East Africa Telecommunications Report Q3 2012
Report Summary

BMI’s update to the report on the telecommunications markets of East Africa contains five-year forecasts for the fixed-line telephony, mobile subscriber and internet sectors of six countries: Burundi, Ethiopia, Malawi, Rwanda, South Sudan and Sudan. Our growth forecasts for these six countries, which extend to the end of 2016, are based on historical market data published by the region’s operators and telecoms regulators, industry and regulatory developments, and macroeconomic factors expected to affect consumer spending during the next five years. The mobile sector is the most active in East Africa, despite the sub-region having an average mobile penetration rate of 30.9% at the end of December 2011, up from 23.4% a year earlier. The telecoms markets of the region play host to numerous international strategic investors, including Luxembourg’s Millicom International Cellular (in Rwanda) South Africa’s MTN (in Rwanda, Sudan and South Sudan), India’s Bharti Airtel (in Malawi and Rwanda) and Kuwait’s Zain (in Sudan and South Sudan). Other notable operators in the region include Sudani, Ethio Telecom, Econet Wireless and Egypt’s Orascom Telecom. At the end of this report, we publish profiles on MTN, Sudani, and Zain. We revised our historical data and forecast for the mobile markets in Burundi and South Sudan following the publication of new regulatory and operator data suggesting that growth in both markets had been slower than previously envisaged. We attribute this to limited network coverage and low purchasing power, which result in mobile services being affordable to only a small segment of the population. There is no change to our forecasts for the remaining markets as available Q112 market data are in line with our expectations. The only market that recorded sluggish growth in Q112 was Rwanda – a development we believe is related to the discounting of inactive lines. However, we have not changed our forecast for the country as we expect the arrival of third operator Airtel, which launched commercial services in April 2012, to spur growth through competition in the latter part of 2012 and the remainder of our forecast period. BMI notes that the fixed-line and internet sectors in the countries in our East Africa report are grossly underdeveloped. BMI attributes this to a number of factors, including underinvestment in fixed-line infrastructure, especially state-owned incumbent operators, increasing fixed to mobile substitution, low urbanisation rates, considerable damages to telecoms infrastructure during civil conflicts in some of the countries and the high cost of international bandwidth for internet services. BMI notes that five out of the six countries in the East Africa report are landlocked, resulting in the reliance on expensive satellite connectivity for internet services. Over the next five years, we expect the internet sector to outperform the fixed-line sector as mobile network operators roll out mobile data services, and access to submarine cables through terrestrial fibre-optic networks drive down the cost of international bandwidth.