Telecoms Moves in Africa

June 11th, 2013

The telecoms sector in Africa looks set to continue its boom as mobile-phone operators from South Africa's MTN Group to France Telecom's Orange and Etisalat of the United Arab Emirates seek to extend their market share. But transporting infrastructure and equipment on the continent means managing a wide range of risks.

The African continent still presents great opportunities for the mobile-phone industry despite the transport challenges.In the global scramble for new customers at the beginning of the decade, telecommunications companies turned to Africa, transforming the continent into one of the fastest-growing mobile-phone markets in the world.

Today, some of the biggest players including South Africa's MTN Group, France Telecom's Orange, India's Bharti Airtel, Vodafone of the U.K. and Etisalat of the United Arab Emirates are all vying to secure greater market share through new markets and services.

The allure is clear: penetration rates of mobile phones across the Africa region stand at around 50% compared with almost 80% globally. That means there are still plenty of potential customers among a population of roughly one billion.

Yet on a continent where cities lie one thousand kilometres inland, physically supplying these telecoms networks with infrastructure and other equipment such as mobile-phone handsets, presents particular challenges.

Risks ranging from port congestion to complex government-controlled customs procedures can cause costly delays to supply-chain budgets worth millions of dollars. Limited and ill-maintained road and rail networks linking major cities can slow the transport of cargo by days.

“The African telecoms market presents a world of opportunity,” says Darren Pearce, telecoms logistics director for SDV. “But there is huge money to be lost if the risks are not managed correctly.”

Mobile phone penetration in Africa stood at 35% at the end of 2008 and rose to 50% at the end of the third quarter of last year, according to figures from Africa and Middle East Telecom-Week. If that growth continues, Africa would achieve 100% mobile penetration by the first quarter of 2014, according to the same report.

Most networks are targeting the region's fast-growing cities of Lagos, Cairo, Johannesburg, Nairobi, Accra and Kinshasa. “If you can use a relatively small net to capture a huge quantity of fish, it's a very attractive business,” notes Pearce.

Manufacturers of mobile-phone network equipment betting on the continent include the Finnish-German joint venture, Nokia Siemens Networks, Ericsson of Sweden, France's Alcatel-Lucent and China's Huawei and ZTE. They must also meet the challenge of delivering their equipment along often complex supply chains.

Transporting high-value goods such as handsets and electronic equipment, for example, may mean extra security. “Handsets are highly sought after,” says Pearce. “We have to use armed security convoys in some areas.” Satellite tracking systems allow clients to track the progress of goods.

Meanwhile, the trend towards shifting production sites from Europe to Asia has made transport more complex as many routes from Asia to Africa pass through the main European and Middle Eastern hubs. “It's a delicate planning scenario involving constant negotiations and monitoring of capacity, routes and rates,” Pearce adds.

At a time when many telecoms groups are focusing on cutting costs, switching to sea from air freight is one way to reduce the transport budget. The strategy has risks, however. Sea cargo can take between ten and 60 days to reach its final destination, compared with just two to three days for air freight, Pearce warns.

One solution is to combine sea and air transport by using fast ocean vessels from Hong Kong or Singapore to Dubai and then switching the transport to air for the final leg to Africa, says Pearce, noting that the biggest risks typically lie at the end of the journey.

That's where local knowledge helps deliver the goods. When corridors from the busy port of Abidjan on the Ivory Coast to neighbouring Mali were closed recently following political unrest, SDV managed to redirect cargo through Senegal via the port of Dakar.

“We can deal with the risks and find alternatives,” says Pearce.

Key Figures
  • 20%

    More fuel-efficient for the Boeing 787 and the Airbus A350

  • 70%

    of Urbanisation is expected by 2050

  • 27

    mega-cities are expected by 2050, with at least 10 million people, compared to 1...

  • +18,4%

    of growth for E-commerce retail market in Europe in 2015

  • 82%

    of goods are moved by road

  • 1 billion

    Population in Africa

  • 60%

    of Africa’s population will be urbanized by 2050

  • 7,5%

    of growth for Indian GDP in 2014

  • 4,9%

    of growth for African GDP in 2016

  • 6,1%

    of growth for East Asian GDP in 2015, the world’s fastest-growing region

  • 19 224 teus

    transported by the MSC Oscar, the largest container ship in the world

  • 396 m

    is the size of the MSC Oscar ship

  • 120 h

    is the Non-Stop Flight Record done by Solar Impulse

  • 4,5%

    of growth in 2015 for Global Airfreight demand