1. Realizing The Knowledge-Based Economy Through a Comprehensive Policy Environment Karel Pienaar CEO MTN South Africa

2. Copyright 2008 © Mobile Telephone Networks. All rights reserved. Contents 1. Africa is poised to reap the rewards of the Knowledge Economy. 2. What can a knowledge-based economy deliver for Africa? 3. Broadband investment is the foundation to enable a Knowledge Economy. 4. The Knowledge Economy Index – Where is Africa today? 5. Mobile communications remains the key driver for organic growth in African ICT markets. 6. Mobile industry partnering with governments to bring the benefits of the African continent’s ICT development goals. 7. Competition engineering through licensing does not work. 8. Conclusion and recommendations. 2

3. Copyright 2008 © Mobile Telephone Networks. All rights reserved. 3 The trends suggest that Africa is poised to reap the rewards of the Knowledge Economy Trend 1: A larger, younger and more affluent population Trend 2: Africa’s urbanising population Trend 3: Africa is leapfrogging through technology Trend 4: Africa’s commodity wealth Trend 5: Africa’s expansion of its financial sector African Growth Driven by key trends Source: Freemantle, SBSA

4. Copyright 2008 © Mobile Telephone Networks. All rights reserved. 4 A larger, younger and more affluent population that is urbanising rapidly African Growth Source: IMARA Securities FMCG Sector Report March 2012 Africa as a continent has 52 cities with more than 1.0m residents, almost the same number as in Europe and more than Latin America, according to McKinsey Global. Between 2010 and 2050, Africa’s economically active population is forecast to grow from 56% to 66%, at a time that most of the developed nations and major emerging markets’ populations will be ageing and moving into the dependent category.

5. Copyright 2008 © Mobile Telephone Networks. All rights reserved. 5 Africa’s commodity wealth is further enhanced by becoming a player in the world’s energy markets Africa’s share of world commodities Copper production growth, 2006 − 2010 Proved oil reserves as at 2011, bn barrels Africa had 9.5% of world’s crude oil and 8% of the world’s natural gas reserves at the end of 2011 Source: SBSA, Africa Macro Insight & Strategy

6. Copyright 2008 © Mobile Telephone Networks. All rights reserved. 6 What can a knowledge-based economy deliver for Africa? From resource- based economies From industrial- based economies Diversification Increased productivity Efficient use of factors of production Increased innovation and competitive advantage in terms of patents, skills Global Competitiveness In technology In research and development In access and infrastructure Foreign Direct Investment Improved GDP Improved income per capita Increased skills levels and employment capacity and capability Improved quality of life Socio Economic Advancement Adapted from World Bank Institute and K4D

7. Copyright 2008 © Mobile Telephone Networks. All rights reserved. 7 Broadband investment is the foundation to enable a Knowledge Economy Source: The World Bank, K4D

8. Copyright 2008 © Mobile Telephone Networks. All rights reserved. 8 Broadband Internet users and traffic – How do we light up the African continent?

9. Copyright 2008 © Mobile Telephone Networks. All rights reserved. 9 The Knowledge Economy Index – Where is Africa today? The KAM Knowledge Index (KI) measures a country's ability to generate, adopt and diffuse knowledge. This is an indication of overall potential of knowledge development in a given country. Africa does not feature on the top 50 KEI rankings for 2012. Source: The World Bank, K4D

10. Copyright 2008 © Mobile Telephone Networks. All rights reserved. 10 There is also a positive correlation between economic development and the KEI

11. Copyright 2008 © Mobile Telephone Networks. All rights reserved. 11 There is a positive correlation between broadband penetration and economic growth According to the World Bank (2009), every 10% incremental broadband penetration delivers 1.38 percentage point incremental GDP growth. At current GDP levels, this translates into approximately R58bn.

12. Copyright 2008 © Mobile Telephone Networks. All rights reserved. 12 The answer to African KEI growth is… mobile broadband infrastructure and investment As a result of the availability and use of smartphones and ordinary internet capable handsets, access to the internet is driven predominantly by mobile. Growth has been phenomenal – How far can SA go? Definition: *Any user who made use of a mobile internet connection to download content (ringtones, wallpapers) or browse the internet for information or social purposes (google, facebook, instant messaging). **Also includes telemetry devices. ***fc = MTN estimates

13. Copyright 2008 © Mobile Telephone Networks. All rights reserved. 13 African governments and the mobile industry must continue to work together in partnership to bring the benefits of the African continent’s ICT development goals Private sector invest is building capacity and capability efficiently. Risk capital Market knowledge Technology and distribution know-how Innovation and platform competition Scale and efficiency Competitive “trial and error” Optimum network configuration (sharing) and market structure 100% access target Local regulations (planning, environmental laws, etc.) Contribution to the target Smart subsidies Long-term market support (supply/demand-side subsidies) Policy & regulatory framework (e.g. spectrum licensing, access regulation, investment certainty, IT literacy) Government fosters a conducive investment climate. Skills development and education partnering with private sector to achieve this Adapted from World Bank Institute

14. Copyright 2008 © Mobile Telephone Networks. All rights reserved. 14 Bringing Broadband to All requires substantial infrastructure investment Private sector invest is building capacity and capability efficiently. Risk capital Market knowledge Technology and distribution know-how Innovation and platform competition Scale and efficiency Competitive “trial and error” Optimum network configuration (sharing) and market structure

15. Copyright 2008 © Mobile Telephone Networks. All rights reserved. 15 Competition engineering through licensing does not work Private sector invest is building capacity and capability efficiently. 2000 19 3G new entrants licensed across 15 countries 2011 7 3G new entrants left, many in a precarious financial position No country with 2 new entrants Remaining new 3G licensees in 2011 bankruptcy M&A Returned licenses New 3G licensees in Europe around 2000 EU case study – 10 years

16. Copyright 2008 © Mobile Telephone Networks. All rights reserved. 16 Use the USO funds but USO needs to be “smarter” Private sector invest is building capacity and capability efficiently. Poor global track record of USO funds: No fund has been capable of distributing more than 2% of sector revenue. Government can play a significant role in releasing funds to subsidise roll-out of fibre in rural areas through SOEs where commercial incentive is lacking. Learn from past South African experience, e.g. UALs. Performance of 15 developing countries USFs. Source:Intelecon

17. Copyright 2008 © Mobile Telephone Networks. All rights reserved. 17 Conclusion: An ICT framework to help Africa leapfrog towards a KE? Mobile is key to deliver lion’s share of KE infrastructure (but fibre needed in backhaul and backbone, too). Urgent need for DD spectrum now. Do not fragment allocations: this increases costs. Essential to leverage incumbents investment capacity and existing infrastructure Invest in skills and education Delicate mix between infrastructure and service-based competition, incumbents and new entrants Policies should protect competition and not competitors Network sharing in rural areas likely to be key to deliver Broadband for All Facilitate (Digital Dividend, e-skills, Right of way, planning, local content support), rather than participate Focus scarce Government resources where private investment cannot reach Let SOE’s tender with the private sectors for ICT expansion initiatives INVESTMENT COMPETITION GOVERNMENT USO Focus SOEs on delivering support infrastructure in rural areas (fibre backhaul) Smart USO obligations in spectrum licenses Subsidies for rural access and capacity expansion Incentives for innovation

18. Copyright 2008 © Mobile Telephone Networks. All rights reserved. Thank you 18