1. Scanbi Invest 1 2007-11-14 Anders Engvall Options for Terrestrial Connectivity in Sub-Saharan Africa 5th International Conference on Open Access – Bagamoyo, Tanzania

2. Scanbi Invest 2007-11-14 2 Study Objectives Increase the awareness of mobile investments in backbone facilities Identify the issues for improved utilization Sida of Sweden financed the study

3. Scanbi Invest 2007-11-14 3 An Improved Picture Average Tele-Density 12.3 % by end 2005

4. Scanbi Invest 2007-11-14 4 Mobile Business Dominate the Change Average Mobile/Fixed 10 times by end 2005

5. Scanbi Invest 2007-11-14 5 Study Results on Backbone Ownership Mobile Operators own 70 % of the Backbone Networks in the 18 studied countries

6. Scanbi Invest 2007-11-14 6 Gaps in Backbone Networks Our study showed that: When > 80 % coverage is obtained, the backbone networks are countrywide with very few gaps 23 % of the countries are in this category With < 50 % coverage there exist major gaps in backbone networks 40 % of the countries are in this category A recent study by GSMA showed that GSM in Sub-Saharan Africa had reached 60 % population coverage by end 2005

7. Scanbi Invest 2007-11-14 7 Future Trends Mobile operators will continue to account for the lions share of the growth: They are all aiming at > 90 % population coverage, probably corresponding to market penetration of at least 40% They will show an increasing attention to international traffic (especially the regional traffic) They are starting to promote and offer data services on their networks (technology choice still an undecided issue) The Fixed Line incumbents market position is rapidly deteriorating

8. Scanbi Invest 2007-11-14 8 Connect Africa Conference Kigali October 2007 New data on private investments: USD 35 billion has been invested by GSM operators in Sub- Saharan Africa to date USD 50 Billion in planned network investment in next five years By end 2012, population coverage will be above 90% Increased attention to data services will require proportionally more investment in backbone facilities Donor financing of investments: World Bank claimed that there are very few gaps Some targeted projects with its Regional Communications Infrastructure Program (RCIP) Donor financing only a fraction of private investments (<5%)

9. Scanbi Invest 2007-11-14 9 The Celtel Service Expansion in Nigeria Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 3520 sites

10. Scanbi Invest 2007-11-14 10 The Celtel Fibre Network in Nigeria 10 Lagos Kano Abuja Port Harcourt Bauchi Ibadan Asaba Benin Kaduna Uyo

11. Scanbi Invest 2007-11-14 11 Conclusion of the Study Sub-Saharan Africa will soon have countrywide backbone networks

12. Scanbi Invest 2007-11-14 12 Changing International Traffic Pattern

13. Scanbi Invest 2007-11-14 13 90% drop Changing International Traffic Pattern The satellite cost component for voice is less that the national interconnect rate Now cheaper to call from Africa to EU than from EU to Africa

14. Scanbi Invest 2007-11-14 14 Africa is the First Continent Moving Towards Free Roaming Celtel introduced One Network for Kenya, Tanzania and Uganda in September 2006. Expanded to coast- to coast in 2007 Safaricom in Kenya, Vodacom in Tanzania, and MTN in Uganda joined forces and offered the same services in February 2007 Conclusion: Mobile operators are no longer only focusing on the domestic market

15. Scanbi Invest 2007-11-14 15 Two Dominating Trans-African Operators - Opportunities & Threats Celtel Footprint

16. Scanbi Invest 2007-11-14 16 Main Issues for Backbone Networks The Open Access Issue The Pricing Issue The Fibre Issue The Regulatory Issue

17. Scanbi Invest 2007-11-14 17 Open Access - Competition Only at the Service Layer Selling transmission capacity not in the mobile operators business model Little opposition to sharing capacity with other licensed operators Mobile operators not in favour of open access Network built for coverage - perceived competitive advantage License is often specifically for own use Sales to third parties a threat Open access also threat to fixed operators

18. Scanbi Invest 2007-11-14 18 The Pricing Issue – Mozambique Example By mid-2008, the incumbent TDM will have a countrywide backbone network based completely on fibre. There is no competing backbone carrier The issue is - Will it be used?

19. Scanbi Invest 2007-11-14 19 Prices Issue - Mozambique Example The long-range marginal cost of SDH M/W is below USD 40 per E1 and km. Market prices are 5 to 10 times this level in the studied countries. Without a dramatic price change, the fibre will be underutilized!

20. Scanbi Invest 2007-11-14 20 The Fiber Issue Low traffic volumes on most routes, implying microwave is the least cost solution Very limited fibre links of total installed capacity Existing fibre (railways, power utilities…) is rarely integrated with public networks Mobile operators generate the bulk of demand - must be involved and drive fibre investments

21. Scanbi Invest 2007-11-14 21 The Fibre Issue - Tanzania Example A Shared Network Approach Total Cost upgrade fibre/MW network: USD 25 million Total Cost all fibre network (use existing): USD 77 million new Total Cost all new fibre network: USD 99 million Total Cost upgrade fibre/MW network: USD 25 million Total Cost all fibre network (use existing): USD 77 million new Total Cost all new fibre network: USD 99 million Upgrade MW Existing fiber New MW Border crossing TANZANIA PROPOSED NATIONAL BACKBONE

22. Scanbi Invest 2007-11-14 22 The Regulatory Issue Restrictions on resale are gradually removed Mobile operators are becoming dominant Weak or no regulation of domestic dominance No regulation on regional dominance New trends towards regional domination and cartels

23. Scanbi Invest 2007-11-14 23 Conclusions There are extensive backbone links in Sub-Saharan Africa. They could be available for forming national backbone networks Issues to solve are Open Access, Pricing, Technology and Regulation Considering the rapid change, there is a short window of opportunity If the issues are solved, Sub-Saharan Africa could have adequate national and regional backbone networks in a few years There are extensive backbone links in Sub-Saharan Africa. They could be available for forming national backbone networks Issues to solve are Open Access, Pricing, Technology and Regulation Considering the rapid change, there is a short window of opportunity If the issues are solved, Sub-Saharan Africa could have adequate national and regional backbone networks in a few years

24. Scanbi Invest 2007-11-14 24 What Could Governments Do? Remove any remaining regulatory barriers Stimulate competition (e.g. allow electricity companies to become carriers carrier) Avoid interference on the supply side (not invest in backbone networks) Increase demand for broadband connectivity (pre-purchase of capacity for public organizations) Remove any remaining regulatory barriers Stimulate competition (e.g. allow electricity companies to become carriers carrier) Avoid interference on the supply side (not invest in backbone networks) Increase demand for broadband connectivity (pre-purchase of capacity for public organizations)

25. Scanbi Invest 2007-11-14 25 Telephone Kiosk in Africa Thank you! anders.engvall@scanbi-invest.com Report Available on www.scanbi-invest.com

26. Scanbi Invest 2007-11-14 26 Close Correlation Market Penetration and Extent of Backbone Networks