Asian Operators Expanding in Africa
State-owned Vietnamese telecom company Viettel is considering opportunities in Ethiopia, after the government announced in June its intention to liberalize key economic sectors, including telecom, according to a news report. Currently the telecom sector is a state monopoly.
The plan is still in its early stages, but scenarios outlined by the authorities include the sale of a minority stake in state-owned Ethio Telecom, the granting of licenses to new operators or a combination of both. The official said even if government decides only to sell a stake in Ethio Telecom, which has over 60 million mobile subscribers, Viettel may still be interested.
Viettel currently operates or holds licenses in African markets including Mozambique, Burundi, Cameroon and Tanzania. Other foreign operators have expressed interest in entering the Ethiopian market, including MTN of South Africa and France-based Orange.
Another Asian operator, China Unicom, reportedly also wishes to increase its African footprint, focusing on connectivity and ICT services in South Africa. Unicom South Africa will serve Chinese and “other Asian enterprises” that have branches in Africa, as well as African enterprises that have branches overseas. CEO Dennis Meng said the strategy is to leverage its “extensive global network coverage and professional experience” as well as continued local investment and qualified service to secure its footprint in South Africa.
This pair of moves strikes us as interesting because they underscore the fact that Africa is an important new frontier in the increasingly globalized mobile telecom market. Sub-Saharan Africa is a developing and largely “mobile-first” region, in which a very large proportion of communications and financial transactions take pace via mobile devices. As such, it is a very desirable field for aggressive international operators to expand into.
Viettel, Vietnam’s military-owned operator, has been very focused over the past several years on expansion far from its own region, in South America and Africa. In Ethiopia, Viettel has potentially located, so to speak, the ultimate in virgin territory, since the country’s telecom market is at present a monopoly. To become an operator there would give Viettel first-mover advantage in a market that is opening up, and that would afford it huge potential revenue opportunities. And even if the Ethiopian government does not give Viettel a license but only sell it a stake in Ethio Telecom, there is still opportunity for the Vietnamese operator to make money in Ethiopia and put itself in a position to possibly start its own independent venture later on.
As for China Unicom, while South Africa is a far more developed and competitive market than Ethiopia, establishing a presence there will give the Chinese operator a beachhead from which to launch ventures throughout the continent. In particular, this venture appears to be oriented toward business operations rather than consumer, with cloud services a particular area of concentration. This will help Unicom serve the needs of Chinese enterprise clients doing business in South Africa and elsewhere in Africa.