The Future of African Mobile Profitability: Stupendous Value, Mobile Darwinism & The Next Phase of Growth


April 15, 2009
107 Pages - SKU: AFN2223025
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Countries covered: Africa

African mobile operations have long been extremely profitable; stories abound of triple digit subscriber growth, seemingly boundless potential, and an overall environment in which operators need only build it and profits will come. If only things were that simple.

The reality is more complicated. Building on a comprehensive analysis of mobile operator performance in 40 African markets, the report reveals a market that “offers a remarkable blend of stupendous value creation alongside ostensibly misguided value destruction, can’t miss profit machines at the top versus volatile opportunities at the bottom, and pervasive premium valuations for what is increasingly a Darwinist, commodity business.”

In The Future of African Mobile Profitability, the AfricaNext research team goes beyond gaudy top line subscriber and revenue numbers, to provide in depth analysis of the drivers of African mobile profitability, including pricing and usage, OpEx, CapEx, EBITDA and free cash flows dynamics in an increasingly competitive environment and in the face of a severe economic downturn.


List Of Exhibits
Companies Mentioned In This Report
List Of Abbreviations
Executive Summary: All That Glitters Isn’t Gold
The Baseline - Solid Top Line Growth All Around
The Model: A Business In Transition - Commoditized Revenue, Tough Opex, High Capex Requirements
The Bottom Line: Great At The Top, Not So Good At The Bottom
The Players, Valuation And M&A: Inflation, Depression, Consolidation
Report Structure
Some Preliminary Observations
African Markets Are Not Created Equal: From Value To Volume Opportunities
Section I African Mobile Subscriber Review
1.1 African Mobile Subscriber Base Growth: The Boom Is Not Over
1.1.1 Key Adoption Characteristics: Prepaid, Churn, Voice
1.1.2 Mobile Penetration: Average Nominal Penetration Now At 45%
1.2 Mobile Subscriber Forecasts: How The 100% Penetration Barrier Will Be Smashed
1.2.1 Demand Side Assumptions: Of Addressable Markets And Mobile Voice Price Elasticity
1.2.2 Supply Side Dynamics: Competition, Low Cost Models And Network Evolution
1.2.3 Our Projections: A 700m Subscription Target For 2013
1.3 The African Business Model Paradigm: Build It And They Will Come - But Will They Stay?
Section II Arpu & Revenue Dynamics
2.1 Outgoing Voice Revenue: The Path To Commoditization
2.1.1 Prices: High, But Declining
2.1.2 Evolution: Giving Away Minutes To Protect Arpus
2.1.3 Usage: Conditions Ripe For Mou Upwards Trend
2.2 Interconnect Revenue: Will Trend Down
2.3 From Sms To Mobile Data And Money Transfer - The Wildcard
2.3.1 Mobile Internet - Tremendous Upside
2.3.2 Other Vas - From One-network Roaming To Mobile Banking - Beyond The Hype, All About Churn
2.3.3 Arpu: Towards Sub-$5 Levels
2.4 Top-line Revenue: A $44bn Business And A $65bn Target
Section III Opex: Looking For Low-cost Models
3.1 Top Line Opex: Growing Faster Than Revenue
3.2 Cost Of Sales: The Interconnect Challenge
3.2.1 Interconnection Costs: A Hurdle For Late Entrants, But Looking Good
3.2.2 Acquisition Costs And Dealer Commissions
3.3 Operating Expenses: Few Places To Go But Up
3.3.1 Network Expenses: Controlling Cell Site Costs, Pushing Self-provision
3.3.2 Staff Costs: Between Expatriates And The Outsourcing Of Customer Care
3.3.3 G&A: Largely Stable
3.3.4 Management Fees: Legitimate Or Shortsighted?
Section IV Capex: Le Nerf De La Guerre
4.1 Capex: The Price To Play
4.2 Capex Drivers: Nigeria, Capacity, Transmission
4.3 The Capex Difference: Correlation To Market Share And Revenue
4.4 The Capex Impact Of The Credit Crunch
Section V The State Of African Mobile Profitability & The Future Of The Model
5.1 State Of Profitability - A Top Heavy Ebitda Market
5.2 The Drivers Of African Mobile Profitability - And What Will Happen To Them
5.2.1 Arpu: A Tenuous Correlation To Profitability
5.2.2 Market Share: Critical To Profitability.
5.2.3 Other Drivers Of Profitability: Gross Margins, Termination Rates And Network Self-provisioning
5.3 Can African Markets Support 4+ Operators?
5.3.1 Redefining Viability
5.3.2 Late Entrant Performance To Date - Mixed
5.3.3 Identifying Successful Late Entrant Opportunities
5.3.4 The Bottom Line On Late Entrants - Forget About Dividends
5.3.5 Impact Of Late Entrants On Incumbent Bottom Line - Negative
5.4 How Will The 2009 Credit Crunch Change The Operating Landscape?
5.5 The Next Business Model: Convergence Vs. Bottom Of Pyramid Models
Section VI African M&A Context & Valuations: From Inflation To Depression?
6.1 License Valuations
6.2 Global Recession Effect On License Valuations
6.3 A Depression In Mobile Operator Valuations: Going Too Hard The Other Way?
6.4 Breaking Down M&A Catalysts For 2009
Section VII Sizing Up Pan-african Players: From Mtn And Zain To Warid And Sudatel
7.1 The Weight Of The Pan-african Player
7.2 Late Entrant Pan-african Players - The Case For (And Against) Warid, Sudatel Or Lap Green Networks
7.3 Late Entrant Pan-african Review
7.3.1 Sudatel: More Capex Needed, Cdma Focus Creates Challenges
7.3.2 Warid Telecom: Strong Performance, Challenging Economics
7.3.3 Lap Green Networks: Building Up To Sell?
7.3.4 Other Players - Telecel Globe, Comium, Lintel, Bintel

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