Breaking the barriers

Africa is a continent of unrivalled opportunity for the telecoms sector.

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By  Roger Field Published  June 17, 2008

Africa is a continent of unrivalled opportunity for the telecommunications sector, but numerous challenges and pitfalls continue to stifle growth, according to delegates speaking at ITU Telecom Africa in Cairo in May.

Much has been heard about the opportunities in Africa in recent years, as investment pours in and international companies consider entering the market.

Indeed, the UK's GSM Association announced in October 2007 that its industry members planned to invest some US$50 billion between 2008 and 2012 in networks in Africa, covering 90% of the population.

The organisation also announced at the time that the number of mobile connections in Africa had risen by 70 million to 282 million.

But for most companies considering entering the African market, the initial enthusiasm is tempered by problems such as corruption and widely dispersed populations, which can make it difficult and costly for operators to establish comprehensive networks.

The subject was the focus for a panel of industry experts including Mohamad Omran, chairman, Etisalat, Tom Phillips, chief government and regulatory affairs officer, GSM Association, and Russell Southwood, founder and CEO, Balancing Act, South Africa, speaking in May at ITU Telecom Africa in Cairo.

As chairman of Etisalat, which operates in 11 African countries, Mohamad Omran has a clear view of Africa's positive and negative points. "When we decided to enter Africa we saw many opportunities for us to add value to Africa," he said.

"We have invested in many countries in Western Africa. The governments of these countries have welcomed investment because they see that it will attract further investment. But it can be very complex and hard work.

Indeed, Omran said there are some serious challenges on the continent, not least with governments sometimes failing to provide companies a consistent business environment.

In some countries, the governments accept certain regulations, and then they change their mind. This is often the case in Sub-Saharan African countries and some others," he said. "If there are the right regulations, there are very good opportunities.

"Sometimes when there is a change of government, there is a change of rules. I have heard some operators say that they won't touch Africa. Some heads of state ask how they can encourage investment?" Omran said that governments need to establish tax incentives to encourage inward investment.

Omran added that another big problem is that some governments in Africa issue telecom licences purely to raise cash, which can lead to problems for the existing players by creating too many competitors.

Perhaps one of the most pressing difficulties for a new foreign entrant to the African market is a lack of skilled ICT professionals in Africa.

While this problem exists on a global level, it is exacerbated in many African countries, whose governments impose restrictions on how many foreign workers a company can bring into the country.

"We just started in Nigeria. There is a shortage of skilled labour and the Ministry of Labour says that companies can't bring foreign labour into the country," Omran said. "Sometimes we might need foreign labour for a certain length of time.

We have built an academy in Dubai and we have trained people from other countries. But until local labour is developed, I need to get foreign people in to work in local markets."

Reducing regulation

For Tom Phillips, the GSM Association's chief government and regulatory affairs officer for public policy, over regulation in many African markets is hampering the efforts of private companies to invest in their businesses.

We think that overall there is globally a trend to increase the burden of regulation on mobile business and we see that as a bad thing," he said. "Regulations are an increasing concern and potentially an increasing burden to us.

Phillips pinpointed international gateways as one area that is in dire need of liberalisation in African countries. "As the mobile industry we have made very substantial commitments.

Back in West Africa in Kigali last year we committed US$50 million into the African continent in the next five years but one or two things are holding us back.

If we don't liberalise, market by market, the international gateway facilities, many of which continue to be monopolies, we will not get investment in there and we will not get rid of the bottle necks. The prices will stay high and demand will not be met at the price it needs to be met," he said.

"I would urge all governments that continue to support monopoly international gateways to liberalise those facilities and bring in competition.

And while some people involved in the telecom sector have called for national regulators to work closer together, and even for the creation of a pan-European telecom regulator, Phillips urges caution.

"I think there are two sides to this argument and they need to be carefully weighed up and evaluated," he said. Best practice, yes - it's very important that National Regulatory Authorities share best practice and put together the experience that they can learn from other markets.

That is very important and in that regard, regulators getting together as they already do - not least under the auspices of the ITU - to share best practice and get input from quarters is very important.

The GSM Association is committed to supporting that process. But a super national body would not be helpful.

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