What does it take to succeed in Africa?

Posted by Matthew Reed Wednesday, March 31st, 2010

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With Bharti’s acquisition of Zain Africa now agreed by the two parties, it’s a good moment to look at how to operate successfully in Africa.

With that in mind, principal analyst Nick Jotischky and I have identified ten factors that we think are critical to success on the continent, and we’ve written about those in-depth in a special report that is free to download via the following link: http://clientfiles.msgfocus.com/files/tfinf_telecoms_media/project_966/Investing_in_African_Telecoms.pdf

#1 Be innovative with pricing strategy – there is some price elasticity from which a well-managed and lean operator can take benefit, but rather than drive down tariffs excessively, new operators should look to pricing innovation. Within the mobile data segment, there may be more room for price cuts.

#2 Leverage existing trusted supplier relationships and create partnerships – do not allow supply chains to become fragmented, unwieldy and complex, and instead build on existing partnership relationships in order to create efficiencies.

#3 Focus on operational delivery, outsource those services that are not core – base strategy around pricing levels, distribution models, customer management, creating a relevant products and service portfolio and sound financial management, and look to outsource other services to the right partners.

#4 Create network sharing agreements to reduce opex and facilitate rural expansion – sharing the cost of rural expansion is the only sensible strategy in some African markets. As an additional revenue generator, establishing a tower company can help incumbents to unlock the value of their infrastructure.

#5 Maximise mobile data potential – take advantage of the demand for data services, which will be met by wireless rather than wireline connections.

#6 Build on potential of WiMAX in Africa – consider the technology as an efficient means of addressing one of the most important growth markets in the region, that of business and residential broadband.

#7 Provide the most relevant content – remember an operator in Africa is competing not just for a share of a user’s spend on communications, but on that user’s total spend. The service offering must therefore be relevant and make a difference.

#8 Build a distinctive brand – mobile operators tend to have strong brands in Africa as they are often associated with empowering individuals. This must be treasured as a brand is only as strong as the company’s customer management, network reliability, service portfolio and distribution.

#9 Expect market consolidation and prepare M&A strategy – in many of Africa’s markets, there are too many operators for all to be profitable. Take advantage of the likely upcoming period of market consolidation and divest those less attractive assets. Look for the right acquisition targets – there will be opportunities – by monitoring demographics and market characteristics closely.

#10 Build a robust distribution model – along with network coverage and affordable tariffs, a good relationship with retailers and distributors is vital to an operator’s rural growth strategy.