Global Insight Perspective | |
Significance | No financial details of the transaction are available, but with a 53% shareholding in Orange Uganda Ltd, France Telecom/Orange will hold a controlling stake in the operator, which has already deployed a GSM network. |
Implications | This key development is symptomatic of both the consolidation being witnessed in Africa's increasingly liberalised markets and the expansion by multinational investors through the acquisition of smaller operators. |
Outlook | This will see France Telecom/Orange enter its sixteenth market in sub-Saharan Africa. The scope of HITS Telecom's licence will importantly allow it to become a total communication provider, offering broadband and other services in addition to GSM voice services. |
Hot on the heels of recent acquisitions in Kenya, Niger, Guinea-Bissau, Guinea and Central African Republic, France Telecom announced yesterday (19 October) that it has entered into a partnership with HITS Telecom Uganda and will launch services under the Orange brand in the coming months. Under the transaction, a new company—called Orange Uganda Ltd—has been created in which France Telecom owns a 53% stake. The operator said in a company press release that the Uganda Communication Commission (UCC) has transferred HITS Telecom’s licences to the new company.
France Telecom commented that this investment is fully in line with its development strategy of targeting strong growth markets and will further strengthen its presence in East Africa. “With a rapidly growing population of around 30 million people and a mobile penetration rate of less than 17% in March 2008, Uganda offers major prospects for growth” said France Telecom in a company press release.
Orange/France Telecom reported a total of 22.255 million African GSM subscribers by the end of December 2007, split between 10.771 million subscribers in Egypt and 11.141 million in sub-Saharan Africa (see Sub-Saharan Africa: 21 February 2008: Orange/France Telecom Reach 22.3 mil. African GSM Subscribers). In terms of subscriber base, within sub-Saharan Africa the operator had reached 13.2 million by 30 June 2008, putting it in fifth place behind MTN, Vodacom, Zain and Globacom.
In the last 18 months, the operator has entered five new markets and continues to explore other opportunities.
- Guinea-Bissau: In January 2007, Sonatel—the fixed-line incumbent of Senegal, which is part of the France Telecom group—was awarded the third mobile licence in Guinea-Bissau (see Guinea-Bissau: 19 January 2007: Sonatel Wins Mobile Licence in Guinea-Bissau). By 31 December 2007, the operator had 36,000 subscribers.
- Guinea: Sonatel also acquired a mobile licence in Guinea during March 2007 and launched mobile services on 5 November under the "Orange" brand (see Guinea: 15 March 2007: Sonatel Acquires Spacetel's Mobile Licence in Guinea). By 31 December 2007, it reported 185,000 subscribers.
- Central African Republic: France Telecom acquired a mobile and internet licence in the Central African Republic in April 2007 and created a new Orange subsidiary to operate the service (see Central African Republic: 6 April 2007: France Telecom Acquires Mobile/Internet Licence). By 31 December 2007, the operator reported 34,000 subscribers.
- Niger: In November 2007, France Telecom won the tender for a "global fixed, mobile and internet" licence in Niger (see Niger: 23 November 2007: France Telecom Wins Fixed, Mobile and Internet Licence in Niger). "Niger offers good prospects for growth, with a growing population of around 13 million people and a mobile penetration rate of under 5%," said France Telecom in a company press release.
- Kenya: France Telecom won a 51% stake in fixed-line incumbent Telkom Kenya with a bid of US$390 million late last year (see Kenya: 16 November 2007: France Telecom Consortium Wins 51% Stake in Telkom Kenya). Telkom Kenya was previously granted a mobile licence and in September 2008 Orange launched its GSM network, reached 30,000 subscribers in the first three weeks, and has set a target of 1.5 million fixed and mobile subscribers within a year (see Kenya: 9 October 2008: Orange Reaches 30,000 Kenyan GSM Subscribers).
House for Integrated Technology Systems (HITS) Telecom was awarded a third unified licence in Uganda during December 2006 and officially launched commercial services in November last year (see Uganda: 30 November 2007: HITS Telecom Launches Mobile Service). It has built out a GSM network and awarded a US$100-million contract to Alcatel-Lucent in August 2007 (see Uganda: 24 August 2007: HITS Telecom Uganda Awards US$100-mil. Contract to Alcatel-Lucent). The operator has been awarded a full telecoms licence, according to a company press release, which includes GSM 900/1800 spectrum, WIMAX broadband, international gateway, mobile virtual network operation and data-transmission services (see Uganda: 14 March 2007: HITS Telecom Awarded Ugandan Mobile Licence).
HITS Telecom competes against MTN, Zain, UTL (Mango), Warid Telecom and Reliance Communications. Uganda had 5.7 million mobile lines by 31 March 2008, according to the UCC, up from 3.6 million by the end of June 2007. The new entrants are making strong headway, with Warid Telecom reporting 860,000 subscribers by August (see Uganda: 11 September 2008: Warid Telecom Reaches 860,000 Mobile Subscribers).
Outlook and Implications
HITS Telecom not only provides France Telecom with entrance into the Ugandan mobile market, but also into the growing broadband market. In an indication of this, Uganda’s inbound international bandwidth increased from 60.5 Mbps in 2005 to 188.7 Mbps in 2006 and 257.7 Mbps in 2007, driven by the growth of broadband (see Uganda: 3 July 2008: Uganda's Inbound International Bandwidth Reaches 257.7 Mbps). Meanwhile, Orange has chosen to deploy WiMAX for its "Livebox" broadband wireless service in both Botswana and Cameroon in order to provide stable, high-capacity broadband services to corporate clients. This strategy has also been adopted by Safaricom in Kenya, which bought the ISP One Communications and is investing in the expansion of its WiMAX network.