1. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Research Forecast Report The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 September 2013 Karim Yaici

2. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Contents [1] 7.About this report 8.Executive summary 9.Sub-Saharan Africa telecoms market summary: growth in handset data and broadband services will drive the telecoms market in 2013–2018 10.Key methodology changes: we have added IPTV and M2M to our forecast coverage 11.Key forecast changes [1]: revised fixed broadband forecast for the region; strong smartphone take-up in Nigeria; slowing mobile market in Ghana 12.Key forecast changes [2]: stronger than expected market growth in South Africa and Uganda; mixed outlook for Sudan and Tanzania 13.Regional overview 14.Mobile networks will account for 99% of voice connections and 80% of broadband connections in Sub-Saharan Africa by 2018 15.Smartphones will account for 80% of active broadband connections and 22% of handsets by 2018 – 95% of handset connections will be prepaid 16.Demand for fixed broadband and business services will offset declining fixed voice revenue during the forecast period 17.M2M is set for rapid growth, led by South Africa; IPTV will remain a niche service because it depends on fibre 18.The erosion of mobile prices will affect revenue more than we had expected, but the main market growth trends have changed little 19.2G connections will continue to dominate the mobile market, and will be slowly replaced by 3G connections; 4G will have a minor impact 2 20.Country-level analysis 21.Ghana telecoms market: growth will be mainly driven by mobile broadband and handset data 22.Ghana mobile market: growth will start to slow down in the next 5 years because low-ARPU users will erode revenue 23.Ghana fixed market: we have revised our forecasts for fixed voice, and DSL connections continue to dominate the broadband market 24.Kenya telecoms market: mobile voice will be resilient and adoption of fibre and 4G will be strong 25.Kenya mobile market: the outlook for mobile voice revenue and 4G take- up is more positive than expected 26.Kenya fixed market: take-up of fibre will increase but fixed voice will continue its decline, albeit at slower pace than our previous forecast 27.Nigeria telecoms market: modest growth rate as an increase in mobile data services offsets the decline in fixed voice 28.Nigeria mobile market: competition and price erosion hindered revenue growth despite strong take-up of smartphones 29.Nigeria fixed market: fixed voice continues to decline and underdeveloped infrastructure is hindering fixed broadband growth 30.South Africa telecoms market: growth driven by take-up of smartphones and the introduction of VDSL in fixed broadband 31.South Africa mobile market: smartphone penetration and handset data revenue in 2012 were higher than we had forecast 32.South Africa fixed market: fixed voice is expected to be more resilient than broadband; DSL will maintain its market share thanks to VDSL Slide no.

3. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Contents [2] 33.Sudan telecoms market: handset data revenue to offset voice and messaging; fixed-wireless to dominate fixed broadband market 34.Sudan mobile market: handset date offers best growth opportunity, outpacing voice and messaging 35.Sudan fixed market: pessimistic outlook for fixed voice, while fixed broadband showed stronger growth in 2012 than expected 36.Tanzania telecoms market: handset data, and fixed and mobile broadband will drive most of the growth 37.Tanzania mobile market: strong demand for data services helped offset declining voice revenue 38.Tanzania fixed market: room for growth of fixed broadband aided by competition and government’s initiatives 39.Uganda telecoms market: strong growth in both mobile data services and fixed broadband 40.Uganda mobile market: more mobile broadband connections and revenue than expected because of deployments of 3.5G and 4G 41.Uganda fixed market: downward revision of fixed voice and fixed broadband market in light of data that became available in 2012 3 42.About the author and Analysys Mason 43.About the author 44.About Analysys Mason 45.Research from Analysys Mason 46.Consulting from Analysys Mason Slide no.

4. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 List of figures [1] Figure 1: Summary of report coverage Figure 2: Retail revenue by service type, Sub-Saharan Africa, 2009–2018 Figure 3: Growth rates of retail revenue by service type, Sub-Saharan Africa, 2009–2018 Figure 4: Details of how our forecast methodology has changed since the previous edition was published in January 2013, Sub-Saharan Africa Figure 5a: Details of how our forecast data has changed since the previous edition was published in January 2013, Sub-Saharan Africa Figure 5b: Details of how our forecast data has changed since the previous edition was published in January 2013, Sub-Saharan Africa Figure 6: Fixed and mobile voice connections, Sub-Saharan Africa, 2009– 2018 Figure 7: Broadband access connections by technology, Sub-Saharan Africa, 2009–2018 Figure 8: Broadband connections by type, Sub-Saharan Africa, 2011–2018 Figure 9: Smartphones as a percentage of mobile handsets, Sub-Saharan Africa, 2009–2018 Figure 10: Handset connections by subscription type, Sub-Saharan Africa, 2009–2018 Figure 11: Fixed connections and penetration by service type, Sub-Saharan Africa, 2009–2018 Figure 12: Fixed retail revenue by service type, Sub-Saharan Africa, 2009– 2018 Figure 13: M2M connections in key countries, Sub-Saharan Africa, 2012– 2018 4 Figure 14: IPTV connections and revenue, Kenya and South Africa, 2012– 2018 Figure 15: Fixed and mobile retail revenue, new and previous forecasts, Sub-Saharan Africa, 2009–2018 Figure 16: Fixed voice and mobile handset connections, new and previous forecasts, Sub-Saharan Africa, 2009–2018 Figure 17: 3G’s and 4G’s share of mobile connections, new and previous forecasts, Sub-Saharan Africa, 2009–2018 Figure 18: Retail revenue by service type, Ghana, 2009–2018 Figure 19: Growth rates of retail revenue by service type, Ghana, 2009–2018 Figure 20: Connections by type, and growth rates, Ghana, 2009–2018 Figure 21: Active mobile connections, new and previous forecasts, Ghana, 2009–2018 Figure 22: Handset retail revenue, new and previous forecasts, Ghana, 2009–2018 Figure 23: Fixed voice connections and fixed voice revenue, new and previous forecasts, Ghana, 2009–2018 Figure 24: Share of fixed broadband connections by technology, new and previous forecasts, Ghana, 2009–2018 Figure 25: Retail revenue by service type, Kenya, 2009–2018 Figure 26: Growth rates of retail revenue by service type, Kenya, 2009–2018 Figure 27: Connections by type, and growth rates, Kenya, 2009–2018 Figure 28: Mobile voice retail revenue and mobile voice MoU, Kenya, 2009– 2018 Figure 29: 4G active mobile connections, Kenya, 2013–2018

5. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 List of figures [2] 5 Figure 30: Fixed voice connections and fixed voice revenue, new and previous forecasts, Kenya, 2011–2018 Figure 31: Fixed broadband connections by technology, new and previous forecasts, Kenya, 2009–2018 Figure 32: Retail revenue by service type, Nigeria, 2009–2018 Figure 33: Growth rates of retail revenue by service type, Nigeria, 2009– 2018 Figure 34: Connections by type, and growth rates, Nigeria, 2009–2018 Figure 35: Active mobile connections, new and previous forecasts, Nigeria, 2009–2018 Figure 36: Smartphones’ share of handsets, new and previous forecasts, Nigeria, 2009–2018 Figure 37: Fixed voice connections and revenue, new and previous forecasts, Nigeria, 2009–2018 Figure 38: Fixed broadband connections by technology, new and previous forecasts, Nigeria, 2011–2018 Figure 39: Retail revenue by service type, South Africa, 2009–2018 Figure 40: Growth rates of retail revenue by service type, South Africa, 2009–2018 Figure 41: Connections by type, and growth rates, South Africa, 2009–2018 Figure 42: Active mobile connections and smartphones’ share of handsets, new and previous forecasts, South Africa, 2009–2018 Figure 43: 4G connections and share of handsets and mobile broadband connections, new and previous forecasts, South Africa, 2009– 2018 Figure 44: Fixed voice retail revenue and connections, new and previous forecasts, South Africa, 2009–2018 Figure 45: Fixed broadband connections, and share by technology, new and previous forecasts, South Africa, 2009–2018 Figure 46: Retail revenue by service type, Sudan, 2009–2018 Figure 47: Growth rates of retail revenue by service type, Sudan, 2009–2018 Figure 48: Connections by type, and growth rates, Sudan, 2009–2018 Figure 49: Mobile handset retail revenue by service type, new and previous forecasts, Sudan, 2009–2018 Figure 50: Mobile voice retail revenue and mobile voice traffic, new and previous forecasts, Sudan, 2009–2018 Figure 51: Fixed voice connections and revenue, new and previous forecasts, Sudan, 2009–2018 Figure 52: Fixed broadband connections, and share by technology, new and previous forecasts, Sudan, 2009–2018 Figure 53:Retail revenue by service type, Tanzania, 2009–2018 Figure 54: Growth rates of retail revenue by service type, Tanzania, 2009– 2018 Figure 55: Connections by type, and growth rates, Tanzania, 2009–2018 Figure 56:Mobile voice retail revenue and minutes of use, new and previous forecasts, Tanzania, 2009–2018 Figure 57:Mobile broadband service revenue and mobile broadband connections, new and previous forecasts, Tanzania, 2009–2018 Figure 58:Fixed voice retail revenue and fixed voice connections, new and previous forecasts, Tanzania, 2011–2018

6. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 List of figures [3] 6 Figure 59: Fixed broadband retail revenue and fixed broadband connections, new and previous forecasts, Tanzania, 2011–2018 Figure 60: Retail revenue by service type, Uganda, 2009–2018 Figure 61:Growth rates of retail revenue by service type, Tanzania, 2009– 2018 Figure 62:Connections by type, and growth rates, Tanzania, 2009–2018 Figure 63:Active mobile connections and mobile penetration, new and previous forecasts, Tanzania, 2009–2018 Figure 64:Mobile broadband service revenue and mobile broadband connections, new and previous forecasts, Tanzania, 2009–2018 Figure 65:Fixed voice connections and revenue, Tanzania, 2009–2018 Figure 66:Fixed broadband connections by technology, Tanzania, 2012– 2018

7. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 About this report  This report provides:  an interim update of our 5-year forecasts of more than 60 mobile and fixed KPIs (see Figure 1) for the Sub- Saharan Africa region as a whole and for key countries, which were previously published in January 2013 1  an extension of the forecast horizon to 2018  an explanation of the significant changes to our previous forecasts.  Upward or downward revisions to our previous forecasts occurred mainly for the following reasons:  market developments – some drivers were stronger or weaker than previously expected, based on the latest reported operator and regulator data  changes to the macroeconomic outlook, competitive and regulatory environment  changes to historical data because of newly available information and restated data, including from operators’ and regulators’ reports.  For the complete data set, see the accompanying Excel file at www.analysysmason.com/SSA-interim-Sep2013. Figure 1: Summary of report coverage [Source: Analysys Mason, 2013] 1 See The Sub-Saharan Africa telecoms market: trends and forecasts 2012–2017. Available at www.analysysmason.com/SSA2012. www.analysysmason.com/SSA2012 Geographical coverage Major KPIs Regions modelled:  Sub-Saharan Africa Countries modelled individually  Ghana  Kenya  Nigeria  South Africa  Sudan  Tanzania  Uganda ConnectionsRevenue Mobile  Handset, mobile broadband, M2M 2  Prepaid, contract  2G, 3G, 4G  Smartphone, non-smartphone Fixed  Voice, broadband, IPTV 2, dial-up  Narrowband voice, VoBB  DSL, FTTH/B, cable, BFWA, other Mobile  Service, retail  Prepaid, contract  Handset, mobile broadband, M2M 2  Handset voice, messaging, data Fixed  Service, retail  Voice, broadband, IPTV 2, dial-up, BNS  DSL, FTTH/B, cable, BFWA, other ARPU Voice traffic Mobile:  SIMs, handset  Prepaid, contract  Handset voice, data Fixed and mobile  Outgoing minutes, MoU 2 New KPIs added to the forecast coverage. 7

8. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 8 Executive summary Regional overview Country-level analysis About the author and Analysys Mason

9. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Sub-Saharan Africa telecoms market summary: growth in handset data and broadband services will drive the telecoms market in 2013–2018 Service type Revenue (USD billion)CAGR 201220182009–20122012–2018 Mobile voice27.4338.778.3%5.9% Mobile messaging2.582.8814.4%1.8% Handset data3.198.4948.1%17.7% Mobile broadband 1 1.082.4540.7%14.6% M2M0.040.4832.5%50.5% Fixed voice 2 4.102.63–10.1%–7.2% Fixed broadband 3 0.570.9923.7%9.7% Other1.662.371.2%6.2% TOTAL40.6659.068.0%6.4% Figure 3: Growth rates of retail revenue by service type, Sub-Saharan Africa, 2009–2018 [Source: Analysys Mason, 2013] 1 Includes USB modem, and mid- and large-screen, but not handset-based data. 2 Includes narrowband, dial-up Internet access. 3 Includes IPTV.  Handset data services, mobile broadband and fixed broadband offer the strongest opportunities for revenue growth in the next 5 years in Sub-Saharan Africa, and they will help offset stagnating messaging and declining fixed voice revenue. The M2M market will also grow rapidly, but will represent a small share of total revenue.  We forecast that mobile messaging’s revenue growth rate will slow to a CAGR of 1.8%, and mobile voice’s will slightly decrease to a CAGR of 5.9%. Figure 2: Retail revenue by service type, Sub-Saharan Africa, 2009–2018 [Source: Analysys Mason, 2013] 9

10. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 ChangeGeographical scope Description New KPIs: IPTV revenue is split out from broadband revenue. The region as a whole and all countries modelled individually Broadband revenue now refers to data-only revenue. We are splitting out IPTV revenue as a separate category. This has affected historical figures for broadband revenue in Kenya. We forecast that the number of IPTV connections will increase from around 7000 in 2012 to 307 000 at the end of 2018. New KPIs: M2M is included in the total number of mobile connections. The region as a whole and all countries modelled individually Ghana, Nigeria and South Africa are believed to be among a few countries in the region where mobile operators have launched M2M. We forecast that 2.9% of all mobile connections in Sub-Saharan Africa will be M2M by the end of 2018, while M2M revenue will represent less than 1% of mobile retail revenue. Countries with the highest M2M share of total mobile SIMs by 2018 are expected to be Nigeria (3%) and South Africa (15%). Key methodology changes: we have added IPTV and M2M to our forecast coverage Figure 4: Details of how our forecast methodology has changed since the previous edition was published in January 2013, Sub-Saharan Africa [Source: Analysys Mason, 2013] 10

11. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 ChangeGeographical scope Description We have revised downwards our forecast of fixed broadband penetration of households in light of the latest data and benchmarking against more-developed markets in Latin America (LATAM) and the Middle East and North Africa (MENA) Most countries that we have modelled in Sub-Saharan Africa We have reviewed our outlook for fixed broadband for Ghana, Kenya, Nigeria, Tanzania and Uganda based on 2012 data from operators and regulators, our review of operators’ and national plans for upgrading fixed broadband infrastructure, and a comparison of benchmarking penetration against more developed markets in LATAM and MENA. As a result, we forecast that the number of fixed broadband connections will double from 2013 to reach 6 million at the end of 2018, compared with 15.5 million previously forecast. Accordingly, we have revised retail revenue growth downward, to reach USD980 million by the end of 2018 compared with the USD3.3 billion that we had previously predicted. Mobile subscriber growth will slow down during 2013–2018 GhanaMobile subscriber growth in Ghana in 2012 was slightly lower than we had expected because 2.3 million SIMs were deactivated in 2012. The introduction of mobile number portability (MNP) in 2011 will favour smaller players like Expresso and Glo Mobile, but they will find it difficult to sign up new subscribers who are likely to come from the low-income population in rural areas. We forecast that the number of active mobile connections will grow at a CAGR or 8.4% to 37.5 million (excluding M2M) by the end of 2018. Operators are likely to independently develop 4G KenyaOperators in Kenya are likely to implement their own LTE plans via infrastructure sharing partnerships because the public–private partnership consortium that was set up in 2013 has not made much progress. Therefore, we have improved our outlook for 4G in Kenya and have forecast 1.2 million connections by 2018, compared with 1.1 million previously. Smartphones’ share of handsets is increasing more quickly than expected NigeriaThe availability of affordable handsets and consumer appetite for data services boosted the take-up of smartphones in 2012. We have accelerated our forecast adoption profile for smartphones in Nigeria and expect that smartphones will account for 22% of Nigeria’s active mobile handsets by the end of 2018 (our previous forecast was 16%). Key forecast changes [1]: revised fixed broadband forecast for the region; strong smartphone take-up in Nigeria; slowing mobile market in Ghana Figure 5a: Details of how our forecast data has changed since the previous edition was published in January 2013, Sub-Saharan Africa [Source: Analysys Mason, 2013] 11

12. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 ChangeGeographical scope Description More conservative outlook for fixed broadband growth NigeriaFixed broadband growth in terms of connection numbers in 2012 was lower than we had expected in Nigeria because the national broadband plan has been delayed, the incumbent continues to have a monopoly and the market lacks affordable tariffs. We forecast that the number of fixed broadband connections will increase from 360 000 in 2013 to 810 000 in 2018 (compared with our previous forecast of 1.2 million connections). Mobile market growth remains strong – smartphones are driving handset data revenue South AfricaMobile penetration of the South African population in 2012 was higher than expected, driven by operators’ aggressive acquisition strategies – 8ta, MTN and Vodacom registered the highest year-on- year growth. We forecast that active mobile connections will reach 80 million by the end of 2018. We expect smartphones to represent 27% of handsets, and handset data to account for 26% of service revenue by 2018. Mobile data will offset declining voice and messaging revenue Sudan In Sudan, MTN, Sudatel and Zain all offer 3G, the fixed broadband market lacks competition and high fixed broadband tariffs are encouraging handset data take-up. We forecast handset data revenue to grow at a CAGR of 13.2% from 2013 to 2018, compared with 2.5% for messaging and 4.0% for voice. However, a government decision to increase telecoms taxes could be passed to customers, and might have an impact on usage levels and subscriptions. New taxes might hinder mobile growth, but mobile broadband growth will be stronger than we previously forecast Tanzania We expect mobile penetration in Tanzania to increase during the next 5 years from 59% in 2012 to 76% in 2018, and this growth is likely to come from the underserved rural population. Mobile broadband take-up was stronger in 2012 than previously forecast. We expect connection numbers to grow at a 12% CAGR during 2013–2018 to just over 2.5 million, boosting data service revenue. The mobile market has room for growth, albeit at a lower rate than before UgandaThe mobile market slowed down in 2012, after the 3.7 million jump in net additions in 2011, which was driven by multiple-SIM ownership and on-net call promotions. We expect the market to grow between 2013–2018 but at a lower CAGR than previously forecast. We expect 29 million mobile connections by 2018 (excluding M2M), driving mobile penetration from 58% to 69% during the next 5 years. Key forecast changes [2]: stronger than expected market growth in South Africa and Uganda; mixed outlook for Sudan and Tanzania Figure 5b: Details of how our forecast data has changed since the previous edition was published in January 2013, Sub-Saharan Africa [Source: Analysys Mason, 2013] 12

13. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 13 Executive summary Regional overview Country-level analysis About the author and Analysys Mason

14. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Mobile networks will account for 99% of voice connections and 80% of broadband connections in Sub-Saharan Africa by 2018 14 Figure 6: Fixed and mobile voice connections, Sub-Saharan Africa, 2009– 2018 [Source: Analysys Mason, 2013] Figure 7: Broadband access connections by technology, Sub-Saharan Africa, 2009–2018 [Source: Analysys Mason, 2013]

15. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Smartphones will account for 80% of active broadband connections and 22% of handsets by 2018 – 95% of handset connections will be prepaid 15 Figure 9: Smartphones as a percentage of mobile handsets, Sub-Saharan Africa, 2009–2018 [Source: Analysys Mason, 2013] Figure 8: Broadband connections by type, Sub-Saharan Africa, 2011–2018 [Source: Analysys Mason, 2013] Figure 10: Handset connections by subscription type, Sub-Saharan Africa, 2009–2018 [Source: Analysys Mason, 2013]

16. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Demand for fixed broadband and business services will offset declining fixed voice revenue during the forecast period 16 Figure 11: Fixed connections and penetration by service type, Sub-Saharan Africa, 2009–2018 [Source: Analysys Mason, 2013] Figure 12: Fixed retail revenue by service type, Sub-Saharan Africa, 2009– 2018 [Source: Analysys Mason, 2013]

17. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 M2M is set for rapid growth, led by South Africa; IPTV will remain a niche service because it depends on fibre  M2M services were recently launched in a few countries such as Kenya, Nigeria, South Africa and Uganda. We expect that M2M will be particularly used in verticals such as retail, banking and fleet management, and in applications that have direct socioeconomic benefits to the population such as health. M2M connections will grow from 2.8 million in 2012 to just below 28.9 million by the end of 2018, a 45% CAGR.  South Africa was the biggest market in terms of M2M connections in 2012, estimated at 1.7 million. Plans to roll out smart meters during the next 5 years will boost the number of connections at a 27% CAGR. Safaricom in Kenya has developed a mobile solution to make clean energy more accessible and affordable to the rural population, and Orange Uganda launched an M2M offering in late 2012 for fleet management, and remote monitoring and surveillance.  IPTV service is confined to a very few countries, such as Kenya, because most of the fixed infrastructure is copper- based and cannot adequately support the service. Some operators, such as 21st Century in Nigeria, and Mobile Telephone Networks (MTN) and Telkom in South Africa, are considering offering video-on-demand services over fixed broadband but we expect take-up to be small because terrestrial and satellite TV services address consumer demand. We expect 307 000 IPTV subscribers in Sub- Saharan Africa by 2018, up from an estimated 7000 in 2012. Figure 13: M2M connections in key countries, Sub-Saharan Africa, 2012– 2018 [Source: Analysys Mason, 2013] Figure 14: IPTV connections and revenue, Kenya and South Africa, 2012– 2018 [Source: Analysys Mason, 2013] 17 South Africa Kenya South Africa Kenya Revenue: Connections:

18. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 The erosion of mobile prices will affect revenue more than we had expected, but the main market growth trends have changed little 18 Figure 15: Fixed and mobile retail revenue, new and previous forecasts, Sub- Saharan Africa, 2009–2018 [Source: Analysys Mason, 2013] Figure 16: Fixed voice and mobile handset connections, new and previous forecasts, Sub-Saharan Africa, 2009–2018 [Source: Analysys Mason, 2013] Mobile Fixed New: Previous:

19. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 2G connections will continue to dominate the mobile market, and will be slowly replaced by 3G connections; 4G will have a minor impact  3G take-up in the region has been positive as a substitute for fixed broadband. 3G SIM take-up will be driven by operators’ efforts to expand 3G coverage and capacity, cheaper data tariffs and the increased availability of more affordable data- enabled devices.  Operators increased the number of deployments of HSDPA and HDSPA+ networks across the region, making 2012 the first year of fast mobile broadband. We forecast that 3G will reach 152 million active SIMs (excluding M2M) by 2018, accounting for just under 20% of non-M2M SIMs.  The 2G base will continue to increase throughout the forecast period. 3G and 4G will be limited to urban areas because the population in rural areas will be more price sensitive and will continue to use basic phones. As a portion of SIMs, 2G will decline from 87% in 2013 to 78% in 2018.  We altered our 4G take-up forecasts because the launch of 4G was delayed in several countries such as Kenya and Nigeria. Operators in South Africa and Uganda have recently commercially launched LTE.  We forecast that 4G will account for 1.52% of the 774 million active mobile devices in Sub-Saharan Africa at the end of 2018. Of these devices, 80% will be handsets and the rest will be mobile broadband connections (including tablets). 19 Figure 17: 3G’s and 4G’s share of mobile connections, new and previous forecasts, Sub-Saharan Africa, 2009–2018 [Source: Analysys Mason, 2013] 1 Our definition of 4G includes LTE only. 3G 4G New: Previous:

20. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 20 Executive summary Regional overview Country-level analysis About the author and Analysys Mason

21. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Ghana telecoms market: growth will be mainly driven by mobile broadband and handset data Figure 19: Growth rates of retail revenue by service type, Ghana, 2009–2018 [Source: Analysys Mason, 2013] Figure 20: Connections by type, and growth rates, Ghana, 2009–2018 [Source: Analysys Mason, 2013] 21 Service type Revenue (USD billion)CAGR 201220182009–20122012–2018 Mobile voice0.760.949.5%3.5% Mobile messaging0.070.0921.1%4.1% Handset data0.030.0970.3%18.2% Mobile broadband0.010.0389.7%19.3% M2M0.000.01–– Fixed voice0.020.01–9.4%–5.8% Fixed broadband0.010.0223.8%14.6% Other0.01 7.6%5.6% TOTAL0.911.2011.2%4.7% Service category Connections (million) CAGR 2012–2018 20122018 Mobile handsets24.936.86.8% Mobile broadband0.20.720.7% M2M0.00.7– Fixed voice0.3 1.1% Fixed broadband0.10.217.3% Figure 18: Retail revenue by service type, Ghana, 2009–2018 [Source: Analysys Mason, 2013]

22. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Ghana mobile market: growth will start to slow down in the next 5 years because low-ARPU users will erode revenue  Growth in mobile subscriber numbers in Ghana will slow during 2013–2018. Mobile net additions in 2012 were below our expectations, because 2.3 million SIMs were deactivated. Because mobile penetration of the population was 97% at the end of 2012, we expect the market to slow down. The introduction of MNP in 2011 will continue to favour smaller players such as Expresso and Glo Mobile, but they will find it difficult to sign up new subscribers because they will come from the low-income rural population. We forecast 37.5 million active connections (excluding M2M) by the end of 2018 (36.5 million in our previous forecast).  Operators will need to increase opex to improve QoS. Operators will aim to sign up low-ARPU subscribers, which will have an impact on profit. All six operators were fined by the regulator in 2013 for failing their QoS obligations. We have revised our assumptions and forecast handset service revenue to reach USD1.12 billion by 2018 (previously USD1.18 billion).  The regulator has no plans to issue 4G licences in the near future. However, operators will be allowed to re-use existing spectrum if needed. Three operators were awarded 2.6MHz spectrum for fixed broadband access. The regulator is planning to free up spectrum by 2015. We expect 4G/LTE to have a limited impact during the forecast period – only 1.6% of mobile connections by 2018 (previously 1.4%). Figure 21: Active mobile connections, new and previous forecasts, Ghana, 2009–2018 [Source: Analysys Mason, 2013] Figure 22: Handset retail revenue, new and previous forecasts, Ghana, 2009–2018 [Source: Analysys Mason, 2013] 22

23. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Ghana fixed market: we have revised our forecasts for fixed voice, and DSL connections continue to dominate the broadband market  Fixed voice connection growth in 2012 was below our expectations. The fixed voice market stabilised in 2012 after steady growth in the preceding 3 years. Given the low population penetration rate, we expect growth in connections at a 1.3% CAGR (compared with 1.8% in our previous forecast) between 2013 and 2018. We expect fixed voice lines to reach 304 000 in 2018 and have maintained our outlook for minutes of use (MoU), which are expected to decline from 159 minutes per person per month in 2013 to 148 minutes in 2018.  Fixed voice revenue will reflect the slower-than-expected growth in connections. We have revised our forecast for fixed voice revenue in light of the slow growth in connections and decline in MoU. We forecast that revenue will decrease to USD11.8 million in 2018 – a CAGR of –6.8% (compared with a previous forecast of USD17.6 million).  DSL will dominate the broadband market during the forecast period. DSL dominates the fixed broadband market, but fixed–wireless technology will remain important – in March 2013, the regulator issued three technology-neutral broadband wireless access licences in the 2.5GHz to 2.6GHz band. We have revised our forecasts to bring the introduction of retail fibre forward to 2014 because metro fibre deployment is lagging behind backbone roll-out, and the government has also started expanding fibre networks to rural areas in 2013. Figure 23: Fixed voice connections and fixed voice revenue, new and previous forecasts, Ghana, 2009–2018 [Source: Analysys Mason, 2013] Figure 24: Share of fixed broadband connections by technology, new and previous forecasts, Ghana, 2009–2018 [Source: Analysys Mason, 2013] 23

24. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Kenya telecoms market: mobile voice will be resilient and adoption of fibre and 4G will be strong Figure 26: Growth rates of retail revenue by service type, Kenya, 2009–2018 [Source: Analysys Mason, 2013] Figure 27: Connections by type, and growth rates, Kenya, 2009–2018 [Source: Analysys Mason, 2013] 24 Service type Revenue (USD billion)CAGR 201220182009–20122012–2018 Mobile voice 0.830.996.9%3.0% Mobile messaging 0.130.1721.6%4.5% Handset data 0.270.6143.8%14.8% Mobile broadband 0.040.14202.4%23.6% M2M 0.000.04–– Fixed voice 0.020.01–38.0%–10.5% Fixed broadband 0.090.1741.5%11.8% Other 0.030.044.1%2.0% TOTAL 1.402.1713.0%7.5% Service category Connections (million) CAGR 2012–2018 20122018 Mobile handsets 27.541.97.2% Mobile broadband 0.20.825.1% M2M 0.00.7110.8% Fixed voice 0.30.2–3.7% Fixed broadband 0.10.214.6% Figure 25: Retail revenue by service type, Kenya, 2009–2018 [Source: Analysys Mason, 2013]

25. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Kenya mobile market: the outlook for mobile voice revenue and 4G take-up is more positive than expected  We have revised our figures for mobile voice and the outlook is now more positive. We reviewed historical figures for mobile voice MoU and revenue in light of new data that became available. Mobile voice generated USD811 million in retail revenue in 2012, compared with a forecast of USD660 million, resulting in a jump of the price per minute (PPM) by 9% year-on-year. We expect mobile voice revenue to continue to grow to USD994 million in 2018 – a CAGR of 3.7% between 2013 and 2018.  We have revised our forecast of LTE connections upwards because operators are likely to accelerate roll out. A public–private consortium was set up in 2013 to deploy an LTE network under a shared infrastructure model. The group includes government representatives, and telecoms operators and vendors. However, the consortium has not achieved much, which is pushing operators such as Safaricom to consider deploying their own LTE networks. Initially, LTE will only be available in 2.6GHz, which will limit it in the near term. Eventually, 800MHz will be available, which will be a more significant boost for 4G – digital switchover is to begin in December 2013. More operators are likely to pursue their own LTE goals with some form of infrastructure sharing. As a result, we have revised upwards our forecast of 4G mobile connections – 1.26 million by the end of 2018, compared with 1.16 million in our previous forecast. 25 Figure 28: Mobile voice retail revenue and mobile voice MoU, Kenya, 2009– 2018 [Source: Analysys Mason, 2013] Figure 29: 4G active mobile connections, Kenya, 2013–2018 [Source: Analysys Mason, 2013]

26. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Kenya fixed market: take-up of fibre will increase but fixed voice will continue its decline, albeit at slower pace than our previous forecast  The fixed voice market in terms of connections was more resilient in 2012 than we had expected. The number of fixed voice lines declined in 2012, but it was higher than expected. We believe that the number of fixed voice lines will decline from 231 000 in 2013 to 201 000 in 2018 (151 000 in our previous forecast).  Fixed voice revenue declined more than expected in 2012 because fixed voice traffic decreased. Fixed voice traffic fell by 43% year-on-year in 2012, resulting in a 38% drop in retail revenue (compared with a forecast decline of 26%). We expect that fixed voice revenue will decline to USD8 million – a CAGR of –12.4% between 2013 and 2018 (compared with –3.9% in our previous forecast).  Compared with our previous forecast, our forecast for fixed broadband is more conservative and fibre take-up is stronger. Based on recent developments and cross- country benchmarks, we have revised down our forecast of fixed broadband connections. However, fibre’s share of connections will be 67% by the end of 2018 based on its higher-than-expected share in 2012 (61% compared with 50% in our previous forecast). This reflects significant investments made by several operators such as Jamii Telecommunications, Kenya Data Networks, MTN and Safaricom. Fibre deployment will probably continue to be focused on cities such as Nairobi and Mombasa. 26 Figure 30: Fixed voice connections and fixed voice revenue, new and previous forecasts, Kenya, 2011–2018 [Source: Analysys Mason, 2013] Figure 31: Fixed broadband connections by technology, new and previous forecasts, Kenya, 2009–2018 [Source: Analysys Mason, 2013]

27. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Nigeria telecoms market: modest growth rate as an increase in mobile data services offsets the decline in fixed voice Figure 33: Growth rates of retail revenue by service type, Nigeria, 2009–2018 [Source: Analysys Mason, 2013] Figure 34: Connections by type, and growth rates, Nigeria, 2009–2018 [Source: Analysys Mason, 2013] 27 Service type Revenue (USD billion)CAGR 201220182009–20122012–2018 Mobile voice7.109.522.4%5.0% Mobile messaging0.210.32–2.5%7.2% Handset data0.210.5143.0%16.2% Mobile broadband0.070.1763.5%17.1% M2M0.000.14–– Fixed voice0.160.06–39.9%–14.4% Fixed broadband0.030.0627.0%13.0% Other0.100.14–18.2%5.1% TOTAL7.8910.94–0.0%5.6% Service category Connections (million) CAGR 2012–2018 20122018 Mobile handsets111.9145.74.5% Mobile broadband0.92.720.0% M2M0.06.5194.1% Fixed voice0.40.3–5.0% Fixed broadband0.30.819.7% Figure 32: Retail revenue by service type, Nigeria, 2009–2018 [Source: Analysys Mason, 2013]

28. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Nigeria mobile market: competition and price erosion hindered revenue growth despite strong take-up of smartphones  Mobile penetration in 2012 was higher than we previously forecast, but it is relatively low at 65.5% in 2012, so we expect sustained growth in the next 5 years with mobile connections to reach over 148 million by the end of 2018 (penetration of 75%). Early data showed that MNP, introduced in April 2013, has had limited impact – only 22 000 subscribers are reported to have used the service.  Take-up of smartphones in 2012 was faster than we had expected. We expect smartphones to account for 22% of active handsets by the end of 2018, up from 16% in the previous forecast. This will be driven by cheaper handsets.  Mobile voice retail revenue increased in 2012, despite a decrease in PPM. Promotions drove increases in net additions and MoU in 2012, which also caused network congestion, prompting the regulator to ban the promotions in late 2012. Growth in voice traffic will help to offset the decline in PPM, which we believe will follow a downward trend during the next 5 years. This is now reflected in our forecast.  Launch of LTE pushed to 2014, one year later than we had expected. The National Broadband Plan 2013–2018 aims to increase broadband penetration with 3G coverage for at least 80% of the population by 2018 and free up 2.5GHz and 2.6GHz spectrum for before 2015. We now believe that 4G will be launched at the end of 2013 at the earliest – Airtel Nigeria and Smile Communications Nigeria are trialling LTE. 28 Figure 35: Active mobile connections, new and previous forecasts, Nigeria, 2009–2018 [Source: Analysys Mason, 2013] Figure 36: Smartphones’ share of handsets, new and previous forecasts, Nigeria, 2009–2018 [Source: Analysys Mason, 2013]

29. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Nigeria fixed market: fixed voice continues to decline and underdeveloped infrastructure is hindering fixed broadband growth  Fixed-line connections have declined more slowly than we expected. The fixed voice market continued its downward trend in 2012, falling by 42% year-on-year. This decline had a direct impact on voice traffic and associated revenue. We believe that fixed-to-mobile substitution, driven by better mobile coverage and lower tariffs, will continue to favour the mobile market. We forecast fixed voice lines to decrease at a –6% CAGR in the next 5 years to 308 000.  Our fixed broadband outlook is more conservative than our previous forecast. A national broadband plan was set out in 2009 to expand broadband access to rural areas. MTN won the project along with Multi-links Telecommunications, but pulled out in 2012. In addition, we revised our forecast because of the underdeveloped fixed broadband infrastructure, the incumbent’s monopoly and the lack of affordable tariffs. The number of fixed broadband connections will grow from 360 000 in 2013 to 810 000 in 2018 (2.1 million in our previous forecast).  DSL take-up was lower than expected in 2012, while fibre is expected to have a slow start – only a few operators (for example, Globacom) are offering it. Nigeria held auctions in December 2012 for 2.3GHz spectrum to be used mostly for WiMAX services. However, fixed–wireless providers will struggle to compete with the wholesale players Globacom and MTN, which also offer retail broadband services. 29 Figure 37: Fixed voice connections and revenue, new and previous forecasts, Nigeria, 2009–2018 [Source: Analysys Mason, 2013] Figure 38: Fixed broadband connections by technology, new and previous forecasts, Nigeria, 2011–2018 [Source: Analysys Mason, 2013]

30. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 South Africa telecoms market: growth driven by take-up of smartphones and the introduction of VDSL in fixed broadband Figure 40: Growth rates of retail revenue by service type, South Africa, 2009–2018 [Source: Analysys Mason, 2013] Figure 41: Connections by type, and growth rates, South Africa, 2009–2018 [Source: Analysys Mason, 2013] 30 Service type Revenue (USD billion)CAGR 201220182009–20122012–2018 Mobile voice7.8810.197.5%4.4% Mobile messaging0.890.8010.6%–1.8% Handset data1.904.1839.1%14.0% Mobile broadband0.611.2237.1%12.3% M2M0.030.1032.4%23.1% Fixed voice2.181.45–7.3%–6.5% Fixed broadband0.290.4524.1%7.6% Other0.911.355.4%6.9% TOTAL14.6819.758.1%5.1% Service category Connections (million) CAGR 2012–2018 20122018 Mobile handsets67.772.31.1% Mobile broadband3.67.813.4% M2M1.77.327.5% Fixed voice4.03.7–1.6% Fixed broadband1.11.99.5% Figure 39: Retail revenue by service type, South Africa, 2009–2018 [Source: Analysys Mason, 2013]

31. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 South Africa mobile market: smartphone penetration and handset data revenue in 2012 were higher than we had forecast  Outlook for mobile subscriber growth remains strong during 2013–2018. Mobile SIMs increased (18.5 million net additions) in 2012 by more than we previously forecast. 8ta, MTN and Vodacom registered the highest year-on-year growth rates. Mobile penetration of the population was 146% in 2012, so growth will be gradual and active connections will reach 80 million by the end of 2018.  Strong smartphone take-up will drive handset data revenue more quickly than previously forecast. Data revenue in 2012 was boosted because of an increase in the number of handset data users and smartphones. Smartphones represented 14% of total handsets in 2012, while we had previously forecast 11%. We expect that smartphones will represent 27% of total handsets by 2018, while handset data will represent 26% of service revenue.  Operators went ahead with their LTE plans in 2012 because of delays in licensing suitable spectrum. Operators decided to re-use existing spectrum to launch LTE because no LTE spectrum award is in sight. Vodacom and MTN were first to launch LTE at the end of 2012 on refarmed 1800MHz spectrum. Neotel aims to launch in September 2013. We forecast that by 2018 there will be 2.7 million 4G connections. However, we expect LTE to only represent 2.5% of total connections – take-up will be slow because of the lack of affordable LTE-compatible handsets and tablets. 31 Figure 42: Active mobile connections and smartphones’ share of handsets, new and previous forecasts, South Africa, 2009–2018 [Source: Analysys Mason, 2013] Figure 43: 4G connections and share of handsets and mobile broadband connections, new and previous forecasts, South Africa, 2009–2018 [Source: Analysys Mason, 2013]

32. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 South Africa fixed market: fixed voice is expected to be more resilient than broadband; DSL will maintain its market share thanks to VDSL  Fixed voice is proving more resilient than expected. The reported number of fixed connections aligned with our previous projection, and we forecast that fixed voice connections will decrease at a –1.9% CAGR to 3.7 million by 2018. However, we expect associated revenue to fall at a faster pace. We have revised downwards fixed voice revenue for the same period – we now estimate that it will reach USD1.4 billion by the end of 2018, a 31% drop from 2012.  More positive outlook for fixed broadband market. South Africa had just under 1 million fixed broadband connections in 2012. As operators, such as Telkom, start to offer high-speed VDSL and tariffs become more affordable, we forecast that the number of fixed broadband connections will double between 2012 and 2018, corresponding to revenue of USD448 million by the end of the forecast period.  DSL is expected to maintain its market share thanks to VDSL. DSL will continue to dominate the fixed broadband market, aided by the introduction of VDSL. But increased adoption of DSL will dampen the demand for fixed–wireless technology in the future. Consequently, we reviewed our connection forecast and slightly adjusted DSL and BFWA shares to 79% and 15% by the end of 2018. Retail fibre services are available for enterprises from operators such as Metrofibre Networkx and Telkom, but we expect fibre’s share of fixed broadband connections to be just 10% by 2018. 32 Figure 44: Fixed voice retail revenue and connections, new and previous forecasts, South Africa, 2009–2018 [Source: Analysys Mason, 2013] Figure 45: Fixed broadband connections, and share by technology, new and previous forecasts, South Africa, 2009–2018 [Source: Analysys Mason, 2013]

33. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Sudan telecoms market: handset data revenue to offset voice and messaging; fixed-wireless to dominate fixed broadband market Figure 47: Growth rates of retail revenue by service type, Sudan, 2009–2018 [Source: Analysys Mason, 2013] Figure 48: Connections by type, and growth rates, Sudan, 2009–2018 [Source: Analysys Mason, 2013] 33 Service type Revenue (USD billion)CAGR 201220182009–20122012–2018 Mobile voice1.051.366.4%4.5% Mobile messaging0.090.1019.3%2.8% Handset data0.030.0645.4%14.6% Mobile broadband0.020.0341.2%12.4% M2M0.000.02–– Fixed voice0.050.03–9.4%–7.9% Fixed broadband0.010.0214.2%4.2% Other0.01 2.8%2.4% TOTAL1.251.647.0%4.6% Service category Connections (million) CAGR 2012–2018 20122018 Mobile handsets27.135.54.6% Mobile broadband0.41.119.3% M2M0.00.5– Fixed voice0.50.4–0.6% Fixed broadband0.20.39.2% Figure 46: Retail revenue by service type, Sudan, 2009–2018 [Source: Analysys Mason, 2013]

34. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Sudan mobile market: handset date offers best growth opportunity, outpacing voice and messaging  We have revised the share of contract subscribers as new data become available, which affects our forecasts. This figure indicates a higher share of contract subscriptions in the market than previously estimated. This has slightly affected our forecast for the shares of prepaid and contract connections, but our forecast for total mobile connections is unaffected – they will increase from 28.3 million in 2013 to 33.2 million in 2018.  Messaging revenue in 2012 was lower than forecast, but offset by increased handset data revenue. The ready availability of 3G from all three operators, MTN, Sudatel and Zain, the lack of competition in the fixed broadband market and the high cost of fixed broadband tariffs are boosting handset data use. Handset data revenue will grow at 13.2% CAGR during 2013–2018, compared with 2.5% for messaging.  Mobile voice traffic increased in 2012 by more than expected, but resulted in a small increment in revenue. Mobile voice traffic grew by 26% year-on-year (compared with 18% forecast), but resulted in only 5% revenue uplift. The growing number of handset connections will help offset the continued erosion of PPM. Voice revenue will grow from USD1.1 billion in 2013 to USD1.36 billion in 2018 – a CAGR of 4%. The decision by the government to increase taxes on telecoms services to 20% to compensate for lost revenue from oil, and the risk that they will be passed on to customers, will affect revenue and growth. Figure 49: Mobile handset retail revenue by service type, new and previous forecasts, Sudan, 2009–2018 [Source: Analysys Mason, 2013] Figure 50: Mobile voice retail revenue and mobile voice traffic, new and previous forecasts, Sudan, 2009–2018 [Source: Analysys Mason, 2013] 34

35. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Sudan fixed market: pessimistic outlook for fixed voice, while fixed broadband showed stronger growth in 2012 than expected  Revised historical data and outlook for fixed voice market. We have revised the historical figures based on new data released by Sudatel in 2012, and increased the share of fixed–wireless. Fixed voice revenue declined more than expected because of net losses in 2012. Our market outlook for fixed voice is therefore more pessimistic than previously forecast. We now forecast revenue to decline at –6% CAGR to SDG97 million (USD 29 million), while connections will reach 440 000 by 2018 (previously 591 000).  Growth of fixed broadband was slightly higher than expected in 2012. Most growth in 2012 came from BFWA. We forecast that as much as 97% of fixed broadband connections will be fixed–wireless technology because it is suitable for the sparse population outside the main cities. However, operators will need to keep upgrading their BFWA infrastructure, and prepare it for migration to LTE.  Fibre will remain a niche segment confined to urban centres and large clients. Canartel and Sudatel have deployed national fibre-optic backbone networks, but end- user access to fibre services is limited to large businesses and government departments. In addition, the lack of a national broadband plan means that fixed broadband’s growth prospects are limited. We forecast that the number fibre connections will double during 2013–2018 to 4000 connections but will only represent 1.4% of total connections. 35 Figure 51: Fixed voice connections and revenue, new and previous forecasts, Sudan, 2009–2018 [Source: Analysys Mason, 2013] Figure 52: Fixed broadband connections, and share by technology, new and previous forecasts, Sudan, 2009–2018 [Source: Analysys Mason, 2013]

36. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Tanzania telecoms market: handset data, and fixed and mobile broadband will drive most of the growth Figure 54: Growth rates of retail revenue by service type, Tanzania, 2009– 2018 [Source: Analysys Mason, 2013] Figure 55: Connections by type, and growth rates, Tanzania, 2009–2018 [Source: Analysys Mason, 2013] 36 Service type Revenue (USD billion)CAGR 201220182009–20122012–2018 Mobile voice 0.811.1915.0%6.7% Mobile messaging 0.140.2123.4%6.9% Handset data 0.020.0696.0%17.6% Mobile broadband 0.020.0414.7%11.6% M2M 0.00 –– Fixed voice 0.02 –10.5%–3.2% Fixed broadband 0.01 24.4%14.1% Other 0.000.011.7%4.4% TOTAL 1.031.5515.8%7.1% Service category Connections (million) CAGR 2012–2018 20122018 Mobile handsets 27.240.36.8% Mobile broadband 1.12.514.2% M2M 0.00.6– Fixed voice 0.2 1.6% Fixed broadband 0.00.119.0% Figure 53: Retail revenue by service type, Tanzania, 2009–2018 [Source: Analysys Mason, 2013]

37. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Tanzania mobile market: strong demand for data services helped offset declining voice revenue  With 59% mobile penetration at the end of 2012, the market has room for growth. However, it is likely to come from low- income segments as operators plan to improve coverage in rural areas. The new 14.5% excise duty on telecoms services and the TZS1000 (USD0.64) monthly tax could affect low- income users and reduce multiple-SIM ownership. Overall, the trend will be positive and we forecast mobile penetration to reach 76% by 2018.  Availability of unlimited mobile calling tariffs is eroding revenue. Mobile MoU increased in 2012 to 76 minutes, driven by the transition to unlimited packages, but revenue only grew by 13% year-on-year to USD806 million. We have taken a more optimistic view of mobile traffic in this forecast, but are slightly more conservative about voice revenue to reflect eroding PPM.  Tanzania has the highest proportion of mobile broadband subscribers at the end of 2012, after South Africa. The country had an estimated 1.1 million connections. This was driven by operators’ investments to expand 3G/3.5G networks and increase their transmission capacity. We now forecast mobile broadband connections to increase at 12% CAGR during 2013–2018 to just over 2.5 million. As a result, we are more optimistic about data service revenue, which we forecast to grow at a 8% CAGR to USD344 million by 2018 (previously, USD201 million), while data’s share of service revenue will rise to 20% in 2018, from 14% in our previous forecast. Figure 56: Mobile voice retail revenue and minutes of use, new and previous forecasts, Tanzania, 2009–2018 [Source: Analysys Mason, 2013] 1 The monthly tax was so controversial that the government announced in July 2013 that it would freeze its enforcement while pending a review. Figure 57: Mobile broadband service revenue and mobile broadband connections, new and previous forecasts, Tanzania, 2009–2018 [Source: Analysys Mason, 2013] 37

38. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Tanzania fixed market: room for growth of fixed broadband aided by competition and government’s initiatives  Continued growth of fixed voice market aided by investment in infrastructure. The number of fixed-line connections increased slightly by 9% year-on-year in 2012. The government’s support for investment in fixed–wireless access to extend access of fixed voice to the underserved rural areas will aid in market growth in subscribers. We forecast that the number of connections will grow from 181 000 in 2013 to 194 000 by 2018. However, price erosion of fixed voice and reduced traffic mean that revenue will decline at –3% CAGR to USD17.1 million by 2018.  The government's plan to deploy a national backbone network will help extend fixed broadband’s reach and reduce connectivity costs. Tanzania suffers from poor fixed infrastructure. The government has undertaken measures to remedy this issue, such as completing phase two of the National ICT Broadband Backbone (NICTBB) in August 2012. However, complaints have been made about the high connection cost imposed by the managing company TTCL, which is state-owned. The government also plans to help fund greater access in rural and underserved areas via a universal service fund (the tender process began in October 2012). With more capacity, a larger network and lower broadband pricing, we expect fixed broadband connections to grow at 17% CAGR between 2013 and 2018 (compared with 16% in our previous forecast), to just under 146 000 by period end – generating USD13.2 million in revenue. Figure 58: Fixed voice retail revenue and fixed voice connections, new and previous forecasts, Tanzania, 2011–2018 [Source: Analysys Mason, 2013] Figure 59: Fixed broadband retail revenue and fixed broadband connections, new and previous forecasts, Tanzania, 2011–2018 [Source: Analysys Mason, 2013] 1 38 1 Including IPTV revenue.

39. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Uganda telecoms market: strong growth in both mobile data services and fixed broadband Figure 61: Growth rates of retail revenue by service type, Tanzania, 2009– 2018 [Source: Analysys Mason, 2013] Figure 62: Connections by type, and growth rates, Tanzania, 2009–2018 [Source: Analysys Mason, 2013] 39 Service type Revenue (USD billion)CAGR 201220182009–20122012–2018 Mobile voice0.500.7613.7%7.3% Mobile messaging0.040.0623.2%6.4% Handset data0.000.0124.6%16.7% Mobile broadband0.020.0688.4%17.1% M2M0.000.02–178.2% Fixed voice0.01 10.5%–2.7% Fixed broadband0.010.02120.4%17.2% Other0.00 15.5%4.1% TOTAL0.590.9516.0%8.2% Service category Connections (million) CAGR 2012–2018 20122018 Mobile handsets18.927.76.6% Mobile broadband0.61.718.5% M2M0.00.6159.2% Fixed voice0.30.44.2% Fixed broadband0.10.222.8% Figure 60: Retail revenue by service type, Uganda, 2009–2018 [Source: Analysys Mason, 2013]

40. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Uganda mobile market: more mobile broadband connections and revenue than expected because of deployments of 3.5G and 4G  The mobile market slowed in 2012 compared with 2011. After a jump in net additions in 2011 by 3.7 million driven by the multiple-SIM phenomenon and on-net call promotions, the mobile market gained just 2.9 million new subscribers in 2012. We expect Uganda to have 29 million mobile connections by 2018 (excluding M2M), driving mobile penetration from 58% to 69% in the next 5 years.  Falling MTRs will erode service revenue growth. Mobile voice pricing will decline with continued reductions in MTRs, which will fall from UGX121 (USD0.05) in 2012 to UGX92 (USD0.04) in 2014.  Positive outlook for the adoption of data services. 3G USB modems were popular in 2012 because of the downward pressure on pricing. 1 We forecast that Uganda will have 1.7 million mobile broadband SIMs by the end of 2018, and will contribute USD61.1 million to service revenue.  LTE launched by MTN and Smile in 2013. In addition, Uganda has allocated 800MHz spectrum for LTE ahead of the digital switchover. Therefore, we have brought back the start of LTE to 2013 but because of the slow maintained the share of 4G out of total active connections by 2018 at around 1.5% because of slow take-up. Figure 63: Active mobile connections and mobile penetration, new and previous forecasts, Tanzania, 2009–2018 [Source: Analysys Mason, 2013] 1 Warid launched an HSDPA network in 2011, Airtel launched HSPA+ network in 2012 and MTN Uganda is upgrading its data speeds to 42Mbps. Figure 64: Mobile broadband service revenue and mobile broadband connections, new and previous forecasts, Tanzania, 2009–2018 [Source: Analysys Mason, 2013] 40

41. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 Uganda fixed market: downward revision of fixed voice and fixed broadband market in light of data that became available in 2012  Fixed voice connections dropped in 2012 after a boost in 2011. Fixed voice connections increased in 2011, which is attributed to growth in the CDMA and fixed GSMA customer bases and the launch of VoIP over WiMAX. The drop in 2012 is probably because Uganda Telecom disconnected inactive fixed GSM lines, which drove most of the growth in 2011. We have revised our forecast and expect fixed voice connections to reach 404 000 (517 000 in previous forecast), and revenue to reach USD11.9 million (USD21.8 million before).  We revised downward our fixed broadband forecast because of strong take-up of mobile broadband in 2012. We previously overestimated growth of the fixed broadband market compared with data released in 2012. The government-backed fibre backbone roll-out has been plagued with quality problems during installation, and growing costs raised questions about the viability of the project, further delaying the stimulation of the fixed broadband market.  We forecast the number of fixed broadband connections to increase to reach 240 000 in 2018 (previously 342 000), because operators will focus on mobile.  Fixed–wireless will continue to dominate the fixed broadband market, because the copper infrastructure is limited. We forecast that 83% and 14% of fixed broadband connections will be DSL and BFWA, respectively, by 2018. 41 Figure 65: Fixed voice connections and revenue, Tanzania, 2009–2018 [Source: Analysys Mason, 2013] Figure 66: Fixed broadband connections by technology, Tanzania, 2012– 2018 [Source: Analysys Mason, 2013] Probably because inactive fixed GSM lines were disconnected

42. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 42 Executive summary Regional overview Country-level analysis About the author and Analysys Mason

43. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 About the author Karim Yaici (Analyst) works on Analysys Mason’s The Middle East and Africa regional research programme. His primary areas of specialisation include mobile operators’ VAS strategies in developing markets, and the adoption of IP Multimedia Subsystem (IMS) services and mobile devices. Prior to joining Analysys Mason, Karim was an associate analyst at Informa Telecoms & Media, where he authored reports on mobile accessories and mobile applications. Prior to that, he worked as a research engineer in the Centre for Communication Systems Research (CCSR) and Vodafone. Karim holds an MSc in Information Systems Management from the University of Southampton and a PhD in human–computer interaction from the University of Surrey. 43

44. © Analysys Mason Limited 2013 The Sub-Saharan Africa telecoms market: interim forecast update 2013–2018 About Analysys Mason Knowing what’s going on is one thing. Understanding how to take advantage of events is quite another. Our ability to understand the complex workings of telecoms, media and technology (TMT) industries and draw practical conclusions, based on the specialist knowledge of our people, is what sets Analysys Mason apart. We deliver our key services via two channels: consulting and research. 44 Consulting  Our focus is exclusively on TMT.  We support multi-billion dollar investments, advise clients on regulatory matters, provide spectrum valuation and auction support, and advise on operational performance, business planning and strategy.  We have developed rigorous methodologies that deliver tangible results for clients around the world. For more information, please visit www.analysysmason.com/consulting. Research  We analyse, track and forecast the different services accessed by consumers and enterprises, as well as the software, infrastructure and technology delivering those services.  Research clients benefit from regular and timely intelligence in addition to direct access to our team of expert analysts.  Our dedicated Custom Research team undertakes specialised and bespoke projects for clients. For more information, please visit www.analysysmason.com/research.

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