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Africa Privatization of Telecoms. Based on Business Day from Johannesburg, South Africa November 28, 2001
Nov 28, 2001

African countries preparing to sell telecommunication licences could struggle to find anyone interested in the opportunity, the International Telecommunication Union has warned.

The chance of attracting investors for more cellular networks is bleak, given the global recession in the telecoms industry. But the union is even more pessimistic for countries about to offer fixed line licences exactly as SA is doing. "Most African countries probably could not give away, let alone sell, fixed-line licences," it said.

South Africa government officials are currently touring Asia and Europe in a bid to drum up interest in the second fixed line licence. They may be unsuccessful, if the union's chilling comments prove true. Potential investors are deterred by the lack of demand for fixed line phones now that cellular services are so prevalent and becoming more affordable.

New entrants are also put off by the price structure of incumbent operators, which do not make entering the market a profitable proposition.

Other problems include civil instability in some countries and the hassle of trying to collect bad debts from consumers. Five African nations privatised their fixed line operators in 2000: Uganda, Tanzania, Mauritius, Lesotho and Morocco. Investor interest was lukewarm and the prices paid were relatively low.

What made the Ugandan and Tanzanian bids more successful was a promise that winners could divert into cellphone operations. To be blunt, the union says, it is hard to get excited about fixed line telephones in Africa and it questions whether that sector has much future.

The union made its comments in The African Telecommunication Indicators 2001 report, which points out successes and failures as various nations take telephony to the masses. But tougher times are about to strike, it warns. Africa will be hit by turbulence in the telecoms world, where many players have seen their shares depreciate and debts increase after over-investing in licenses for third generation networks.

For those nations yet to offer cellphone licences, the picture is not much brighter. Instead of holding out for high prices, African nations "should welcome any interested party, provided they are willing to invest and meet coverage targets. Indeed, these countries should be overjoyed if they can find enough investors to fully utilise the spectrum available for mobile cellular use," the report says.

South Africa has yet to decide when to offer third-generation licenses, but has said they will be available to all existing operators.

Despite the potential lack of interest, nations have a duty to introduce competition to avoid doing a disservice to their citizens, the union believes. Stateowned monopolies will not liven up the market, nor should governments expect multinational operators or aid agencies to build their networks.

Instead, they should encourage homegrown operators like SA's MTN, Egypt's Orascom and pan-African MSI, which are leading the mobile revolution.

Citizens are also suffering from exorbitant costs of internet access, the report says. Because the amount of global bandwidth required by African countries is tiny in global terms, they have no bargaining power to negotiate economies of scale. Africa accounts for a mere 0,15% of the total internet connectivity.

One solution may be for countries to pool their requirements, the union suggests. For example, Senegal has launched a new link with enough capacity to support neighbouring countries.

Another solution, which internet users have long called for in SA, is for telephone operators to be forced to charge less when a line is used for internet access instead of voice calls. Unless such methods are adopted, internet penetration in Africa will remain at under 1% until 2005.

For the telecoms sector to thrive, Africa has to forget the old ways of operating and old technologies, the union says. The future lies in wireless technologies, pre-paid billing, increased competition and in sharing facilities. The telecoms market has changed forever, and government policies and corporate business plans must change to prevent Africa falling further behind the western world.

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