1. Investing in ICT’s in Emerging Markets
9-10 December 2009
Partnering with CTO 4 ICT Investments
Dr Ekwow Spio-Garbrah
Chief Executive Officer,
CTO
2. Impact of Economic Crisis on ICT Industry
• “Global growth has deteriorated for the past 15 months, as financial
sector deleveraging has continued, and producer and consumer
confidence has significantly fallen in the developed economies. However,
the emerging economies have had a reduced impact on their growth
rates" … states the IMF published on Dec 09.
• The ICT industry continues to face challenges:
• Access to capital is increasingly difficult and expensive
• Revenue growth is under threat and jeopardised by FX exposure
• Margins will face sustained pressure as costs increase
• Mobile telephony ARPU levels decreasing globally
• Competitive forces demand continued investment and innovation
• Investment required for value added content and applications
• Cutbacks/slowdowns on expansion, capex, HR recruitment/training
3. Economic Benefits of ICTs
• Globally, cumulative ICT % ICT Contribution to GDP
spending is estimated at
US$3 Trillion 14.00%
12.00%
• Growing at an average of Ireland
10.00%
8.9% per annum Finland
8.00%
US
• Representing 6.8% of Global 6.00% Jamaica
GDP. 4.00%
EU Average
Germany
2.00%
• ICT Growth has to be a part France
of any strategic plan to drive 0.00% Italy
an economy in Info Age Denmark
EU Average
France
Germany
Denmark
US
Italy
Ireland
Jamaica
Finland
• Essential part of Global
Market Participation.
4. Investing in ICTs
"Investment and trade — as opposed to aid and charity — must drive the
transformation of our economies. In order to realize this much-needed
economic revolution, we have to forge productive relationships between
government and business,"
H.E. President Paul Kagame of Rwanda.(Connect Africa Summit, 2007)
Planned Additional Critical Investments in African Infrastructure (at 2007)
• Private Sector Leading the way with USD50 Billion from GSM Operators by
2012
International Community backing
• EU Trust Fund for Africa – 100 million Euros in grants + 260 Million Euros for
loans for 2007 – 2008
• World Bank – Doubling Commitment to African ICT to 1 Billion by 2012
• African Development Bank – plans to increase its financing of infrastructure by
60% over the next 3 years
• African Venture Capital Association reports numerous private deals
• AsDB, CDB, Inter-American Dev Bank all focussed on infrastructure
5. Trends In Emerging Markets ICT Investments
• $100bn/year over next 5 years, World Bank report on 56 Emerging Markets
• China investment in Infrastructure rose from 1 Billion in 2001 to 7 Billion in 2007
• Exports from Africa to Asia have tripled in Last five years
• Huawei’s provision of concessional finance for national back infrastructure and establishment
of 32 country offices from Cairo to J’burg
• Zain $3.36 Billion acquisition of Celtel (2005)
• MTN 5.5 $Billion takeover of Investcom (2006)
• Vodafone $904 Million for 70% of Ghana Telecom
• Saudi Telecom $908 Million for 26% of Kuwait 3rd Mobile License (2007)
• Reliance and Bharti Consider $45 Billion acquisition of MTN (Ongoing)
• Iraq Government Sells 3 15-year 3G Licences for $3.75 Billion
• Nigerian, Zambian, Botswana and other national telcos for privatisation
• Nigeria, Ghana and other Wimax 2.3-5G licenses to generate further investment
• Over 1,000 FM and TV stations established in Africa in last decade alone
• Software Development, IT Assembly, BPOs, Data Centres, etc, also growing slowly
Information = Investor Confidence
6. ICT Investment Distribution by Regions
Investment in African
Telecommunications is far
behind all regions apart from
Oceania
Africa – USD 12.9 per capita
Oceania – USD190.80 per
capita
Investment in telecommunications 2005
7. Challenges in Emerging markets
• Inadequacy of network infrastructure: national transmission backbone,
Point of Interconnection (POI), Internet Exchange Points (IXP), etc.
• Unreliable and inadequate public electricity power supply
• Security of telecommunication network infrastructure and installations:
vandalism, theft, etc posed a threat
• Difficulties in acquiring land and suitable buildings in rural areas
• Lack of adequate funding / Appropriate Budget allocation
• Inadequacy of experienced ICT manpower in rural areas
10. Africa’s Digital Divide Dilemma (2008)
Rural Urban Total Teledensity
Mobile Phones 37m 327m 364 38.5
Fixed Lines 7.5m 24m 31.5 3.4
Broadband Connection 3m 62m 65 6.7
Total Population 634m 341m 975
11. Rural-Urban Digital Divide
• Mobile sector has had exponential growth –
• In many parts of the Commonwealth, Rural Teledensity
still remains relatively low (<5%) for both Mobile
telephony and even less for Internet/broadband
connectivity
• 60-70% Population in Rural /Semi Urban Areas
• Convert `Universal Service Obligation’ into Universal
Service Opportunity
• Cheetah-Pole-Vault in reaching the `unreached’ (CTO)
12. Improved ICT Policy / Legislation & Regulation
Helps to Promote Capital Inflows
Converged services Consumer
means converged protection, Technologically neutral
regulatory authorities awareness and licensing increasingly the
education norm
Making more
spectrum available
IMPLICATIONS Govts/Regulators
thru innovative working closer with
frequency planning the Private Sector
thru USAFAs
Promoting
Focus on Access, Liberalisation,
Service Quality, Competition,
Affordability, not Privatisation
technology
13. Models for Investing In Underserved Areas
• Competitive subsidy models
• Provide operator(s) with subsidy to build and operate a network in currently
underserved areas of the country. Services provided in these areas on a non-
discriminatory basis.
• Shared infrastructure/consortium models
• Provide operators with incentive to cooperate in the development of backbone
infrastructure in currently undeserved areas of the country where
infrastructure competition is not commercially viable; possibly through
demand aggregation, off-take agreements; co-location
• Incentive-based private-sector models
• Provide operators with an incentive to build networks in currently underserved
areas through reductions in USF contributions or sector levies.
14. ICT Investment Opportunities
Tremendous investment opportunities in ICT Sector
* Privatisation of National Telcos
* Opening of market for New Entrants
* Additional mobile licenses – at least >2 operators
* licenses/frequencies for new wireless technologies
e.g. WiMax, Broadband, Rural, 3G
* National fibre backbone development & investment
• National e-Governance Development – G2G, G2B,
G2C in e-education, e-health e-commerce, e-agri
* Liberalisation of Broadcasting sector – new entrants –
* e-Applications / Local content development
15. Variety of Funding Sources
• Governments, through Ministries, Public Banks, SSF
• Bilateral agencies (DfID, USAID, SIDA, DANIDA, etc)
• Other Emerging Markets (mostly India, China, Mid-east)
• Multilateral Banks/Agencies (IDA, IFC, WB, AfDB, DBSA, AsDB, EU)
• Private Equity Investors & Venture Capitalists—both African and
globally, corporate, consortia and individual
• Corporate Capex Investments and Corporate Social Responsibility
• Structured Funds—Equity, Debt, Emerging Markets/African
Infrastructure, etc
• Commercial Banks—HSBC, Barclays, Standard Chartered, Stanbic,
Zenith, UBA, Ecobank, etc
• Investment/Merchant Bank—Goldman, Morgan Stanley, CSFB, etc
• Vendor Financing—Huawei, Alcatel, Cisco, Nortel, Nokia, Sony,
• New Sources—Grameen, Rural Banks, USAFAs, etc
16. Partnering with CTO 4 ICT Investments
• CTO, 100-year-old organization, owned by governments, ICT
regulators, telephone and ICT operating companies, and ICT
equipment manufacturers, vendors and stakeholders
• Capacity for Market and Sector Research—Nokia/NSN, Ericsson,
COMARCI Phases 1 & 2 (Nigeria, Ghana, Gambia, Sierra Leone)
• Provision of Consultancy and Advisory Services—
• e-NEPAD Commission, World Bank & UN agencies
• Training and Capacity Building Programmes and Courses—DfID/BDO
• Ability to assist with Investment Strategy Planning – Launch of
`Commonwealth Telecom Development Fund’ (CTDF)
• Facilitation of Access to Key Decision-Makers
• Special knowledge of untapped rural markets of Africa/Asia
• Agile, flexible, business-like approach to operations
17. Conclusions
• The World is in a Knowledge Age
• Global ICT trends are leading to Convergence
• Commonwealth Economies have improved over Last 20 years
• Major Opportunities Continue To Exist for ICT Investment in
member countries
• Liberalization, Privatization, Competition = Opportunities
• New Equity, Debt and Venture Funds Available for Member
Countries; Imminent Launch of CTDF
• ICT Sector Getting Highest Returns on Investment in the
Commonwealth Countries
CTO is working with Governments, Operators, Vendors,
Investors, Funding agencies and others to help to bring about
Universal access / connectivity to enhance social and economic
development
