Finnfund

Use of mobile phones is currently increasing fastest in developing countries. One of the growth regions is Africa, where there were 44.8 % more new mobiles last year than the year before.

There are breathtaking prospects in Africa for telecommunications operators as well as mobile phone manufacturers.

Sales are now being boosted by people who could not previously afford a mobile phone or call charges.

“In the last quarter of 2004, Celtel connected fifty thousand new customers a week,” says Celtel’s chief executive, Marten Pieters. Celtel is one of Africa’s largest mobile telephone operators and a Finnfund partner.

An old Finnfund customer

The number of Celtel customers in Africa had reached 5 million by the end of 2004. The operator is expanding rapidly and Finnfund is one of the organizations financing its new investments.

“Sub-Saharan Africa is a focal point for us,” explains Thomas Schmidt, a senior investment manager at Finnfund. “By financing Celtel we’re developing the continent’s private sector and improving infrastructure. Moreover, telecommunications is an important industrial sector for Finland and one of Finnfund’s three focal areas.”

Schmidt says that by working with Celtel Finnfund is able to finance several mobile telephone operators at the same time and also receives valuable information and experience about the business environment for operators in Africa.

“Celtel is an old Finnfund customer. We started financing the company two years ago when it had not yet turned a profit. Celtel’s management, shareholders and financiers are familiar partners. The company has clearly displayed its business skills,” Schmidt says.

In 2004 Celtel was the recipient of the first annual International Finance Corporation’s Client Leadership Award, which recognizes a highly successful corporate client that has made a significant contribution to sustainable development.

Profitable even in poor countries

Registered in the Netherlands, Celtel operates mobile services in thirteen African countries: Burkina Faso, Chad, both Congos, Kenya, Malawi, Niger, Sierra Leone, South Africa, Sudan, Tanzania, Uganda and Zambia.

The list indicates that mobile telephony can be a profitable business even in African countries with low disposable incomes. Celtel provides direct employment for 7,000 people and the company has invested more than 800 million US dollars in Africa.

Competition is becoming steadily tougher between manufacturers of mobile phones and network equipment and also between telephone operators. Celtel’s rivals in Africa are not just local operators but also the South African operators that have expanded their operations to neighbouring sub-Saharan countries.

Mushrooming mobile phones

One of the underlying causes for rapid growth of African mobile markets is the limited penetration the continent’s fixed lines telephone network which at 3 % is the lowest in the world. The number of mobile phones overtook the number of fixed connections back in 2000. At present 80 million of Africa’s 848 million inhabitants use a mobile telephone, up from 52 million in 2003.

Gartner Dataquest, a research company that monitors mobile markets, estimates that about 28 million new mobile phones were sold in Africa last year.

Growth will remain buoyant in the years ahead. Gartner predicts that in 2008, Africans will buy about 31 million new mobile phones. Researchers believe that, in the next few years, Nigeria will overtake South Africa as the largest market area for mobile business.

Growth prospects are also good in other countries, because mobile phone penetration is still extremely low compared with other continents. In Africa, mobile penetration is around 8,9 %, but in sub-Sahara Africa penetration is approximately 5.1 %.

The development of wireless connections brings the greatest benefits to those who previously had no means of communication at all. For example farmers living in the remote countryside can now call by mobile phone to buyers in the city and sell their products at the best available prices. Meanwhile, a mobile telephone is often the only option for Africans to stay in touch with their relatives living in rural areas.

A world of two billion mobiles

At present about 1.7 billion people in the world have a mobile telephone. Nokia for one expects that the two-billion user mark will be breached in 2006. The greatest growth rates are in the new mobile areas of Asia, Africa and Latin America. The ITU has officially declared Africa as the fastest growing continent for mobile telephony.

Underlying the mobile boom in developing countries has been the fall in prices for mobile network technology and devices. At the same time, competition has brought down the cost of phone connections and call charges.

Growth in the number of connections was previously held back by the fact that a mobile subscriber needed a home address and evidence of regular income. Prepaid cards have now eliminated these practical problems.

For more details please contact Mr Thomas Schmidt tel. +358 9 3484 3327, email firstname.lastname@finnfund.fi