African Telecom Paradox
The Delta Perspective
December 2012
Fortune Favours the Informed:
The African Paradox
Authors Andrew Snead - Managing Partner - asn@deltapartnersgroup.com Monica Moldovan - Principal - mm@deltapartnersgroup.com Maxime Bayen - Senior Research Analyst - mba@deltapartnersgroup.com
KEY HIGHLIGHTS
• Africa is unquestionably a continent of opportunity – its sheer size, rapid economic growth, expanding middle class and steadily improving governance indicators provide reason for optimism • Many investors however have yet to subscribe to this ‘golden age’ notion. One plausible explanation for such a disconnect lies in the perception gap influencing investment in Africa • TMT (telecommunications, media and technology) lies at the very core of the African opportunity. Mobile services have material growth potential, underserved demand for Internet services is higher than in peer markets and the level of infrastructure-related investment amounted to more than $60 billion in the last five years • The reality is there is significant investment opportunity in TMT emanating from prevailing market imbalances, attractive multiples relative to other emerging markets, deal fallouts, and the opportunity to exploit infrastructure sharing and ecosystem plays originating from the reluctance of operators and governments alike to adjust their business models • This situation presents significant opportunity for knowledgeable investors who are able to get under the skin of the continent, disentangle the characteristics of the market and ultimately exploit the limited competition
Overview
There is an old fable concerning a shoe salesman who visits Africa but decides there can’t be a market because no one wears shoes. That individual is followed by a second salesman, who deduces that Africa must be a wonderful market because there are so many people who need shoes. The story effectively summarises Africa’s paradox: a continent of plentiful opportunities yet plagued by
December 2012
Fortune Favours the Informed:
The African Paradox
Authors Andrew Snead - Managing Partner - asn@deltapartnersgroup.com Monica Moldovan - Principal - mm@deltapartnersgroup.com Maxime Bayen - Senior Research Analyst - mba@deltapartnersgroup.com
KEY HIGHLIGHTS
• Africa is unquestionably a continent of opportunity – its sheer size, rapid economic growth, expanding middle class and steadily improving governance indicators provide reason for optimism • Many investors however have yet to subscribe to this ‘golden age’ notion. One plausible explanation for such a disconnect lies in the perception gap influencing investment in Africa • TMT (telecommunications, media and technology) lies at the very core of the African opportunity. Mobile services have material growth potential, underserved demand for Internet services is higher than in peer markets and the level of infrastructure-related investment amounted to more than $60 billion in the last five years • The reality is there is significant investment opportunity in TMT emanating from prevailing market imbalances, attractive multiples relative to other emerging markets, deal fallouts, and the opportunity to exploit infrastructure sharing and ecosystem plays originating from the reluctance of operators and governments alike to adjust their business models • This situation presents significant opportunity for knowledgeable investors who are able to get under the skin of the continent, disentangle the characteristics of the market and ultimately exploit the limited competition
Overview
There is an old fable concerning a shoe salesman who visits Africa but decides there can’t be a market because no one wears shoes. That individual is followed by a second salesman, who deduces that Africa must be a wonderful market because there are so many people who need shoes. The story effectively summarises Africa’s paradox: a continent of plentiful opportunities yet plagued by