Regional report: a tale of two cities: telecoms in Africa and the Middle East

 

The telecoms market is very different in the Gulf States and Africa. Multinational companies that do business in these regions will be exposed to one world that is on a fast track to deliver advanced mobile and IP based services, and another that is essentially focusing on the infrastructure improvement necessary to carry fast-growing mobile voice traffic and interconnect sites. This creates a completely different array of access technologies, international call charges and competitive suppliers from one market to the next, which can play havoc for enterprise trying to build a unified pan-regional communications strategy.

 

 

Nothing highlights the difference more between the Arabic nations of North Africa and the Middle East, and those south-west of the Sahara than broadband. Broadband uptake in the Middle East is one of the fastest in the world – Egypt, Tunisia and UAE doubled their broadband base during 2007 – but combined with Africa, the entire region only accounts for 2.5% of the world’s broadband lines, half that of Eastern Europe. Not surprisingly, according to Point Topic, the region has the lowest broadband penetration in the world, with less that 2% of the population connected via broadband.

 

Much of the broadband push in the Gulf is coming from smart cities, the luxury residential and business developments of Saudi Arabia, UEA, Qatar, Kuwait amongst others. “Developers can't sell $1 million apartments that only have a simple telephone plug. Their customers want near infinite bandwidth capable of delivering Internet access, advanced voice services and on-demand entertainment. They want all of the services they would find in Europe at a minimum,” says Giancarlo Duella, Professional Services, Orange Business Services. Broadband content in the Gulf is getting close to what is available in Western Europe and North America. As markets liberalize and competition increases it is expected that incumbents and their challengers will bring further investment into fixed infrastructure and open up new revenue streams.

 

In sub-Saharan Africa it’s a totally different environment with much of the focus on infrastructure improvement to deliver basic voice and data services. It's a fast growing mobile region and there is significant investment in fixed infrastructure, but it still has the world’s lowest telecoms penetration rates. Around 90% of all phone lines in Africa are mobile, and overall Internet and broadband penetration is very low due to limited fixed-line infrastructures, but demand is high, and the proliferation of new wireless technologies, including 3G mobile and WiMAX, will deliver a major boost. Mobile penetration varies dramatically around the continent – in South Africa it exceeds 70% but in Sub-Saharan Africa it is typically under 10%.

 

 

Enterprise communications is coming on leaps and bounds. “Sectors like banking, mining, tourism and oil are expecting improvement in the telecoms infrastructure,” says Duella. “These companies need high quality telecoms service to interconnect different sites on the continent and outside of it.” Analysts Frost & Sullivan believes some of the investment in African telecoms infrastructure is down to oil, gas and mining companies prepared to share the infrastructure costs with telcos to ensure that they can bring their remote locations onto the global WANs.

 

Many countries in the region are also looking towards establishing themselves as offshore outsourcing destinations and this is another enticement to improve telecoms infrastructure. Overcoming infrastructure pitfalls is necessary before the region can truly take hold as a viable outsourcing destination. Countries with credible outsourcing ambitions include Egypt, Morocco, Tunisia in the north, South Africa and Botswana in the South, and Kenya in the East. The Egyptian government has aggressively mounted a campaign to attract outsourcing interest and crafted a coherent plan to create a pipeline of qualified IT graduates.

 

 

But the telecoms development is not all plain sailing. Investors like favorable and stable regulatory and economic environments. Investment in core networks, access and extending fiber to business districts is vital to support the region's economic development and ensure that more businesses and consumers can benefit from voice and data. It will become a virtuous circle: the better the investment performs, the more likely the telco is to extend infrastructure and services to a larger audience.

 

Privatization andpositive market regulation to stimulate competition should encourage foreign investment, and many equipment vendors are aggressively targeting nascent telcos. Because of the poor copper infrastructure most telcos view mobile and wireless technologies as the most suitable carrier of the broadband flag. “It’s good to liberalize, but it has to be under conditions that allow the investors to make money otherwise they will hold back on their investment and you will not get real competition,” says Duella.  “If you liberalize the fixed line market but don't let the new entrants use the ducts of the incumbent, it means the challengers have dig up the road and so the business case will remain limited to very profitable areas. You can liberalize a market but if the barriers are too high, restrictions too big and the potential earnings too low, then no one will invest.”

 

Innovation also plays a key role in telecoms development. And the region’s telcos, particularly incumbents, cannot afford a standing start. Incumbents need to learn to work in a competitive environment and innovate in technology, support processes, billing, customer care and marketing. “One of the problems they have in the region is skill sets. They have the money but they have a problem sustaining growth because of a lack of skilled and experienced personnel,” explains Duella.

 

 

Orange Business Services can help incumbents and new entrants develop next generation fixed and mobile services through its innovative Solutions for Operators (SFO) program. Orange Business Services is already making a considerable impact on the development of telecoms throughout North Africa, the Middle East and West Africa. 

 

For incumbent providers, SFO delivers network and organizational transformation to help them deal with fast evolving markets and make the most of the opportunities presented by advanced services. For new entrants into telecoms, such as real estate developers, Solutions for Operators is a fully-functioning telco-in-a-box service, utilizing an IP core network and access options for supporting mobile, broadband and enterprise IP services. Solidere in the Lebanon, Wana in Morocco, Cote D’Ivoire Telecom and Oyak Telecom of Turkey are just a few of the region’s service providers that have benefited from Solutions for Operators.

 

Solutions for Operators is designed to share Orange’s experience of transformation in France, and the insights from its market leading mobile, broadband and enterprise lines of business, and so fast tracking customers through network transformation, marketing and service creation.