Waka Waka : Orange in Africa

Waka Waka : Orange in Africa

General Telecom Market View:

As per analysts’ reports, the Telecom Services revenue in Western Europe is slated to decline at a CAGR of 0.8% between 2012-2017. To add to this in a significant development the European Parliament has now given its consent to put an end to the roaming costs in Europe and up held Net Neutrality. All this means that the Telecom Services providers in Europe are now desperately looking at new markets, cross border consolidations and bundling of products and digital services to arrest the decline in service revenues. The three major Telcos of Europe –OVT, Orange, Vodafone and Telefonica are now more than ever focused on the growing and emerging markets. OVT are now carefully choosing the markets that they want to grow and introduce new products and services, at the same time exiting unprofitable ones. Orange is relying on Middle East and Africa, Vodafone banks on Asia while Latin America contributes more than 50% of the Spanish incumbent Telefonica revenues. 

Africa: Waka Waka Diamond Mine?

Middle East and Africa would register 5.9% CAGR growth in mobile connections from 2012-2017, second only to APAC, whereas the growth in western Europe is 2.3%.  Thus Africa becomes a very important market for most western CSPs targeting subscriber growth. As expected, ARPU across globe is on decline but the volume increase in subscribers means service revenue will have +ve CAGR growth for developing markets like APAC and MEA.As per Informa-There were 778m mobile subscriptions in Africa (Jun-13).

Forecast

• Mob subscribers would be 1.2b by 2018
• Voice revenue would grow from $51b in 2012 to $63b in 2018
• Data revenue to grow from $8.5b in 2012 to $23.2bn in 2018
• Non-SMS data revenue to grow from $5b in 2012 to $20bn in 2018

Thus Africa would play an important role in growth strategy for most CSPs who can play their cards correct. 

Counter view:

Things are not all rosy in this market which is known for its geo political issues. Unreliable and poor infrastructure puts heavy pressure on predictability. Also the Network Opex is very high.Economic issues doubled with corruption makes it very difficult for MNCs to manage their operations effectively

Telecom IQ Analysis for Orange’s Strategy in Africa

There is no one single strategy that will fit all CSPs. Each CSP will have to evaluate their strategy based on their market diversification and product diversification strategy.

Orange in Africa:

Orange has a formidable presence in Africa and the Middle East, with a strong growth in the mobile customer base (+7.9% year on year), and 88.0 million customers at 31 December 2013 (including 3.4 million net additions in the 4th quarter). 3G is now available in 17 countries and Orange Money had 8.9 million customers as on 31 December 2013.  For Q4-13 Africa and Middle East registered a YoY growth of 6.6%,  the highest of all the market facing Units. France and European Countries on the contrary registered a negative growth of -6.2% and -9.2% respectively. Baring 2-3 countries other regions have shown +ve growth in Africa. Senegal (+3%), Ivory Coast (+13%) , Mali ( +26%) and Guinea (+75%) registered a phenomenal growth rate.For Orange, in the Rest of World segment, revenues increased 1.3% thanks to growth of 4.7% in Africa and the Middle East, while Europe, marked by the downturn in Belgium and Slovakia, fell 2.8% 

Thus Africa is an extremely important market for Orange and they have made huge investments in terms for network and R&D labs in the continent. Having said that,  the network Opex is expensive in Africa because of geopolitical issues, poor infrastructure & corruption. So Orange should choose its battlefields and its ammunition of products carefully.

Telecom IQ Recommends:

Key Markets:

Orange should focus on the markets where it is No1 or No2 in terms of mobile customers and markets where it has got both Fixed and Mobile presence. This is very important for its Triple play strategy to its customers. From this viewpoint, the following markets are significant for Orange- Senegal (62.9% market share), Ivory Coast (34.7%) , Mali (63.6%) , Cameroon (43%)  and Madagascar (over 50%). It should exit markets like Uganda, Central African Republic, Vanuatu etc., where it has not been able to create a good market share so far and any attempts to expand will impact EBITDA.

Thus consolidation should be the mantra for Orange in Africa.

Product portfolio:

In terms of services, Mobile Money looks like a killer offering in Africa. MTN, Orange, Airtel and Safaricom all have a thriving mobile money business. As far as the digital strategy is concerned, key focus for Orange should be  mobile payment (Orange money was launched in 2008 in Cote D’Ivoire. Now Orange Money is present in 12 countries), eCommerce (Orange via Orange Horizons develops new businesses like online stores and other digital services) and Music & Games (Deezer and Gameloft agreements for Africa).Orange seems to have got their product strategy right for Africa and should focus on this portfolio instead of further diversification.

In a nutshell, Orange should focus on key markets where they have made good investments and have good presence. They should focus on their product portfolio in the digital space and try and exit markets where they don’t have a strong market share. 

Waka Waka , this time for Africa!