Unlocking Africa’s Digital Potential – ITW 2016Russell Southwood, CEO, Balancing Actwww.balancingact-africa.com@balancingactafr

Africa’s Digital Road Map – Where we’ve come from

The end of selling shortage – satellite to fibre – more competition – - mobile voice to data - cheaper wholesale and retail prices - Split between slow lane and fast lane countries – The transition has its pitfalls but is happening

Africa’s Digital road map – where we’re going

The move from infrastructure to services and applications – the arrival of “critical mass” of users – trends begin to reinforce each other – convergent content – media as online players – Rise of African consumers

Everything turns into data What’s App, Viber (Mali example), Skype – Past peak SMS? Smile – Data as minutes and then just data? More investment, less returns – Layered markets and

infrastructure sharing Need to move from narrow straw (2G) to broad pipe (fibre for 4G) Networks not ready (eg East African streaming platform on 3G) Shift to 4G and eventually 5G Data at commodity prices The end of mobile operators as we know them now Data companies (selling high volume, low price data) and

content and services companies. Hard for mobile operators to be the latter (examples MTN, Tigo and Orange). You can’t be everything

Supply - International infrastructure

International: 9 cables landed. Nigeria: 15 Tbps

Countries: All capitals connected by fibre except in Eritrea and South Sudan

Another Cable: Africa One Cable – 12,000 kms along East Coast + 5,000 kms branching. -> Saudi Arabia, Egypt and Pakistan

Changing business models: Seacom’s Fibre Internet Access – 25 mbps – 1GB

Supply: National and local infrastructure

National: Steady roll-out. Largely competitive in East Africa but continuing market blockage elsewhere.

Carriers carriers: Liquid Telecom largest carriers’ carriers. Only national companies elsewhere

Different Ways: Infrastructure sharing? Dark fibre (DFA)? Alternative fibre (FibreCo, Powerline fibre)?

Nov 2014 – 44% of population within reach of fibre

Local access: Largely gone mobile 3G but now increasingly 4G and WiFi hot spots… FTTH.

Quality and reliability issues on worst routes

Supply – Connecting the uncovered: A schematic view

• Challenges: Price/income, literacy/education, gender gap, power, etc

• New Business Models: Vanu, Argon Telecom, Mawingu, Virural,And Inveneo

• Options: Mobile operators; mobile franchisees, new independents

Supply – Value Chain PressuresInternational National Metronet Local Access

Prices at commodity level – Sub $100 at volume

Prices will move to commodity level in medium-term Sub US$00s at volume

Prices will move to commodity level in medium-termSub US$00s at volume

Prices lower to create greater volumes

• Still big issues for landlocked countries with transit prices

• Big split between liberalised countries and the unliberalised (like Ethiopia, Djibouti, Angola, Cameroon)

Demand - Steady Growth of InternetPenetration

Country 2006 or 2007

2009 or 2011

2013 Projected2016

Ghana 1% 4% 21% 25%

Kenya 1% 11% e17% 20%

Nigeria 1% 5% 20% 25%

Senegal 2% n/a 17% 25%

Tanzania n/a 4% 17% 25%

Source: Balancing Act Market research, 2014Below 5%: DRC, Sierra Leone, Somalia, South SudanExample: Liberia – Internet (2.1%) and smartphones (2.6%)

3G + Cheap Smartphones + Social Media = Internet Growth

Mobile and Fixed InternetCountry Mobile Fixed & Wireless

Ghana 14,254,407 Est 120,000

Kenya 23,794,550 135,107

Nigeria 92,285,052 Est 200-300,000

Uganda 6,057,148 122,550

Sources: National regulators, all 2015 except Ghana 2015Ghana and Nigeria Fixed and Wireless, Balancing Act estimates

Africa’s Internet Effect Touches Everything Film and TV : Over 100 platforms. Eg iROKo TV, Juliet Asante,

Mobilefliks, MTN’s Showmax Music: Over 100 platforms. 10 m users. Set to grow 10X in next 5

years e-Commerce: Nigeria – Jumia and Konga 1 m customers each. Hybrid Publishing: Worldreader. 125, 000 active mobile readers. Deal with

Opera Art: Guns and Rain, Pavilion 33 = online galleries Radio: Iono.fm – Prog downloads = 1 m per month Media: Pulse: 3 million uniques; Top show: 175,000 views. Daily

shows 10-12,000 views. Launch of Guardian TV Games: GamersNights multiplayer cty in Kampala Streaming: SkyroomLive, Wild Earth B2B Processes – Paga – 75% of agents nationally now online

Emerging Data Centre and Meet Point Ecosystem Three key countries with independent DCs: South Africa (Teraco

– Joburg, Cape Town and Durban); Kenya (Iolo, Liquid Telecom) and Nigeria (Main One’s MDX and Rack Centre)

First wave driven by regulation. Central Bank of Nigeria – Banks must have primary and secondary DCs at certain distance. Aim to cost save by sharing. CBN’s own mechanism to achieve.

Meet points – Example of Nigeria: IXPs (IXPN) and commercial meet points (Medallion and DCs shown above).

The furthest frontier: Content delivery all hosted outside country - Reasons

The Next Big Step Up – 4G

The Price Glide with 3G – Accelerating high volume use earlier?

10-20-fold inc in 1st wave, more to come. 100-200% with 4G. Example of Nigeria: Somewhere just north of 500 mbps use..

4G launched in 45 countries with 63 operator launches. 154 projects in pipeline

High end users on Smile in 2015 in Uganda: 8-12 GBs per month.

With right pricing, data use and data volumes will increase

Can we meet the challenges? 4 key questions for the session: How can the retail price of Internet come down as fast as

possible to increase volumes? How can operators help deliver “low-cost, high-volume”

wholesale and retail bandwidth to less liberalised countries? How can operators work with others to improve both uptime

and reliability? How can mobile operators deal with market blockages at

content and services level (revenue share, payment methods)?