Harnessing the power of the sun

As African operators push out into rural areas, solar power is capturing the attention of many of the region’s players.

Whilst it can’t comment on specifics, Indian solar powered infrastructure firm VNL, told the Show Daily that it is building many pilot sites throughout Africa, after overwhelming interest from local operators.

Craig Hall, senior vice president for global initiatives at VNL, said that the company’s WorldGSM basestation has been specifically designed to enable mobile operators to reach remote rural areas where ARPUs are less than $2 a month. The target audience is the 1.6 billion people who have no electricity and another one billion, who live in areas with unreliable access to power.

Hall said the key to successful deployment of these sites is low power electronics. Unlike traditional GSM base stations, the kit deployed by VNL at village sites need no shelter, air conditioning, mains power, generator or diesel fuel. The system integrates with existing GSM macro networks and extends them into previously unreachable rural areas with the benefits of zero opex, made possible by major reductions in power consumption; allowing for the use of solar power as the single energy source. The equipment needs only 50 - 150 watts per base station compared to the 3000 watts required for traditional GSM. Each site can be powered by a 2-8m² solar panel.

But most importantly, said Hall, is the opportunity for operators to build customer loyalty by giving them their first phone call.

Recent research published by industry body the GSMA found that there is significant interest in off grid power solutions with 60 per cent of mobile operators interviewed by the association revealed to already have or be in the process of exploring off grid charging initiatives for handsets. However, there is thought to be only limited understanding about the full scope of options and the associated social and business benefits.

Today, a panel session on Stream A of the conference will look at using solar power to provide affordable mobile services to rural areas, featuring VNL and Paul Naastepad, CEO of Intivation, a firm which develops solar charging technologies for mobile handsets, seen as one of the last hurdles to bringing mobile services to the emerging markets.

Delivering data by air and sea

During the keynotes and panel sessions on the morning of the first day of the Africa Com event in Cape Town, it became clear that non voice services hold much potential not just as a revenue generator, but also as a customer retention tool in Africa.

Figures from Informa Telecoms & Media show that data revenues in Africa increased 13 per cent in the second quarter of 2009 to reach over $1bn. But we’re not talking about mobile broadband or YouTube here, it was also clear that data services have to provide timely and relevant content and information to the region’s subscribers.

A good example of this is Safaricom’s m-pesa initiative in Kenya, which analysts agree has shown the way in mobile banking, as a revenue generator as well as a customer retention tool.

And it is the dynamism of the market that will see more exciting and interesting data services rolled out as more bandwidth becomes available. Speaking at the opening keynote session of the event, Themba Khumalo, CEO of MTN Uganda, said that there is increased access to bandwidth in the country because of the landing of submarine cables such as EASSy on the continent. “Prices will come down so we will have to look at our own business model and price ourselves correctly. Data is a key area of concentration, we need to deliver value and great experience,” said Khumalo. “While we still need to maintain expensive connections from satellite for some time, customers will eventually see reduction in tariffs, as attractive pricing from other developed markets is coming in.”

But on the same panel Nagi Abboud, CEO of Atlantique Telecom, based in Cote d’Ivoire, said that most of his business is still based on voice. “The cost of data is still very high, and customers are not willing to pay,” he said. “But as more cables land prices will come down.”

This is a market being targeted by Google-backed satellite operator O3b Networks, which stands for “the Other 3 billion” and has attracted the interests of HSBC Principal Investments and Liberty Global as well.

Rash Jhanjee, VP MEA & Central Asia for O3b, said the firm offers fibre performance over satellite links, at prices comparable to fibre in developed regions, as well as plugging directly into core networks and 3G cellular and WiMAX towers to change the economics of the telecommunications game in the world’s fastest growing markets.

African incumbents are under threat

The prospect of consolidation among African and Middle Eastern operators has provided much fuel for the industry rumour mill in 2009, but the apparent collapse of talks involving Zain Africa as well as those between Bharti and MTN has not diminished the appetite for expansion.

Singaporean carrier SingTel, owner of Optus, is the latest major player to express an interest in the African region. As the Africa Com 2009 event kicked off in Cape Town on Wednesday SingTel’s chief executive Chua Sock Koong said that she was eyeing up Africa as a potential target for expansion. “Africa is a market that is definitely worth our interest,” Chua said.

The announcement came as SingTel reported quarterly financials for the three months to the end of September. Net profit at the group was up 10 per cent year on year to S$956m, compared to S$868m in 2008, while revenues climbed 5.4 per cent year on year to S$4.1bn.

Singapore has a mobile penetration of    and SingTel is looking further afield for growth opportunities. Given its 32 per cent holding in Indian operator Bharti Airtel, SingTel was one of the supporters of Bharti’s move to acquire a stake in African carrier MTN.

The talks between Bharti and MTN collapsed however, amid concerns on the part of the South African government that its national champion could fall into foreign hands.

At the same time, tongues were also wagging about the potential sale of Zain Africa, or at least a stake in the firm. Yet in his opening keynote speech at the Africa Com event on Wednesday, Chris Gabriel, CEO of Zain Africa repeated a number of times that “Zain Africa is not for sale. We are focused on our objective to become a top ten player by 2011 and we still have an appetite for expansion,” he said. Yet Gabriel expects further consolidation within the region, led by a handful of major players.

But this expected wave of consolidation could catch the incumbent carriers on the back foot. Nick Jotischky, regional research manager for Africa at Informa Telecoms & Media, warned that Africa was a land of challenges due to its harsh operating environment, but it also has strong growth opportunities. “It is survival of the fittest,” Jotischky said during the opening keynote. “Those operators who best adapt to their environment will succeed, they need new business models,” he said.

Despite the little M&A activity so far, it seems the industry is agreed that there is a huge potential in Africa for canny investors and innovative companies. But there is also the potential for incumbents and other market heavyweights to lose their footing.

“The operating environment is a threat to incumbents,” said Jotischky. “There is much more competition, new players, alternative players such as MVNOs,” acknowledging the success of Oman’s first MVNOs Friendi and Renna, the former of which notched up 100,000 subscribers in the first three months.

“These MVNOs have ambitions to become regional players,” said Jotischky. “They show that there are opportunities for players big and small to enter new markets as long as the business model is good. And the MVNO business model is of interest in Africa. There are huge opportunities as many regulators would like to see MVNOs in their market. So incumbents have to ask whether they are an opportunity or a threat, but if they are an opportunity then the carriers need to make sure they have a strong brand, a focus on an underserved market, good market reach and distribution and relevant content to make it a success.”

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London, UK – November 11, 2009 – Openwave Systems Inc., (Nasdaq: OPWV), one of the world’s leading software innovators offering a mediation platform and tools to mobilise the Internet, today announced Openwave^® Mobile Internet ReadySet, a low-cost, prepackaged platform that provides operators with a central point from which to offer new, revenue generating, mobile internet services. Openwave will demonstrate its ReadySet solution, as well as its latest mobile internet, messaging and location software applications and infrastructure at AfricaCom Congress & Exhibition located in Cape Town, South Africa on November 11 - 12, 2009.

Openwave’s ReadySet provides a complete mobile internet solution consisting of traffic management tools including content adaptation and acceleration, bandwidth optimisation, and service promotion and billing, in a single package. With very low-cost hardware and standard pre-configured deployment options, ReadySet is ideal for smaller operators and newer markets which require a quick return on investment for minimal capital outlay. Additionally, ReadySet is scalable and will expand to meet subscriber growth and demands both in terms of increased numbers and increased user expectation.

“Openwave is committed to serving emerging markets and helping operators of all sizes offer subscribers the most advanced mobile internet and messaging experiences available,” said John Giere, senior vice president of products and marketing, Openwave. “ReadySet provides smaller operators with the flexibility to rapidly deploy new services in a cost effective manner. ReadySet serves as a single management point for the operator to control and observe all internet services. We believe Mobile Internet ReadySet, as well as our location and messaging offerings, will enable smaller operators to effectively differentiate their customer offerings while growing their mobile data revenue.”

In addition to the AfricaCom exhibition, Christian Goswami, director of product management, Openwave, will participate in a seminar presentation entitled, “Bringing the Mobile Web to Africa” that takes place on Wednesday, November 11 at 12:00 p.m. in the Exhibition Seminar Theatre.

Live product demonstrations for Openwave’s solutions will be available in the Openwave Exhibit Booth located at #D25, and include:

• Mobile Internet ReadySet - control the mobile internet experience with a single, flexible platform specially designed for smaller operators requiring a fast return on investment
• Location Express – an easy-to-deploy, low cost, location-based infrastructure appliance that provides a full range of location-based services (LBS) on mass-market devices to meet the varied needs of operators in growing markets.
• Smart Call and Voice SMS – Voice Messaging and Call Management solutions that give subscribers the power to communicate when and how they want.
• Mobile Analytics – offers network operations managers and marketing executives a clear view across all aspects of mobile data subscriber activity: from mobile internet browsing to messaging to social networking

About Openwave
Openwave Systems Inc. (Nasdaq: OPWV) is one of the world’s leading software innovators, offering a mediation platform and tools to mobilize the Internet.

As the communications industry intersects with the Internet, Openwave software enables service providers to converge services, increasing the value of their networks by accelerating time to market and reducing the cost and complexity associated with new service deployment. Openwave’s unique product portfolio provides a complete range of service management, analytics, messaging and location technologies. Openwave is a global company headquartered in Redwood City, California. For more information please visit www.openwave.com.

Cautionary Note Regarding Forward Looking Statements

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1943 and Section 27A of the Securities Act of 1933. These forward-looking statements are subject to many risks and uncertainties that could cause actual results to differ materially from those projected. Notwithstanding changes that may occur with respect to matters relating to any forward looking statements, Openwave assumes no obligation to update the forward-looking statements included in this press release..

Spirit of innovation driving growth in Africa

African telecoms operators have faced several challenges in 2009. The global economic downturn, a fiercely competitive landscape, and pressure to expand networks into rural areas have tested the mettle of the region’s carriers both big and small.

And yet, forecasts from Informa Telecoms & Media show that mobile subscription growth is still set to increase by 26.6 per cent year on year in 2009, with the total number of active subscriptions to exceed 473 million by the end of the year.

This figure is projected to increase to approximately 800 million by 2014, by which time SIM penetration across the region should reach 70 per cent, the analyst predicts.

“African operators have always recognised the need for innovation in meeting the demands of a low-income population, but the need to stand out from the crowd and differentiate from one’s competitors is taking this requirement to a new level,” said Nick Jotischky, Informa’s principal analyst covering the Middle East & Africa.

Chris Gabriel, chief executive officer of Zain Africa is delivering the opening keynote on day one of the Africa Com event, “Reassuring Operator Strategies in Challenging Times,” which focuses on Africa’s innovative spirit in the telecoms market.

“There is still plenty of growth potential in Africa,” said Gabriel. “The rules of the game have changed with a paradigm shift from customer numbers to customer value (share of wallet) and business models must adapt to optimising asset utilisation through right sizing, outsourcing and infrastructure sharing.”

Gabriel believes that collaboration between regulators, industry players, carriers and vendors is key to success in creating new products, services, ventures and partnerships, and the potential for future growth remains.

Indeed, a sign of the harsh operating environment facing African telecoms firms is the need for operators to manage their costs and maintain margins. Informa’s Jotischky notes that offsetting the ongoing fall in voice revenues is becoming central to operator strategies across the world. Not only are data services important as an income generator, but they are also useful as a customer retention tool. Investing in infrastructure to provide reliable data services to corporate and consumers will also be a focus of discussions.

“Those operators that adapt to the increased intensity of competition and the evolving role of communications will be best suited to surviving a dynamic but harsh operating environment,” said Jotischky.

In fact, there is a great deal that the African communications sector can teach the rest of the world’s telecoms markets. “There is great potential and value in emerging markets - relevant, affordable and localised products and services together with a lean optimised business model are key to creating value in low ARPU markets,” said Gabriel.

But there is also likely to be more consolidation ahead. Despite the failure of a number of big potential mergers in the region, Gabriel expects that in the medium term just three to four major players will emerge in the market and few medium scale operators will remain. “Scale is king,” Gabriel added.

Google strengthens mobile advertising play with AdMob acquisition

Web giant Google upped its game in the mobile space and strengthened its presence in advertising this week with the acquisition of mobile advertising player AdMob for $750m.

According to Google, the deal will bring new innovation and competition to the nascent mobile advertising market, and will lead to more effective tools for creating, serving, and analysing emerging mobile ads formats. Google and AdMob currently specialise in different areas, with Google’s focus on mobile search ads, while AdMob’s focus is mobile display ads and in-application ads.

Omar Hamoui, chief executive of AdMob, commenting on the deal, said: “Until now, it has always felt like those of us involved in this space played second fiddle to our online brethren. I believe that time is over.”

Hamoui said that Google would absorb his entire team, with the two companies working to maximize ad revenue for the more than 15,000 mobile web sites and applications that make up AdMob’s publisher network. “Our ads will become more relevant, our products more robust, and our monetization capabilities more significant,” he said.

The AdMob chief also sang the praises of Apple for revolutionising the mobile applications market and kick starting the in-app advertising business. Even Google, which competes with Apple on a certain level with its Android operating system, acknowledged the Californian firm’s effect on the mobile space.

According to Google, iPhone and Android users browse the internet more often than anyone else using mobile platforms, contributing to Google’s five times mobile search growth over the past two years. And a quarter of these same iPhone and Android users spend nearly 90 minutes per day using applications on their devices, the firm said.

“Apple solved so many problems that had plagued mobile for so long. They showed all of us the way forward and their efforts have led to a landslide of rapid improvements in our space,” Hamoui said. “We launched the first iPhone ad units focused on the web and quickly added the capability to run ads in applications. Now with the addition of excellent devices from Palm, Nokia, RIM, and plethora of Android powered smartphones, we have all the preconditions necessary for what will be a tidal wave of mobile browsing and app usage.”

Potentially, the move could also provide users with more free or low-cost mobile apps, since it will allow developers to subsidise their products through effective mobile advertising, Google said. It will also encourage more mobile web content by providing mobile web publishers with better monetisation options and mobile users will see more relevant, useful ads on their devices.

According to recent figures from market research firm eMarketer, US mobile advertising spending is set to rise from $320m in 2008 to over $1.5bn in 2013.

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Vodafone hints at job cuts as profits climb

Vodafone, the world’s biggest carrier in terms of revenues got a little bigger on Tuesday, recording a 9.3 per cent year on year increase in reported revenues for the six months to the end of September 2009. Group turnover came in at £21.8bn in 2009, compared to just under £20bn in 2008, while reported profit for the period hit £4.8bn.

The firm hinted at further cuts, accelerating its £1bn cost reduction programme to target a further £1bn in operating cost savings by 2012 by focusing on network, sourcing and infrastructure scale across a wider geographic area, and through further overhead reduction, chief executive Vittorio Colao said.

Colao added that Vodafone intends to deliver on all savings from its existing cost cutting programme in the current financial year, a year ahead of plan.

In Africa and Central Europe Vodafone said that service revenue increased by 34.6 per cent reflecting the full consolidation of Vodacom following completion of the stake purchase in May 2009. On an organic basis service revenue declined by 3.2 per cent with continued growth in Vodacom and a 6.8 per cent increase in the average customer base for the region offset by declines in Turkey and Romania.

The £1 billion cost reduction programme is expected to be delivered a year ahead of plan and we have extended this to a further £1 billion of cost savings by 2012. At the same time, we have maintained our capital investment at £2.6 billion in the first half, delivering further improvements in network quality and performance for our customers. We have continued to develop innovative services for businesses and consumers, such as Vodafone One Net and Vodafone 360, and to expand our fixed line services. We will continue our focus on the delivery of our growth strategy, particularly in data services,” Colao said.

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Tower sharing offers opportunities for emerging markets

While the large operators in Western Europe like Telefonica or Vodafone have instigated advanced active infrastructure sharing and outsourcing, telecom operators in developing markets are now beginning to look into alliances that would help relieve them of heavy costs and speed their expansion into rural areas.

Network infrastructure sharing and outsourcing is finding strong acceptance with mobile operators around the world as an effective way to cut down coverage costs, while reducing the time-to-market. These initiatives have already seen significant traction in India, and are poised to make their impact felt in the Middle East and Africa (MEA).

Operators across the world, especially those in developing markets, face challenges in sustaining margins with declining ARPU. Population distribution patterns in developing markets complicate the situation since access to telecom services varies significantly between urban and rural areas leaving operators in these countries to balance the cost of operations in congested and saturated urban setups with the costs of new network rollouts in other areas. In this context, tower sharing offers a compelling proposition.

In a whitepaper entitled Mobile Tower Sharing and Outsourcing: Benefits and Challenges for Developing Market Operators, Romain Delavenne, director of Capgemini’s telecoms, media and entertainment consulting practice in the Middle East, reveals that towers constitute almost 50 per cent of the total capital expenditure (CAPEX) for an operator. Yet while many operators in developed markets have moved on to sharing both active and passive network elements to save costs, in emerging markets with low penetration levels, operators are faced with the dual challenge of maintaining margins, while ensuring rapid rollout to keep pace with the growth in subscriber numbers.

Capgemini’s estimates indicate that tower sharing could help operators in India and the Middle East achieve total savings of $4bn and $8b respectively in the next five years, with such savings resulting from the benefits of having reduced CAPEX and operating expenditure (OPEX).

Tower sharing has largely been an operator-led initiative in most developing markets, however regulators have also played a significant part in ensuring uptake of tower sharing initiatives. Tower sharing prevents the proliferation of masts thereby reducing the environmental and visual impact of operator networks especially in urban and ecologically sensitive areas. Tower sharing also helps in spurring competition due to a reduction of entry barrier for new operators. More importantly, from a regulatory perspective the pooling of tower infrastructure helps operators expand into rural markets achieving the objectives of universal coverage, while ensuring that operators do not incur significant CAPEX in doing so.

Operating costs associated with the running and maintenance of tower infrastructure, like diesel generators, air-conditioning equipment, and security and site rentals, form a significant portion (nearly 60 per cent) of operator OPEX. These costs are compounded in rural areas due to limited infrastructure facilities such as roads and a steady supply of electricity. For instance, in India the operational costs per tower have been estimated by analysts to increase by up to 20 per cent in remote inaccessible terrain.

For incumbent operators, sharing their existing tower assets helps in reducing the cost of network operations significantly. For instance, in the MEA region, it is estimated that tower sharing with a tenancy ratio of two would enable operators to achieve an annual tower OPEX reduction of 12-15 per cent resulting in savings of $1bn.

In most developing markets, incumbents continue to expand their networks to reach out to rural areas and improve coverage in dense urban pockets. Tower sharing benefits operators in achieving cost effective market coverage by helping reduce cost duplication. For example, in MEA, it has been estimated that an additional 100,000 towers would be required to extend reach in the next five years, a growth of over 50 per cent from current figures. Tower sharing could achieve potential savings of $8bn in that period.

Establishing a separate tower company helps incumbents to unlock the inherent value of their physical infrastructure. Forming independent tower companies that attract additional tenants can aid operators to generate additional revenues, thereby creating value from an otherwise depreciating asset. With incremental operating costs being low, additional tenants on towers lead to very high margins. In developing markets the tenancy ratio per tower ranges between 1.1 and 1.3 compared to 2.2 -3.0 in developed markets such as the US12. Capgemini’s estimates indicate that a typical breakeven tenancy ratio per tower site in developing markets of Asia, Middle East and Africa is 1.5.

For new entrants the installation of cell sites is an expensive, complicated and labour-intensive process as there are a number of municipal clearances and government approvals required. For greenfield operators, partnerships in the form of joint ventures and sharing agreements with incumbent operators and tower companies are particularly attractive as they help reduce time to market significantly. For a mobile operator, more than 60 per cent of the total network rollout cost is accounted for by towers and accompanying infrastructure. For a new entrant, this translates into a significant financial burden which tower sharing and outsourcing helps to alleviate. According to analyst estimates, tower sharing can reduce overall cost of ownership after accounting for the tower lease costs, by 16 to 23 per cent.

Capgemini concludes that tower sharing and outsourcing have a significant role to play in developing markets in order to promote universal telecommunication access and especially so, given the background of the global economic turmoil which has affected investment pipelines. For incumbents, new entrants and regulators in developing markets, tower sharing and outsourcing models offer growth paths to service expansion and enhanced subscriber penetration. However, tower sharing brings in its wake numerous challenges. Operators and independent tower companies need to clearly identify the path most suitable to their needs to avoid the pitfalls and realize the potential benefits.