity for Celtel to add a professional edge to V-Mobile’s operations and expand the Nigerian operator’s network capacity and subscriber base significantly. ||**||

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