Turning Challenges Into Opportunities - Part One

Financial crisis

Telecoms operators and vendors doing business across Africa are entering unchartered terrain with this conjuncture of profound crises – the fallout from the financial crisis will be severe. People are being faced with a deep sense of insecurity; misery and hardship will increase for many poorer people everywhere. The movements will grow further as recession starts to bite and economies start sinking into depression.

We need principles of transformation, perhaps more than at any other time in our history, to produce good news. These principles must now come to the forefront of our thinking. Mobile operators, vendors not to exclude government bodies must evaluate the requirement for change, be innovative, talk about them, work together and exchange results, network, pass them on to others, and so forth. Only principles of transformation will produce the good news that we long to hear.

The global financial crisis becomes “a human crisis.” Nowhere is this truer than in Africa. Although spared the first-round effects of banking failures, Africa is already facing the second-round impacts of declining capital flows, slowing remittances, stagnating foreign aid, falling commodity prices and export revenues, African currencies are and will be bound to devaluation . The continent will almost surely experience a deceleration in growth, and if history is a guide, this deceleration will have an adverse impact on commercial growth and people development.

Telecoms in Africa

Mobile communications has grown at a phenomenal rate across the African continent. The impact of mobile services on the economy of Africa, as everywhere, is potentially far-reaching. A high-quality communications infrastructure is widely held to allow human capital to be deployed more effectively and more productively. For these benefits to be realized in Africa and distributed evenly throughout society, it is crucial to have a mobile telephony service affordable, widely available and of high quality. Mobile communication has proven to be a delivery and transactional vehicle that fosters direct and indirect job creation in emerging economies transforming other industries such as health, banking or education. There is a direct and unquestioned correlation between increased mobile phone penetration and increased macro- and micro-economic development; a Deloitte study found that where mobile penetration increased by 10%, GDP is uplifted by 1.2% (2007).

Mobile Operators has invested significantly in network roll out for the most part funded by foreign currency debt. The need for change reflecting upon an increasing competitive environment, more sophisticated services, pressures on reducing operating costs while improving customer services now also must address the need for drastic business transformation that reflect the current economical crisis.

One of the fastest growing markets in Africa, Nigeria, provides an excellent example of the need to rethink and transform. Operators have in recent years collectively invested in excess of seven billion US dollars in building out their networks across the country. The Nigerian competitive environment is getting increasingly fiercer, Etisalat being the latest entrant in addition to CDMA operators like Visafone, Multilink’s and Starcoms grabbing an ever increasing share of the market. The financial crisis and the falling oil price, provides even more pressure on the Nigerian economy, government recently increased taxation on telecom equipment and handsets. This raises the price of mobile services, slows its development and harms the industry, its customers, employees and all the sectors that depend on it. Paradoxically, these taxes prevent the very people who need them most from gaining access to services. Since December 2008 the local currency has devalued against the US $ of about 30%, leaving scarred shareholders to accept a significant adjustment to their earnings expectation from what is the fastest growing but also one of most the most complex markets on the continent.