CMI Conference November 2014: A Market Model study of mobile infrastructure Sharing in Africa Mårten Sundquist KTH University

Background – Network Infrastructure sharing  A strong general trend  From vertical to horizontal business model - cooperation by competitors - outsourcing of services - divestment of key network components  Different technical solutions  Regulatory aspects - Preservation of competitive environment  Financial aspects

Background – Africa  Spectacular subscriber uptake development  Mobile broadband dominating internet access  Operators stronger position  Financial situations increasingly challenging for MNOs  Growing economies

Research Questions What types of innovative network sharing cases can be identified in Africa and how do they differ from the ones in Europe? What are the business rationales of the new types of network operators? Methodology i.Market review ii.Identification and data collection of innovative cases iii.Analysis

Case 1: Tower companies in Nigeria  Tower companies strong development in Africa  Business: - buy and lease-back towers - try to get additional operators per site => Network sharing  Service scope wide in Africa - power solutions - security - design of new operator site solutions

Nigeria Tower Co market  175 M population  Growing economy  145 M SIMs (but still majority without phone)  Networks growing  Tower co 2-3BUSD divestment 2014

Nigeria Tower Co Business Rationale 1.Off-load balance sheet 2.Cost reduction Contracted Price Operator saving Tower Company margin New (Tower Co) Cost Level Original (MNO) Cost Level Operational efficiency Cost of Capital Multi tenancy Cost per Site

Case 2: Rural Network operator Tanzania  Tz km 2 38M inhabitants  ~50% population coverage.  Three main MNOs in Tz (Vodacom, Millicom and Bharti)  Challenge: how to build cost efficient rural coverage  Business idea: - Create independent rural “network operator” - Sell capacity whole-sale to network operators

SNT - Rural Network Operator  Independent network operator created  900 MHz spectrum from regulator  Sell capacity whole-sale to existing operators  Three operators on-board  Some resistance from MNOs - Core business - SNT not always first  Low margin business  World unique setup.

Rural Operator Business Actors 2G/3G

Case 3: National combined LTE network in Rwanda  Rwanda km M population  Three large MNOs (MTN, Millicom and Bharti) running 2G/3G  One LTE license (170MHz on 800, 900 and 1800) given to KT/JV  LTE capacity wholesale to three operators  Compete via technology advantage World unique setup!

Rwanda Integration

Rwanda: Views of different actors  Rwanda government + JV - Decreased overall investment - Quick rollout - Competition via technology  MNOs - Intrusion in Core business - “Network ready for LTE” - Complex integration  Vendors - Less sales  End-users - Remain to be seen…

Case 4: M-Pesa Kenya  Mobile payment systems generally not successful  But: In Africa hugely successful - Large unbanked population - Undisturbed by regulations - Creative solutions  M-Pesa Kenya - Operated by Safaricom (Vodafone) - 18% of Safaricom revenue - 25% of Kenya’s GDP pass through M-Pesa

M-Pesa Application sharing  Due to regulation and competitor pressure, M-Pesa is 2014 opened up for competing MNOs  Mobile System Application Sharing!!!  M-Pesa ecosystem include: agents - Application and mobile system interconnect - Central bank supervision

Summary Horizontalization of business models

Summary network sharing in Africa  There are many interesting, innovative and even world unique cases of network sharing in Africa  Cases 2 and 3 should be considered by national regulators in many countries – not only in Africa  Paper Contribution: Increase understanding of: - Network sharing research topic - African mobile market - Regulators and vendors choices for network sharing

Thank you!