Disruption predicted for mobile networks in Africa -

Qualcomm's executives were emphasising, at IQ2011, the importance of emerging markets for the company. At one point Dr Paul Jacobs mentioned the gold dust that is spectrum in Africa, and our interest was picqued.

He said the Middle East, Africa and Asia will have 400 million added mobile broadband connections between now and 2015, and that HSPA+ is clearly the technology of choice right now. Qualcomm also wants to move spectrum up from 2G to 3G, the reasons being, of course, that it's better, and that it benefits Qualcomm.

With this in mind, we had a discussion with Stefan Zehle, the CEO of Coleago Consulting, an independent telecoms consultancy deeply rooted in Africa, to clear up the confusion.

Is there going to be a bloodbath as the auctions progress to 3G and beyond up and down the continent? Well, Coleago doesn't think so, but there will be the chance of some severe disruption over the coming five years. Coleago is more than qualified to comment - it's just been commissioned for a report in emerging markets by the World Bank to help describe the devil which, as usual, happens to be in the detail.

Steady and regulated spectrum is vital for the whole ecosystem. What is interesting to us is there involvement of Chinese and Indian companies, busy building infrastructure and setting up networks. They have been there for years. The "reference to India is particularly a reference to Bharti Airtel," says Zehle, "who bought the Zain operations in Africa with the exception of Sudan. But most of the African operators have been acquired by Airtel. Since then they have acquired a further operator and are going for further licenses and re-expanding their African footprint. That is a major trend." You can see Bharti Airtel's involvement in the continent highlighted in red, in the above picture.

Bharti and other Indian operators are motivated mostly by commercial opportunity, Zehle tells us that China, while also obviously driven by commercial interests, the Chinese companies want to gain influence in the region. "That is not to say that for the Chinese there is no commercial benefit," Zehle says. "But I think when you generally read what is going on, the drive for China to secure resources, that fits in with everything else - you only have to open the economist or the FT to read stories of a similar kind in other industries in Africa." China Mobile is applying for Greenfield licences.

Zehle doesn't believe it's going to make much of a battleground with allocation, or any more than it is usually. However, he does say there are going to be a couple of points worth considering.

Things are becoming more marginal, he tells us, which is putting off some European investors who are answerable to shareholders.

Zehle predicts that Bharti is going to cast a consolidated footprint across Africa. "Maybe a little bit of further consolidations, and the biggest market, Nigeria, there is likely to be a shake out." A shake out is when some operators will leave, sell off to someone else, and the weakest will give up their assets to the strongest companies.

"And, we are still seeing some new market entry, Rwanda recently had a new operator being licensed," he says.

"It is the consolidation that Bharti made rife," Zehle commented. "And how some of the smaller players made it appear, or sell out. I think the mergers and acquisitions activity that's likely to go on over the next five years, which is going to be interesting."

We agree that there is a bizarre subconscious assumption by a lot of people in business to regard Africa as one market, when actually it is made up of very diverse countries with very different regulations and approaches towards business. Because of this, it is the licence renewal for the original GSM licences that is going to disrupt operations.

"Governments may see this as an opportunity to raise revenue," Zehle said. "Depending on how it's done, like if the governments do it in a sympathetic way then that's good. If they don't, and it is only extracting the maximum of money from the industry exercise, this will be detrimental to the development of communications infrastructure."

And some will certainly be less sympathetic to the operators than others. Of course, this makes up for some of Zehle's bread and butter, so it's unfair to ask who the culprits are. Instead he points to a couple that have exceptionally good policy, in his view: "Mauritious, which is a relatively small and fairly wealthy African country. Possibly also South Africa, and Kenya. The interesting thing is in the old days, people always talked about sub-Saharan Africa and North Africa. But that distinction isn't there any more. For example, if you look at Kenya, they are launching LTE, but if you look at Algeria they haven't even ordered 3G yet."

"One can't generalise, it's very much up to the policy makers and the regulators to get it right."