Mugabe at Geneva

Robert Mugabe’s sudden appearance at the ITU telecoms show being held this week in Geneva must have been a considerable embarrassment to most of the event’s organisers. Deflecting the suggestion that his attendance was ‘unheralded’ – the description originally used by Telecom TV, a website – an ITU spokesperson told the Economist Intelligence Unit that the UN agency knew all about his arrival in advance. It seemed most delegates didn’t, however. And the ITU’s failure/reluctance to publicise it was hardly surprising given his notorious reputation.

International sanctions, of course, prevent Mr Mugabe from travelling around Europe at his convenience. Paradoxically, though, he is allowed to attend UN events, and probably grabbed the opportunity to enter Geneva on this pretext, check his Swiss bank account and buy some chocolates for a few Zanu-PF zealots.

What made the ITU look particularly bad was its treatment of Mr Mugabe at the event. They couldn’t stop him from railing idiotically against the West (which, during a ministerial session, he nonsensically blamed for using the airwaves to destabilise Zimbabwe). But did they have to be so courteous? The spectacle of Houlin Zhao, the ITU’s deputy secretary general, graciously leading Mr Mugabe around the exhibition floor left a nasty taste in this attendee’s mouth.

But if the ITU came out of this badly, the behaviour of various government figures was truly disgraceful. Any minister worth his badge would have quit the session to which Mr Mugabe was invited. Disappointingly, a few were seen shaking him by the hand as he entered the room.

Crisis, what crisis?

Michael Joseph, CEO of Kenya’s Safaricom, is a happy man. Although first-half profits weren’t stunning, Mr Joseph says that Safaricom’s subscriber base grew an impressive 50% this year and that it’s operating margins are close to 50%. The key to future progress, he said at a recent FT conference in London, is providing a good service to the poorest customers as well as the richest.

Against his CFO’s wishes, he introduced ultra-low value pre-paid scratch cards. These have been a huge success. Over half of his customers, he says, top up by increments of just US$0.25 a pop and 74% spend less than US$0.62 at each top-up. “People in Africa live minute by minute,” says Mr Joseph. 

Safaricom’s mobile banking programme – MPESA – is also going from strength to strength. According to Mr Joseph, 45% of Kenya’s population now have phones but 51% don’t have bank accounts. About 4.1m Safaricom customers now use MPESA, he says, and 10,000 new accounts are being opened daily. The average transaction – just US$35 – is still small. But the business shifts Euro1.5m a day.

The company isn’t ignoring its well-heeled customers either. It began offering Blackberrys this year and by September had 9,000 customers for the premium service. But Mr Joseph has even more to celebrate. Safaricom managed to raise a cool US$65m via an IPO in June, well before the world stock markets started to implode. And even though its shares have slipped since then, the company remains East Africa’s largest company by market capitalisation. Not bad for a company that gets 62% of its revenue from just 13% of its customers.

Dynastic squabble

Two Indian brothers inherit a sprawling business empire from their father. Dividing the spoils, each goes on to amass even greater wealth in the years that follow his death. But as their fortunes rise, their relationship sours. Eventually, one brother threatens to bulldoze his sibling’s grand plan to build a telecoms company bestriding the markets of India and Africa.

The plot of a new airport thriller? Actually, it’s the latest in the Reliance-MTN saga (see below for the prequel). Mukesh Ambani, owner of India’s Reliance Industries, says he has the right of first refusal over Reliance Communications, the telecoms operator owned by his brother Anil, and has threatened legal action against the company if its reverse takeover of South Africa’s MTN goes ahead.

That deal could see Anil cash in after taking an influential but non-controlling stake in the combined company. So perhaps Mukesh thinks Anil is doing a massive disservice to the company and their father’s memory by “selling out”.

Alternatively, of course, he is just irked that Anil looks poised to overtake him on the Forbes rich list.

Courting MTN

Ravishing prospects can make overly demanding partners. So Bharti Airtel seemed to think, anyway, after unceremoniously dumping MTN last weekend. The Indian operator’s courtship of South Africa’s most eligible bachelorette was a short-lived affair, collapsing just three weeks after Bharti had popped the big question. Having gathered up US$60bn in funds to pay for the wedding, Bharti was eventually turned off by MTN’s determination to play a dominant role in the marriage.

So far, however, that doesn’t seem to have dampened the ardour of Reliance Communications, Bharti’s main Indian competitor. After watching its rival suitor quickly lose interest in MTN, Reliance has moved in with an offer of its own. A prospective tie-up between the two could take the form of a ‘reverse take-over’ – whereby Reliance would make the proposal but MTN would end up calling the shots.

Reliance would be marrying into lots of money and power. In practical terms, its chairman, the billionaire Anil Ambani, would accept MTN stock in exchange for his 66% stake in Reliance, becoming the single biggest shareholder in the merged entity. Other big Reliance shareholders would be similarly compensated.

By retaining control, MTN, for its part, would not demean itself in the eyes of the South African elite. It would also become one of the strongest players in emerging markets worldwide, with nearly 120m subscribers across Africa, the Middle East and, of course, India.

As did Bharti, Reliance has emphasised this is early days in the process. But if it does go ahead, Bharti could stand to lose out in a rather embarrassing fashion. Having exposed MTN’s willingness to tie the knot – albeit on its own terms – the Indian number one may unwittingly have invited an African behemoth to run riot in its own backyard.

The Big Divide – phones vs the web

The chart above, courtesy of the ITU, shows mobile penetration rates worldwide and for developed and developing regions, between 1994 and 2006. The divide between rich and poor countries is measurably narrowing, which is good news for emerging economies. Take a look at the same data for internet penetration:

The difference is telling. By the end of 2006, just over 10 percent of the world’s population in developing countries were using the Internet, compared to close to 60 percent in the developed world.

Could the key be cheap smart phones with web access?

Y’ello in Africa

Three miles south of Johannesburg’s wealthiest neighbourhoods is the township of Alexandra, one of the city’s poorest communities. The disparity between the two is huge. But, as you can see above, good things are happening. This is a  Y’ello Zone , part of the  MTNaccess project, a nationwide scheme to bring broadband and computing to low-income townships and providing a platform for entrepreneurship. Backed by MTN and the GSM Assocation’s development fund, the Alexandra site just one of seven such pilot projects and hopefully, a sign of better things to come.

But elsewhere in Africa, things are going in exactly the opposite direction. Gabriel Solomon, a director at the GSM Association, recently told Total Telecom Magazine that the new Benin government has suspended the mobile networks of MTN and Atlantique Telecom after they refused to pay US$50m in a one-off fee for a new contract, replacing the one they had paid two years earlier to a previous government. This was a 500% rise from the earlier payment and clearly extortion. 

Despite this kind of despotic behaviour, mobile tariffs in Africa in 2006 were, on average, on a par with other regions, according to the ITU. Just under US$25/month for 100 minutes. When broadband price comparisons look the same, things will really be looking up for Africa.

Africa’s Internet access, mired by politics

It was only a few weeks ago when things were looking up, with talks being held to discuss how to get up to 80% of the continent’s people connected to the Net. But then politics got involved…

A story in South Africa’s Business Day newspaper reports that the government might block Eassy, one of the several pipeline projects, because of its “commercial nature”. As the story runs:

The 10000km Eassy cable will be 27% owned by Telkom, Neotel and MTN, and is designed to provide desperately needed cheap bandwidth to 21 African countries. But SA’s communications department has taken umbrage at what it sees as the commercial nature of the enterprise, and intends to withhold landing rights.

Instead, the government will use taxpayers’ money to roll out two rival cables heading east and west, jointly known as the Nepad Broadband Infrastructure Network.

Unfortunately, the government misses the point. Consumers everywhere want cheap, reliable Internet access. Until the market is opened up to competition, that won’t come. And we know all to well what relying on a state-run telco does for access costs.

Africa’s grand internet access plans

Ministers, regulators and others are meeting for a big powwow in Nairobi this week to discuss how to connect up to 80% of the African continent to the ‘net.

It all sounds very promising:

The meeting, dubbed Connecting Rural Communities Africa Forum 2007 is organised by the CTO with telecoms market regulator Communications Commission of Kenya as the host. It will discuss research findings, policy options, regulatory strategies, business models, financing and investment, available technology and public-private-people-partnerships that can improve rural connectivity in Africa.

But, unfortunately, while hosting more talks is fine, urgent action is more necessary. Africa’s connectivity is dire: less than 4% of the populace has internet access, according to Internet World Stats. Problems range from telco monopolies blocking competition to major infrastructure and skills shortfalls, not to mention widespread power shortages.

That said, there are signs of life surrounding the various cable projects running down the east and west coasts of Africa.  And even the troubled EASSy project recently received a fillip. All this will help improve things. But talk of connecting 80% of the continent remains, for now, just talk.

M-Health?

 M-banking, m-commerce and now m-health? In Africa, this notion is turning into a reality thanks to MTN, Africa’s largest telecom group. Based in South Africa, MTN has become the first mobile operator in the Phones-for-Health initiative, a public-private partnership to help address HIV/AIDS and other health issues in Africa.

The company is subsidising the distribution of handsets and providing network support to enable health workers across the continent to order medicines, download treatment guidlines and interact with a health authorities. Laudatory behavour, to be sure, but with operating margins a healthy 31%, the company can afford to be generous.

Still, this isn’t just altruism on MTN’s part. More than 60% of Africa’s population now lives in areas with mobile phone coverage and that figure should rise to 85% by 2010. As more phones are distributed and more uses found for its networks, the more the MTN’s sales and profits will benefit. Enlightened self-interest anybody?

A Wizard called Wizzit

 With all due respect to Harry Potter, wizardry isn’t always found at Hogwarts School of Witchcraft. Take a look at South Africa’s newest bank, Wizzit.  A virtual bank launched  in 2005 by a group of local entrepreneurs, it has no branches of its own. Its customers use their mobile phones to transfer money, purchase pre-paid electricity vouchers, buy airtime for a pre-paid mobile phone and a host of other services.

As a recent GTF story explains, the bank appeals to the 40 % of the local population who don’t have a bank account or those low-income workers with accounts who can spend an hour getting to a bank, an hour in a queue and an hour going home just to make a deposit or withdrawal. Thanks to the wizardry of the mobile phone, Wizzit customers can now do all this by text message and for substantially less than traditional banks charge.

Not a topic worthy of a blockbuster movie, perhaps, but surely just as magical.