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The Xalam Analytics Monthly

THE EXCLUSIVE MONTHLY ANALYSIS FOR AME’S DIGITAL INFRASTRUCTURE EXECUTIVES

By invitation only

May 2017

May 2017

Outline

The Curious Case of Cameroon’s Internet ShutdownThe Government of Cameroon (GoC)’s shutdown of the Internet in the country’s “Anglophone” regions was the most prominent manifestation of a relationship to the Internet that has long been ambiguous.The GoC’s approach in addressing otherwise legitimate concerns about the Internet will suffocate any efforts to truly harness its capabilities.The GoC (through state-owned Camtel) is building what we see as the best pool of fibre assets in the CEMAC region....But the very public shutdown of the Internet in one of its key regions will have far-reaching consequences – from a lower digital dividend to further undermining the already fragile economic case for the SAIL project.

Djibouti Telecom & the Making of Africa’s Most Strategic Bandwidth HubDespite its small size, Djibouti has emerged as arguably Africa’s most critical international capacity hub. But Djibouti is not merely a passive host to cables passing by. Over the past five years, Djibouti Telecom (DT) has made some of the most aggressive bets by an African operator on international capacity markets.The company has been performing what in our estimation is one of the smartest wholesale plays we’ve seen from an African telco in a long time.

Feature Analysis

The Future of African Bandwidth MarketsWinds of Consolidation in African Mobile Markets – What the Data SaysAfrican Mobile Capex Makes a Fragile Recovery

Monthly Short Notes

Huawei’s Public Cloud PlayRussia’s MTS Says it will “Sacrifice” Connectivity to Drive Software-Centric Rebirth Why Virtualization is a Tough Sell for Finance Teams

From the Light Reading Desk

3© Xalam Analytics LLC - 2017The Xalam Analytics Monthly – May 2017

THE CURIOUS CASE OF CAMEROON’S INTERNET

SHUTDOWN

FEATURE ANALYSIS

4© Xalam Analytics LLC - 2017

FEATURE ANALYSIS: THE CURIOUS CASE OF CAMEROON’S INTERNET SHUTDOWN

The Xalam Analytics Monthly – May 2017

Cameroon – Proudly Swimming Against the Digital Tide

It lasted 93 days – on April 20, the government of Cameroon (GoC) re-established Internet connectivity in the country’s English-speaking (“Anglophone”) Northwest and Southwest regions. The initial shutdown had been designed to help quell civil unrest in the two regions, following days of protests over a variety of issues ranging from linguistic to economic marginalization.

The shutdown has had an immediate economic impact of one to several millions of dollars, depending on the estimates, mostly through economic disruption to the local economy and the upending of the regions’ vibrant local startup ecosystem. The broader consequences, in our view, will be far more extensive and long-lasting.

Cameroon’s Anglophone West is no regional backwater, in the country’s context. It is a popular touristic destination and home to around 15% of the country’s population. The region is also home to the Cameroon Development Corporation (CDC), an agro-industrial conglomerate that also happens to be the country’s second largest employer (after the state); it also houses the headquarters of SONARA a refinery company that is Cameroon’s second largest firm in revenue terms.

The prominence of these collateral casualties make the GoC’s decision to shut down the Internet in the region for a full three months even more remarkable.

How can you put anything in the cloud in a country where the government can just shut it down?

African Fiberco ExecutiveCameroon’s relationship to the Internet (and communications technologies in general) has always been ambiguous. Like most African governments, the GoC talks of leveraging digital technologies to accelerate economic development; it has even developed a broad plan, whose core vision is to make Cameroon a “digital country” by 2020.

In practice, the GoC appears to mostly equate the Internet to a morass of all sorts of excesses. Internet social networks, Cameroon’s Minister of Telecommunications said on public television, are instruments of “destruction” and “destabilization”, in an age of rumors, fake news and revenge porn. In January, the GoC launched a public SMS campaign “reminding” users that they were liable to get 20 years in jail “if found guilty of slander or propagating false declarations on the social media”.

Security concerns are also prominent; unlike traditional communications, the government simply lacks the expertise or capital to monitor popular Internet applications – most of which were widely used during the Anglophone regions’ civil unrest.

In fairness, such concerns are not illegitimate – and Cameroon’s government is not the first to be alarmed by the hazards of the Internet. From China to Saudi Arabia, governments have sought to strike a delicate balance between harnessing the transformative capabilities of Internet technologies while cutting down on their excesses.

What’s peculiar to Cameroon is how it’s dealing with the predicament. Here, a government instinctively suspicious of the Internet and unable to keep up with the technology has built a strategic approach that is fundamentally defensive, structured around control and aggressive enforcement in a number of key areas; market structure, hard digital infrastructure and sector regulation. For Cameroon, the question is increasingly whether a near visceral fear of the Internet will ultimately suffocate any efforts to truly harness its capabilities. On that score, things look ominous.

Cameroon and the Internet: a Complicated Relationship




The Best Pool of Fibre Assets in the CEMAC Region

Few African governments have gone as far as the GoC in ensuring that Internet infrastructure stays under state control. Camtel, the country’s state-owned carrier acts as the custodian and manager of the state’s fibre assets. The company holds a monopoly on the provision of wholesale capacity, one of the last few players in Africa to hold such a legal advantage.

In 2012, the GoC wrestled ownership of the landing points of the ACE and WACS submarine cables from initial owners Orange and MTN, in what was in essence, a soft form of expropriation (at estimated initial value), and bestowed management of the landing points to Camtel.

Combined with a connection to Nigeria’s MainOne submarine Cable through a new Kribi-Lagos 40Gbps link (NCSCS), Camtel’s existing stake in the venerable SAT-3 cable, and management of the Cameroon leg of the World Bank-financed Central African Backbone (CAB), the GoC/Camtel has been able to build what in our view is now the best pool of fibre assets in the Central African Economic Community (CEMAC) region.

Government ownership of fibre assets is not unprecedented in the African context. Research on African capacity ownership conducted for our Future of African Bandwidth report showed that as a group, African governments are the 7th largest owner of African international capacity in the continent – based on direct ownership. If indirect stakes are included, they’re in the top 5. But even by those standards, the GoC stands out, with control over more than 90% of the country’s terrestrial long haul and subsea fibre assets.

The GoC’s more recent initiative is arguably its most daring. In 2016, Camtel formed a consortium with China Unicom to launch the South Atlantic Inter Link (SAIL), designed to connect Cameroon’s coastal city of Kribi to Fortaleza in Brazil. The SAIL project is financed by the GoC through a China loan; it is expected to be ready in late 2018 and would be the main competitor to Angola Cables’ SACS cable linking Angola to Brazil.

SAT-3 Camtel (then known as Intelcam) was one of the original investors in the SAT-3 cable; today, it controls ~3%-4% of available capacity on SAT-3.

WACS The GoC took over MTN Cameroon’s stake in the WACS consortium and allocated landing point management and about 20-25 Gbps of capacity to Camtel.

ACE The GoC took over Orange Cameroon’s stake in the ACE consortium and allocated landing point management and about 4-5 Gbps of capacity to Camtel.

NCSCS ~40Gbps connection to the Main One Cable from Kribi to Lagos, Nigeria.

SAIL Arguably Camtel’s (and the GoC’s) biggest fibre gamble. China-supported subsea cable linking Cameroon to Brazil, RFS 2018-19.

CAB World Bank-financed national fibre backbone network, providing transit access to Chad and the Central African Republic.

Camtel Key Fibre Assets - 2016

South Atlantic Inter Link (SAIL)

RFS 2018

Capex (Initial Only) ~$220m to $490m*

Length 6000 km

Starting & Ending Points Kribi (Cameroon) to Fortaleza (Brazil)

Design Capacity (as of 2016) 32 Tbps

Cable Owner (s) Camtel, China Unicom (actual stakes unclear)

Financing Government of Cameroon, China Eximbank, China Unicom, Camtel

*Conflicting sources, in Cameroon and ChinaSources: Camtel, China Unicom, Xalam Analytics Research




Source: Xalam Analytics Research

Chad and CAR –Landlocked, largely

dependent on Cameroon for international

connectivity

Nigeria, Gabon, Congo Republic –

Secondary targets for route diversity – but they’ll have

options

Government Ownership of International Capacity Assets - Sample Markets - 2016

0%

20%

40%

60%

80%

100%

120%

Cameroon Kenya Ghana Cote-d'Ivoire Nigeria

SAIL vs. SACS Capex – Same Route, Same Distance, Different Price

Estimates by Xalam Analytics; Conflicting sources in Cameroon and China for SAIL CapexSources: The Companies, Xalam Analytics Research

Estimates based on proportional participation in the carriers owning the asset; based on lit/available capacitySources: Xalam Analytics Research

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

SACS SAIL CapEx - Source 1 SAIL CapEx - Source 2

Cape

x pe

r Gbp

s of D

esig

n Ca

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ty p

er k

m

Core Target Markets for Camtel International Capacity




The Consequences of a Shutdown: Well Beyond a Couple of Millions

For these and a number of other reasons, the GoC’s very public shutdown of the Internet in one of its key regions will have consequences that are more far-reaching than the odd million of dollar of economic loss. We lay out three major ones below:

A materially lower digital dividend –It is difficult to harness the upside of something if one is afraid of it. As the focus on control and building barriers pervades strategic and tactical action, Cameroon is irremediably losing ground. Its Internet connectivity lags behind that of many peer markets; its international connectivity prices are among the highest in Africa despite direct access to four separate international cables.

Over time, this will matter, as Cameroon falls behind its African peers. Already, there is a marked difference between a Kenyan citizen interfacing with dozens of government ministries through a one-stop-shop, fibre-connected Huduma Centre running over an AWS public cloud platform - and executives from Cameroon’s largest corporations walking around with sensitive data in CDs(1) and USBs because the Internet has been cut off.

Dropping the digital economy pretense – “How can you put anything in the cloud in a country where the government can just shut it down?”, an African fibre company executive asked (rhetorically) this analyst. There are two answers to this question, none of which are promising for Cameroon. (1) You don’t, and (2) if you must use cloud services, you keep the data stored overseas.

In effect, a government obsessed with controlling the Internet is not only creating the conditions for its losing an already eroding data sovereignty; at a time when economies are relentlessly moving digital, Cameroon is essentially ensuring that the productivity gap between itself and the rest of the world will only grow larger, leaving it ever more dependent on the export of natural resources to serve a growing population. This, to be plain, is mindboggling.

Undermining the SAIL Business Case

Another unintended consequence will be on the viability of the Camtel-led SAIL submarine cable project. In truth, the economic case for SAIL was already a fragile one. With its pool of fibre assets, Cameroon aims to become a capacity hub for the central African region. Target countries will now be further encouraged in their efforts to look for alternative routes. Gabon, the Equatorial Guinea and the Republic of Congo, for example, have been getting their own direct access to international cables – they are unlikely to be inclined to be too dependent on Camtel.

There are other viability issues – For one, the Cameroon-Brazil route does not build on an established trade route; trade between the two countries averaged around $100m annually between 2000 and 2015. By contrast, Angola’s commercial trade with Brazil reached around $2.4bn in 2014 alone. Perhaps most of all, Camtel’s project is going directly against Angola Cables’ SACS cable, a player that is better capitalized, more market savvy, has better Brazilian relationships and owns an onwards, high-capacity submarine connection to the US market. And depending on the Capex estimate, Angola’s SACS will be 40% to 3x cheaper to build than SAIL., and will come to market earlier.

This, in effect, will be challenging enough. A global reputation for tempestuously shutting down the Internet will not help the SAIL case – if anything, it will reinforce concerns that the project may well be a white elephant in the making, and raise questions as to whether it should proceed at all.

Of all the potential disruptors to the African capacity market we examined for our research, Camtel may ultimately be the most unpredictable – It’s the disruptor whose projects have the weakest economic basis - they may also have no choice but to disrupt, if the SAIL venture is to have a chance. But Camtel is also the most likely to have substantial amounts of capacity sitting around idly, as has been the case with its current SAT-3, WACS and ACE assets.

(1) From Jeune Afrique – April 2017


DJIBOUTI TELECOM & THE MAKING OF AFRICA’S MOST

STRATEGIC BANDWIDTH HUB

FEATURE ANALYSIS


DJIBOUTI TELECOM & THE MAKING OF AFRICA’S MOST STRATEGIC BANDWIDTH HUB


An ant on its feet can do more than an elephant lying downKenyan Proverb

A Vital International Capacity Hub

Despite its small size, Djibouti has emerged as arguably Africa’s most critical international capacity hub. As of 2016, 8 international cables were landing in Djibouti, connecting four continents, including some of the most critical to global communications, such as SEA-ME-WE 5 or EIG. This is the highest number of cable landing points in sub-Saharan Africa, and a popular peering exchange point for international cables.

Cables landing in Djibouti currently fall into three groups:International, high-capacity cables connecting Asia to Europe (SEA-ME-WE, EIG, AAE-1)African East coast cables to Europe (Seacom, and Eassy)Regional cables providing an international outlet to neighboring countries, most notably Ethiopia, Somalia and Yemen.

The emergence of Djibouti as an international hub is the result of a deliberate, carefully calibrated strategy. The country’s most important asset is its geographic location, a nexus between Asia, Africa and the Middle East, and a peaceful haven surrounded by larger but more tumultuous neighbors - Ethiopia, Somalia, Eritrea, Sudan, and across the Strait, Yemen. Through Djibouti Telecom, the country’s state-owned carrier, Djibouti has gone about maximizing this position, quickly becoming one of Africa’s most important carriers, despite being one of its smallest.

But Djibouti is not merely a passive host to cables passing by. Over the past five years, state-owned Djibouti Telecom has made some of the most aggressive bets by an African operator on international capacity markets, building what is now one of Africa’s largest pools of international capacity assets. The company has invested ~$100m+ in acquiring stakes in some of the world’s largest cable consortia. Djibouti Telecom is on path to becoming a Top-5 capacity holder in Africa, and a critical player in selling regional and international capacity in the horn of Africa – and across the entire East African coast.

Population~900k

Broadband %~13%




Djibouti Telecom (DT) Key Fibre Assets – 2016 (Ownership Only)*

Direct cable ownership only; DT also believed to have IRUs in a number of cables, notably Seacom, SEA-ME-WE-3Sources: Djibouti Telecom, Djibouti MCPT, Xalam Analytics Research

EASSY Djibouti Telecom is an investor in the EASSY cable through the WIOCC SPV. But the real value of EASSY for DT is elsewhere; EASSY ends (in practice, if not technically) in Djibouti, and DT’s strategic relationship with WIOCC puts it in prime position to provide onward connectivity to Europe to African customers. In effect, WIOCC helps pull African demand for DT’s Djibouti-to-Europe capacity.

EIG Currently one of the most critical cables for East Africa to Europe onward connectivity. DT’s stake estimated at ~3%-4%. MTN and Telkom SA are the other African shareholders.

SEA-ME-WE-5 Gigantic transcontinental cable linking Singapore to Marseille, RFS January 2017; 24 Tbps capacity, 18 primary owners; DT is the only sub-Saharan African owner, getting ~500Gbps from commercial launch.

AAE-1 40 Tbps, ~$800m cable linking Hong Kong to Marseille, RFS 2017; DT is the only sub-Saharan African shareholder, put in ~$36m. Depending on how much is lit up, will own upwards of 200Gbps on this cable from the start, close to 2Tbps of capacity over time.

AWE A more recent DT investment in a new, 20 Tbps connecting Australia to Djibouti, and perhaps the best illustration of DT’s strategic acumen. Very similar to DT’s investment in EASSY; a cable from the critical Australian market, with DT acting as the primary provider of onward capacity.

ADEN-Djibouti Primary international capacity outlet for the Yemeni market

Addis-Djibouti Ethiopia’s primary international capacity outlet to the Seacom cable

DARE DT’s plan to build a 60Tbps regional cable pooling capacity from Tanzania all the way to Djibouti – still in project phase, RFS 2018-19.

How to Build a Hub – Key Connections to and From Djibouti

Sources: Djibouti Telecom, Djibouti MCPT, Xalam Analytics Research

Ethiopia

Sudan Yemen

Tanzania

Djibouti

Kenya

Somalia

Eassy AWE

SEA-ME-WE-5

EIG

Seacom

AAE-1

Egypt




Djibouti Telecom – A Top-3 Holder of African International Capacity by 2018

Djibouti Telecom (DT) has been performing what in our estimation is one of the smartest wholesale plays we’ve seen from an African telco in a long time. It’s a two level play; 1)build up as many diverse routes from Djibouti to Europe as possible, then 2) pool rising regional demand to feed that onward capacity supply to Europe. That this is coming from a state telco, and with the state’s blessing shows perhaps the importance of a strategy whose underpinnings are likely more than commercial.

So long as DT can be extremely competitive on Djibouti to Europe pricing and customize its offering to African demand, it will be a tough competitor for international players (for whom the African market is a secondary consideration – at best) and regional players (who lack the onward capability, or if they have it, will find it difficult to compete on price).

A critical consideration in making this work will be to improve the sourcing of regional traffic, which is currently being brought in by the likes of Seacom and Eassy. This is the likely objective of the DARE cable system, a regional project led by DT, in partnership with a number of Somalian telcos, and designed to offer a 60 Tbps subsea connection from Mombasa to Djibouti. Should DT be able to pull this off, the company would emerge as the biggest challenger to the East African capacity business of Eassy, Teams and Seacom.

This all makes for a solid outlook for DT. Under our capacity projections – and depending on various set of assumptions, Djibouti will emerge as a top-3 holder of African international capacity by 2018. The only blip, in our estimation, is a below-par retail broadband offering in its home market. Djibouti (where DT holds a monopoly) falls in the lower tier of broadband penetration in Africa (~13%), a performance that is surprisingly below the standard that DT’s international performance would lead one to anticipate.

Estimates exclude IRU, leased capacity; 2017-2020 are Xalam projections based on lit capacity assumptions, DT stake; estimates exclude DARE capacity (which we treat as regional) and Aden to Djibouti – which we treat more as a Yemen cable.Source: The Companies, Xalam Analytics Research;

Djibouti Telecom Owned (Lit) Capacity – 2010 – 2020F

Djibouti Telecom’s Regional DARE – DARE Project Specifications

Source: Djibouti Telecom, Xalam Analytics Research

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2014 2015 2016 2017 2018 2019 2020

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EASSY SEA-ME-WE 5 AAE-1 EIG Australia West Europe

Djibouti Africa Regional Express (DARE)

RFS 2018

Capex (Initial Only) ~$100m

Length 5500 km

Landing Points (Proposed) Dar es Salaam, Mombasa, Mogadishu, Bossaso, Berbera, Mocha and Djibouti

Design Capacity 60 Tbps

Cable Owner (s)Djibouti Telecom, Africa Marine Express, TeleYemen, Telesom Company, Hormuud Telecom Somalia, Golis Telecom, Somtel Group. (actual stakes

unclear)


- The Future of African Bandwidth Markets- Winds of Consolidation – What the Data Says- African Mobile Capex Makes a Fragile Recovery- From the Light Reading Desk – Huawei’s Cloud Play, Sacrificing Connectivity and Selling Virtualization to Finance Types

Monthly Short Notes

13

The African Bandwidth Market is Facing a Seminal Change to its Economic Structure

© Xalam Analytics LLC - 2017

The African international capacity market has entered a new era, a new phase that comes after a period of dynamic growth between 2010 and 2015, and follows a miserable decade of bandwidth scarcity between 2000 and 2010.

Things are different in 2017. Today’s African international capacity market is facing a seminal challenge to its economic structure, a paradoxical predicament at a time when Internet traffic is booming across the continent. The dynamics behind these changes and their implications for market players and investors are at the heart of The Future of African Bandwidth Markets report.

There is much to assess. Our research says Africa’s international capacity demand profile looks excellent. The headline number of broadband connections in Sub-Saharan Africa has grown 10x between 2010 and 2016 and should hit close to 300m by 2020. African demand for international capacity has been doubling every two years and will double again between 2016 and 2020. This market, unquestionably, will continue to need international bandwidth – and lots of it.

International capacity supply has been growing too. Between system upgrades, new cable rollouts and technology improvements, African international cable capacity will reach twenty times 2010 levels -and almost four times 2016 levels by 2020.

If the 2000-2010 decade was a decade of bandwidth scarcity, the 2015-2020 period will be a phase of African international bandwidth abundance. How will the marketplace handle this bandwidth bonanza?

The most comprehensive independent analysis available on African international capacity markets and part of Xalam Analytics’ “Future of the African Internet Series”, The Future of African Bandwidth Markets provides an unprecedented view into African international capacity demand, supply, key players, pricing and evolving business models.

Find out:Our ranking of the largest owners of African international capacity;Why we’re projecting African international capacity demand requirements to double by 2020;Why African capacity surplus volumes are actually trending upwards despite a market that is already nominally oversupplied;Why we say that despite oversupply at macro level, only one market has a true bandwidth glut, a third of SSA markets have a bandwidth deficit and bandwidth is being rationed in almost a fifth of African markets;Why there is a deepening divide on African capacity pricing – with material long term implicationsWhy we still see a solid case for building out new capacity – despite the fact that bringing in new international capacity into Africa does look like overkill on the surface;Why we say that in an era of bandwidth abundance, the business case for stand-alone, single promoter pure play international wholesale carriers will probably no longer be viable in Africa;Why we say Angola Cables ambition to be a global first tier carrier is credible – but will not be simple to pull off;Who, of Angola Cables, Camtel Cameroon, Djibouti Telecom and Telecom Namibia will do most to disrupt the African international capacity market, and why;And more..

MONTHLY SHORT NOTES



MONTHLY SHORT NOTES

110 pages of pure, data-driven, no-nonsense

analysis of African international capacity markets. It’s Xalam.

Download full report details and sample pages here


http://www.xalamanalytics.com/research/future_of_african_bandwidth/


MONTHLY SHORT NOTES

Winds of Consolidation – What the Data Says - 2012


African Mobile Operator Average Revenue Growth (USD) vs. Market Share – 2012E

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Fewer than a quarter of all operators in the danger zone – (low/negative growth + low revenue share) Mostly independent, lower tier playersWith a few exceptions, pan-African operators largely out of the danger zone –scale drives profitability Positive Zone

Dots represent African mobile operations; charts based on sample of 55 African mobile operatorsSource: Xalam Analytics Africa Mobile Market Dashboard

Danger Zone

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Airtel Africa

Etisalat Group

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MTN Group

Orange Group

Sudatel Group

Vodafone Group


MONTHLY SHORT NOTES

Winds of Consolidation – What the Data Says - 2016


African Mobile Operator Average Revenue Growth (USD) vs. Market Share – 2016E

Share of Revenue

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Dots represent African mobile operations; charts based on sample of 55 African mobile operatorsSource: Xalam Analytics Africa Mobile Market Dashboard

Danger Zone

~70% of the mobile operators in the sample have been experiencing negative revenue growth over the past two yearsAt least half of all operators in the danger zoneThe bottom line picture looks even worseAll operators are impacted – including pan-African playersOver time, life in that danger zone is not sustainable; some form of rationalization is necessaryThat process has now started.


MONTHLY SHORT NOTES


Data from our Africa Mobile Operator Dashboard shows that African mobile capital expenditure stabilized in 2016, with growth staying flat at around $8bn, and after three years of consecutive decline. While not quite a rebound, the improvement points to signs that operators are slowly ploughing money back into capital investments.

Of the 8 operator groups analyzed as part of our pan-African Capex Index, five showed a marked increase in Capex, by 15%-20% in some cases. Airtel Africa and Millicom Africa saw the sharpest cuts in their capital spend (slightly more than 30% cut in both cases), in another sign that the two groups are gradually narrowing their scope and refocusing their African businesses.

For the most part, Capex actually increased in local currency terms, only to be pegged back by sharp currency depreciation. Capital intensity even increased slightly, from 21% to 22% as operators increased spending despite to USD decline in their top line revenue. It is quite notable indeed, that Capex intensity has continued its rebound, even as top line revenue has continued to decline.

There are material variations by country and operator; South Africa, Egypt and Morocco are recovering while Nigerian capex remains in the doldrums – it has declined by an average of around 20% over the past four years and is now only around 40% of 2012 levels.

The African mobile infrastructure transition towards more cloudified, virtualized platforms has started slowly, with the focus remaining on basic connectivity. Outside of spectrum acquisition, the large majority of capital spend is going to urban area capacity build, 4G deployments, metro fibre and the upgrade of IT systems.

Despite the top line improvements, some underlying weaknesses remain. For one, the top line numbers are slightly inflated by 4G spectrum acquisition, notably in Egypt. Excluding spectrum acquisition, we estimate that top line African mobile Capex actually fell by around 10%.

African Mobile Capital Expenditure – 2010-2016

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23%

$0$1$2$3$4$5$6$7$8$9

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2010 2011 2012 2013 2014 2015 2016

Cape

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Mob

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apex

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Estimates based primarily on Xalam pan-African Mobile Index – including mobile Capex by main pan-African players – MTN Group, Orange Group, Vodafone affiliates (incl. Vodacom, Safaricom, Egypt), Airtel Africa, Millicom Africa, Etisalat (incl. Maroc Telecom), Ooredoo and Sudatel. –Sources: The companies, Xalam Analytics Research

Some of the fundamentals that have led to the previous declines in Capex persist. Consolidation has reduced the discrete number of high-capex players; uncertainty hovers over the African mobile business model; under current revenue and margin trajectory, $1 invested today will return less than half of what it did in 2010.

Further, the investment outlook is largely indecipherable in many markets, from lack of 4G spectrum to increased tax pressure and uncertain regulation. In turn, operators are holding back, only doing what is strictly necessary until they have better visibility.

African Mobile Capital Expenditure: A Fragile Recovery

18

Our favorite (and most AME-relevant) analysis from Light Reading and Heavy Reading

© Xalam Analytics LLC - 2017

FROM THE LIGHT READING DESK


Huawei’s Public Cloud Play

Huawei has announced aggressive plans to challenge the likes of AWS, Microsoft and Google with public cloud services, primarily through working with its carrier partners. We have noted parts of this strategy already in our research of Africa/Middle East Cloud and Data Center markets. The details are still somewhat sketchy – but no other global player can fundamentally change the nature of the African cloud as much as this one.

Read about Huawei’s cloud plans here.

Russia’s MTS Says it will “Sacrifice” Connectivity to Drive Software-Centric Rebirth

Russia’s MTS has been among the most aggressive players in emerging markets in exploring new pathways to transform its business model. Now it says it will likely have to “sacrifice” connectivity to survive. We’re not sure about that one – but the idea cannot be dismissed out hand.

Read about it here

Virtualization is a Tough Sell to Finance Teams - PCCW

In a presentation at the Paris MPLS/SDN/NFV World Congress, PCCW noted that Finance teams are among those having the most difficult time to adapt to changing telco business models. Inasmuch as technical skills have to adjust, so does the financial analysis lens – to new revenue, Capex, OpEx and amortization structures.

Read – Why finance teams are struggling with virtualized models

http://www.lightreading.com/services/cloud-services/huawei-takes-aim-at-aws-google-with-public-cloud-move/d/d-id/731999

http://www.lightreading.com/business-employment/business-transformation/russias-mts-to-sacrifice-connectivity-in-software-rebirth/d/d-id/731906

http://www.lightreading.com/nfv/nfv-strategies/virtualization-a-tough-sell-to-finance-teams-says-pccw/d/d-id/731529


DISCLAIMER


This document is for informational purposes only. It is not to be construed as an offer of the solicitation of an offer to buy or sell any securities or other instruments mentioned herein or to participate in any particular trading strategy in any jurisdiction in which such an offer or solicitation would violate applicable laws or regulations. The information contained herein is based on sources believed to be reliable; however, we do not represent that this information is accurate, current, or complete and it should not be relied upon as such. Opinions, estimates, and projections in this report may represent the individual author’s personal opinions.

Opinions expressed are current opinions as of the date appearing on this material only, and we do not undertake to advise of changes in these opinions or information. The recipient of this report must make its independent decisions regarding and securities or financial instruments mentioned and Xalam Analytics LLC accepts no responsibility or liability regarding such decisions. No part of this material may be reproduced, copied or duplicated in any form or by any means, or redistributed, without Xalam Analytics’ written consent. Any reproduction or distribution of this report without the prior written consent of Xalam Analytics is prohibited.

Leveraging research and data analytics to help investors identify opportunities in AME digital

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The Xalam Analytics Monthly › wp-content › uploads › 2018 › 02 › ... · 2018-09-14 · Internet technologies while cutting down on their excesses. ... stays under state