Portugal Telecom Reports Strong African Growth During 2007

The Portugal Telecom (PT) group reported 6.6% increase in consolidated revenues to 6.148 billion euro (US$9.245 billion) as at 31 December 2007, up from 5.765.3 billion euro the year previously. Revenues from the operator's Portuguese wireline business decreased because of increased competition in the voice market and pricing pressure on broadband services, but growth was driven primarily by PT's international operations, in particular Vivo in Brazil and Medi Telecom in Morocco. Wireline revenues decreased by 5.3% to 1.962.4 billion euro, domestic mobile (TMN) revenues increased by 2.7% to 1.502.4 billion euro, revenue from Brazilian mobile (Vivo) increased by 17% to 2.463 billion euro, and revenue from other group operations increased by 108.4% to 180.1 billion euro. Group earnings before interest, tax, depreciation, and amortisation (EBITDA) increased by 5.4% to 2.357 billion euro.

Portugal Telecom's subsidiaries in sub-Saharan Africa represent a relatively small proportion of the total, but are a rapidly growing business. As a proportion of total revenues, the four largest operators' revenue grew from 12.2% as at 31 December 2006 to 13.7% as at 31 December 2007. The group's two largest operators in sub-Saharan Africa, Unitel and MTC, reported combined revenue of more than 750 million euro and more than 4.2 million GSM subscribers by 31 December 2007. (Medi Telecom in Morocco reported annual revenues of 438.4 million euro and 6.7 million subscribers as at 31 December 2007).

Unitel, the Angolan GSM operator, reported a 61.4% increase in subscribers to 3.307 million underpinned by strong customer growth both in Luanda (the capital) and the main districts of the country. Unitel is rolling out GPRS nationwide, has started the deployment of EDGE in selected areas, and in June 2007 awarded a US$45-million contract to Ericsson to deploy W-CDMA in the capital, Luanda (see Angola: 12 June 2007: UNITEL Awards 3G Contract to Ericsson). Unitel competes with Movicel, which operates a CDMA network and has rolled out both CDMA 2000 1X and CDMA 2000 1X EV-DO networks.

In Namibia, MTC reported an overall growth of 31.3% to reach 800,300 subscribers by the year-end (see Namibia: 21 January 2008: MTC Reaches 800,000 GSM Subscribers as Namibian Government Adds VAT to Airtime). Post-paid subscribers increased by 38.5% to some 71,200, representing 8.9% of the total customer base. This uptake of post-paid subscribers is driven by uptake of mobile data services; MTC launched GPRS, EDGE and HSDPA in December 2006 (see Namibia: 15 December 2006: MTC Namibia Launches HSDPA Network). In March 2007, Namibia's second mobile operator Cell One launched services.

Cabo Verde Telecom reported a 21.6% increase in total subscribers to 221,200. Of this, it reported a 35.9% increase in mobile subscribers, which reached 148,000 by 31 December. Companhia Santomense de Telecomunicações (CST), the incumbent in Sao Tome and Principe, meanwhile reported a 45.4% increase in total subscribers to 37,800. Of this, 30,000 were mobile subscribers, a 63.4% increase over the 18,000 subscribers a year previously.

Outlook and Implications

Since the creation of Africa Holding during 2007, the unit has seen strong organic growth from its GSM operations in particular, which reported a combined total of 4,285,200 subscribers as at 31 December 2007. As a group, this puts PT Africa Holding behind MTN (45.138 million, 30 September 2007), Vodacom (31.564 million, 30 September 2007), Celtel (24.78 million, 30 September 2007), France Telecom (11.484 million, 31 December 2007), and Millicom (5.672 million, 31 December 2007) in terms of total subscribers in sub-Saharan Africa.

In June 2005, PT announced that it was consolidating its dozen or so African holdings into a single holding company, called PT Africa (see sub-Saharan Africa: 8 June 2005: Portugal Telecom Consolidates African Assets Into New Operator 'PT Africa'). Following the acquisition of a majority stake in a Congolese mobile operator and the acquisition of a 34% stake in Namibian mobile operator MTC, PT Africa held stakes in three fixed-line operators, six mobile operators, and a number of ISPs and other service providers (see DRCongo: 2 March 2006: Portugal Telecom Acquires 51% Stake in DRCongo Mobile Operator).  

PT signalled during 2006 that it was looking for investors for the PT Africa unit, and announced that it was planning to launch an IPO on the Johannesburg Stock Exchange (see sub-Saharan Africa: 9 March 2006: Portugal Telecom Mulls Floating African Unit on JSE). The new, reformulated entity called Africa Holding notably excludes Morocco's Medi Telecom, and now consists of three fixed-line operators, five mobile operators (plus a management contract for Mascom in Botswana), and a number of other assets (see table 3 below).

In August 2007, PT announced that it had sold a minority 22% stake in the newly created "Africa Holding" unit for US$171 million to Helios Investors LP (see sub-Saharan Africa: 15 August 2007: Portugal Telecom Sells 22% Stake in Repackaged "Africa Holding" Unit). Under the terms of the agreement, Helios initially acquired a minority 22% stake in Africa Holding for 125 million euro, the holding company that will aggregate all of PT's current interests in sub-Saharan Africa. PT has also subscribed a financing facility issued by Africa Holding for US$450 million. As a result, the implied enterprise value for 100% of Africa Holding amounts to US$1.225 billion, according to a company press release.