Structural adjustment in the Latin American and African mobile sectors

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Telecommunications Policy 32 (2008) 349–363 www.elsevierbusinessandmanagement.com/locate/telpol

Structural adjustment in the Latin American and African mobile sectors Peter Curwen, Jason Whalley Department of Management Science, Strathclyde Business School, Graham Hills Building, 40 George St., Glasgow G1 1QE, Scotland, UK

Abstract In recent times, there has been much discussion about structural changes taking place on the mobile front in Europe and the USA but rather little on developments elsewhere. However, it is in Latin America and Africa where the structure of the mobile sector has recently been undergoing the most rapid and unprecedented change. This paper sets out to explain what has happened in each case covering the period to end-2005, to explain the underlying rationale and to seek finally to answer the question whether there is a common pattern in both cases or whether they are essentially independent. Many more countries are involved in the African case and hence, unsurprisingly, many more operators have been involved as both buyers and sellers. However, in both cases there was an established status quo by the early part of the decade. In Latin America, there were four fairly dominant players—Ame´rica Mo´vil, BellSouth, Telecom Italia and Telefońica—while in Africa there were five—MTN, Orascom, Vivendi Universal, Vodacom and Vodafone. What was common to both continents was a colonial heritage. One other common feature was the presence of investors that were based outside the continent yet heavily committed to developing markets. There have been clear differences in the protagonists in the two restructurings. In the case of Latin America the process has not involved new entrants. By way of contrast, although certain domestic African operators are ‘on the march’, by far the most significant feature is the appearance of non-African operators and in particular those from the Middle East such as Etisalat and MTC. These two are behaving very aggressively and see their entry into Africa as a key plank in their quest for (a form of) world domination. Indigenous operators such as MTN and Vodacom are evidently not prepared to fight their corner to the same extent. Whether the very high cost of recent licences and stakes will come back to haunt their purchasers is a moot point, but what is evident is that these kinds of prices are deterring long-standing African investors. r 2008 Published by Elsevier Ltd. Keywords: Latin America; Africa; Mobile; Telecommunications; Restructuring

1. Introduction Structural change can be brought about either via the transfer of ownership of a telecommunications network or, less commonly, via the creation of a new network from scratch. In recent times, there has been much discussion about structural change taking place on the mobile front in Europe (Gerpott & Jakopin, 2005) and the USA (Curwen, 2005) but rather little on developments elsewhere. However, the reality is that Corresponding author. Tel.: +44 113 2652350.

E-mail address: [email protected] (P. Curwen). 0308-5961/$ - see front matter r 2008 Published by Elsevier Ltd. doi:10.1016/j.telpol.2008.02.004

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P. Curwen, J. Whalley / Telecommunications Policy 32 (2008) 349–363

the structure of the mobile telecommunications sector has also recently been undergoing a rapid and unprecedented restructuring in Latin America and Africa. This paper sets out to explain what has happened in each case, to explain the underlying rationale and to seek finally to answer the question whether there is a common pattern in both cases or whether they are essentially independent. To this end, the paper begins in Section 2 by examining the literature that might help to explain what is going on. Sections 3 and 4 analyse structural changes in Latin America while Sections 5–7 do the same for Africa. In both cases, the underlying strategies of the main protagonists are examined in detail during the period to end-2005 and likely future developments are assessed. The concluding section compares the two cases within the context of the literature review. 2. Review of the literature It is evident that the telecommunications industry is the epitome of a global industry, not simply because every country in the world boasts telecommunications networks of various kinds but also because vast numbers of telephone calls and data streams originating in one country are terminated elsewhere in the world. The global nature of the telecommunications industry has attracted the interest of a small number of researchers (for example, Bevan, Estrin, & Meyer, 2004; Chan-Olmsted & Jamison, 2001; Fang, Fridh, & Schultzberg, 2004; Sarkar, Cavusgil, & Aulakh, 1999; Smith & Zeithaml, 1998; Steinbock, 2002, 2005), but these have paid little attention to global restructuring within the mobile telecommunications sector. Unlike its fixed-wire counterpart where, in effect, the sale of long-distance telephony has become a commodity business characterised by excess supply and falling prices, mobile telecommunications is a growth sector and, as it has grown, it has become an increasingly global phenomenon with mobile services of some kind available in every country in the world. The industry was initially highly fragmented and service providers were national in scope. Many of these were also joint ventures that combined local with foreign companies, with some countries reluctant to allow foreign control of a strategic industry such as telecommunications. However, the regulatory barriers to entry that fragmented the industry have been reduced, if not removed, through continued liberalisation and de-regulation since the mid-1980s (Braithwaite & Drahos, 2000; Manner, 2002; Walden & Angel, 2005; Zacher, 1996) and most markets are now competitive. While such changes are undoubtedly wide-ranging in nature, a key component has been the treatment of foreign investment. Bevan et al. (2004) found that in transitional economies, foreign direct investment was positively related to the quality of formal institutions while membership of the World Trade Organisation reduces the ability of host countries to discriminate between domestic and foreign sources of investment (Walden & Angel, 2005, p. 490). When taken together, these developments have largely removed the barriers to entry that fragmented the telecommunications industry. 3. Background to Latin America Latin America is generally held to comprise 20 countries lying south of the US border together with 24 (groups of) islands. Of the latter, which are currently served primarily by operators with a modest presence elsewhere in Latin America, namely Digicel and Cable & Wireless, few have large numbers of mobile subscribers (although the Dominican Republic and Jamaica have well over 1 million) and hence the discussion that follows is essentially concerned with events in the 20 countries. The pivotal event occurred more than two years ago when, in March 2004, Telefońica tabled a bid for the Latin American assets of BellSouth at a cost of $4.5 billion in cash plus $1.5 billion of inherited debt. American operators were once to be numbered among the most acquisitive in the world as they sought more exciting pastures than their slow-growing domestic market (Whalley & Curwen, 2006). However, those days are long past and in recent times BellSouth has not behaved unusually among its peer group in sinking back into its domestic market. During 2003, for example, Verizon Communications sold its stakes in EuroTel in the Czech Republic, Telecom Asia in Thailand and CTI Mo´vil in Argentina, and in June 2004 put its stake in Italy’s Vodafone up for sale. Meanwhile, SBC Communications sold its stake in Belgacom (majority owner of Proximus) in March 2004 and followed up by offering 31.1% of Denmark’s TDC and 4.5% of Telkom of South Africa in June. But BellSouth was not simply following a changed perception concerning the desirability

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of overseas subsidiaries (Mariscal & Rivera, 2005) since it had a particular need for cash at the time, as did SBC, arising from their joint successful bid (acting as Cingular Wireless) to acquire AT&T Wireless. BellSouth’s withdrawal from Latin America was, nevertheless, a touch ironic, since it had entered during the 1980s when the prevailing opinion was that it was a part of the world best shunned because of its dubious economic performance, and it was now withdrawing at a time when Latin American mobile markets were growing very rapidly.

3.1. The situation in 2003 At the end of 2003, BellSouth was a major player in the Latin American mobile market, ranking third behind Telefońica Mo´viles and Ame´rica Mo´vil—which had been spun off from Mexico’s Telmex and which remained under the tight control of Carlos Slim. The precise status of Telefońica Mo´viles is slightly problematic in relation to Latin America since it must be borne in mind that, until July 2006, Telefońica and Telefońica Mo´viles were not identical; the parent owned only 92.5% of its mobile subsidiary. Furthermore, the assets were not held consistently by either company. Nevertheless, they can be treated as synonymous for the purposes of this exposition. In fourth place, superficially a long way behind, was Telecom Italia Mobile (TIM) although here again it should be borne in mind that it had recently increased its stake in Venezuela and that its parent independently had several stakes in Latin America. The only other operator to have significant multiple stakes in Latin America was Millicom International, which had five, but these produced only 1.73 million proportionate subscribers (total subscribers multiplied by ownership stakes) in December 2003. The tendency for media reports to cite gross subscriber numbers is one reason why a seriously misleading impression has been given of what has been happening of late. The critical issue is how many subscribers are yielding revenues for a given operator and to determine this one must have recourse to proportionate subscriber numbers. These demonstrate that, at the end of 2003, Ame´rica Mo´vil had roughly 40 million such subscribers, while Telefońica Mo´viles (TEM) had a mere 12.5 million. Meanwhile, BellSouth had a further 8 million and TIM had 5.7 million. Hence, we note that the reality was that the merger between Telefońica and BellSouth would still leave Ame´rica Mo´vil twice as large as the merged entity in economic terms, although these strictly also need to be adjusted for differences in average revenue per user (ARPU). Meanwhile, TIM would be left trailing a very long way back in third place. On the other hand, Ame´rica Mo´vil had only 16 million proportionate subscribers in the seven Latin American markets in which it operated outside Mexico at the end of 2003, almost exactly the number applicable to a post-merger Telefońica Mo´viles if Mexico was excluded. Furthermore, the latter would be operating in 13 countries, almost twice as many as Ame´rica Mo´vil. An additional factor was that Telefońica had an even bigger struggle on its hands than the simple numbers indicated. In the first place, it was obliged to achieve regulatory permission in every single country where it was acquiring assets, and there was no guarantee that all regulators would be accommodating. Certainly, where the acquisition would result in multiple networks in the same country, there would be a potential need to sell some assets—probably in the form of spectrum—with Ame´rica Mo´vil in most cases the obvious buyer. Prices in the event of forced sales were likely to be very poor, and would badly affect the retrospective return on investment (ROI) of the companies concerned. Secondly, there was a branding problem given that BellSouth had tended to co-brand, thereby creating the likes of Mo´vicom BellSouth in Argentina. Rebranding all the networks to the TEM brand, Mo´vistar, would not only be expensive but could lead to churn among previously loyal BellSouth subscribers. Thirdly, TEM was primarily a mass-market operator, whereas BellSouth had targeted high-ARPU subscribers. Fourthly, TEM was already committed to the use of both GSM and CDMA technologies in different countries. This was anyway less than fully efficient, but BellSouth was a CDMA-only operator so the balance between TEM’s use of technologies would be disturbed. In particular, its tactic of extolling the virtues of GSM where appropriate was going to prove problematic. Fifthly, where networks could potentially be amalgamated, the obvious source of economies, namely redundancies, was likely to be heavily resisted by both trade unions and, indeed, governments. As for the need to match up IT systems, the less said the better.


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3.2. The situation in 2004 Table 1 illustrates the position at the end of 2004 when the consequences of structural changes agreed earlier had largely worked their way through the system, although some of the issues discussed above in respect of Telefońica Mo´viles had yet to be fully resolved. Because it makes little difference to the number of proportionate subscribers, but makes it easier to keep track of the number of networks, we will use parent Telefońica rather than Telefońica Mo´viles in what follows. At this point in time, Telecom Italia is still in control of just over one-half of TIM, but it has already been agreed that a merger of the companies will take place during 2005—in practice, it took place in June—and so for convenience and comparability we will also use parent Telecom Italia in what follows. As can be seen, Telecom Italia, either directly or via TIM, is present during 2004 in seven countries, the same number as in 2003, while Ame´rica Mo´vil has added Honduras and Uruguay to bring its total up to 10. Not surprisingly, Telefońica has shown considerably more expansion as a result of the BellSouth acquisitions, adding Colombia, Ecuador, Nicaragua, Panama and Uruguay to bring its total country presence to 14. The effect upon the number of proportionate subscribers was fairly dramatic when combined with the rapid growth in existing markets plus the fact that Telefońica now had more than one network in certain countries. At the end of 2004, as shown in Table 2, Telefońica could claim a total of 31.5 million proportionate subscribers, an increase of 143%. However, despite rapid growth at its existing networks, Ame´rica Mo´vil could only claim a rise of 40% in its proportionate subscriber base. Ame´rica Mo´vil was not exactly under threat of being overtaken, but it was understandably concerned with bulking up to achieve economies of scale. Taking the three parent companies together they accounted for 97,608,000 proportionate subscribers, or 56.4% of the total for Latin America as a whole. Table 1 Presence of international opertators in Latin America 31/12/04 and 31/12/05 Othersa

Ame´rica Mo´vil

Telecom Italia

31/12/04

31/12/05

31/12/04

31/12/05

31/12/04

31/12/05

31/12/04

31/12/05

Argentina Belize Bolivia Brazil Chile Colombia Costa Rica Cuba Ecuador El Salvador Guatemala Honduras Mexico Nicaragua Panama Paraguay Peru` Puerto Rico Uruguay Venezuela

Y – – Y – Y – – Y Y Y Y Y Y – – – – Y –

Y – – Y Y Y – – Y Y Y Y Y Y – Y Y – Y –

Y – Y Y Y – – Y – – – – – – – – Y – – Y

Y – Yb Y – – – Y – – – – – – – – – – – Y

Y – – Y Y Y – – Y Y Y – Y Y Y – Y Y Y Y

Y – – Y Y Y – – Y Y Y – Y Y Y – Y Y Y Y

BS, HW, SN – AL, MI PT, SN – – – – – MI MI MI – – CW HW, MI SN VC – VC

HW, SN – AL, MI PT, SN – – – – – MI MI MI – – CW MI SN VC – VC

Total

10

13

7c

5

14

14

Country

Telefońica

Source: Compiled by authors from annual reports and a wide variety of websites. a AL: Alltel (acquired Western Wireless, the previous owner, in 2004); BS: BellSouth; CW: Cable & Wireless; HW: Hutchison Whampoa; MI: Millicom International; PT: Portugal Telecom; SN: Sprint Nextel (Nextel only in 2004); VC : Verizon Communications. b Under offer. c Four networks were directly owned and three indirectly controlled via 56.1%-owned subsidiary TIM.


353

Table 2 Latin American proportionate subscribers, end-2004 Ame´rica Mo´vil Argentina Belize Bolivia Brazil Chile Colombia Costa Rica Cuba Ecuador El Salvador Guatemala Guyana Honduras Mexico Nicaragua Panama Paraguay Peru Puerto Rico Suriname Uruguay Venezuela

3,587,000 – – 13,657,000 – 5,767,000 – – 2,326,000 493,000 1,293,000 – 198,000 28,851,000 448,000 – – – – – 5000 –

Total Latin America

56,625,000

Telecom Italia 533,000

Telefońica

Total

585,000 5,139,000 1,789,000 – – 25,000 – – – – – – – – – 618,000 – – – 785,000

3,050,000 – – 7,566,000 3,066,000 3,046,000 – – 1,038,000 326,000 693,000 – – 4,794,000 264,000 576,000 – 2,611,000 76,000 – 188,000 4,215,000

13,292,000 78,000 1,831,000 64,845,000 9,448,000 10,400,000 1,028,000 85,000 3,544,000 1,570,000 2,730,000 209,000 926,000 38,228,000 738,000 1,236,000 1,255,000 3,908,000 1,910,000 230,000 592,000 9,049,000

9,474,000

31,509,000

173,095,000

–

Source: Compiled by authors from annual reports and a wide variety of websites.

It is of interest that, when compared to Ame´rica Mo´vil, Telefońica had far fewer proportionate subscribers in Brazil where it was popularly thought to play a dominant role. However, since its network, Vivo, was jointly held with Portugal Telecom and at this time there were significant minority shareholders in the individual networks that collectively made up Vivo—something that most commentators overlook—this was indeed the case. It is also of interest to consider the relative importance of Latin America for the three parent companies. In the case of Ame´rica Mo´vil, the only asset outside Latin America was a MVNO operation in the USA (TracFone) largely designed to enable immigrants from Latin America to phone home cheaply. It provided over 4 million proportionate subscribers, but this was well below 10% of the total. Telefońica’s situation was quite different since it had a further 20 million proportionate subscribers in Spain (primarily), Portugal and Morocco, representing 40% of its aggregate total. TIM, for its part, had over 26 million in Italy alone, so even adjusting for Telecom Italia’s stake in TIM, the parent company had more proportionate subscribers outside Latin American than within. An added factor is that aside from Brazil, Telecom Italia’s Latin American holdings did not yield that many subscribers, and it was facing increasing competition from the two regional heavyweights. With its attention directed towards its imminent and costly merger with TIM, it was unsurprising that Telecom Italia was intent upon a streamlining operation which would involve the shedding of non-core assets both in Latin America and elsewhere—initially, the Czech Republic and Greece. Obviously, Brazil had to be retained, but nothing else was strictly essential. Indeed, it had already increased its stake in Venezuela from 67% to 100% in July 2004 with a view to an agreed takeover by fixed-wire operator CANTV—after this was refused regulatory approval in May 2005 the stake was eventually sold to Telvenco in May 2006—but, unfortunately, despite agreement being reached between the parties in November, the regulator had misgivings and was unwilling at the time to sanction the deal. The situation at the end of 2004 was accordingly far from stable. Crucially, Ame´rica Mo´vil wanted to grow bigger to retain its role as regional leader while Telecom Italia was keen to sell up. Regulators willing, this was a potential marriage made in heaven.



3.3. The situation in 2005 The position at the end of 2005 in terms of countries supplied is illustrated in Table 1. As can be seen, Telefońica still served 14 countries although this was somewhat deceptive. In the first place, the last of the acquisitions from BellSouth had finally been sanctioned by regulators at the beginning of the year so it had more than one network in several countries. As a consequence, Telefońica merged its multiple networks in Chile and Peru but also had to dispose of some spectrum in a small number of cases to satisfy regulatory concerns. The process of rebranding as many networks as possible to achieve a common brand across Latin America was set in hand, but the relationship between parent and mobile subsidiary remained a little convoluted. Assets were periodically being transferred as in Argentina and it was not immediately obvious why a parent owning 92.4% of its mobile subsidiary should not place all of the mobile holdings under one roof. Meanwhile, despite the obvious symmetry between Telecom Italia’s desire to sell and Ame´rica Mo´vil’s desire to buy, only one asset was actually transferred. While Telecom Italia did sell out in Peru in August, it arranged to sell its Chilean stake to Almendral in January and its Bolivian stake to Cotas, a local co-operative, in July, subject to regulatory approvals (which in the latter case evolved into an attempted renationalisation that Telecom Italia has put into arbitration). Ame´rica Mo´vil had anyway got around its lack of a Chilean network by buying SmartCom PCS in August, one month after agreeing to acquire Hutchison Whampoa’s network in Paraguay, but Bolivia remained uncovered. The reason for this is apparent if one bears in mind that in 2003 the only holding below 90% was in El Salvador, a situation that was remedied in August 2004 when this was increased to 95.2%. Hence, acquisition of the half share held by Telecom Italia in Bolivia would have been contrary to Ame´rica Mo´vil’s desire to have virtually complete control over its subsidiaries. The three acquisitions discussed above resulted in the number of networks controlled by Ame´rica Mo´vil rising to 13 by the end of 2005. The proportionate subscriber numbers in Table 3 tell their own story. At the end of 2004, the three operators accounted for 32.7%, 5.5% and 18.2% of the total, respectively, and 56.4% overall. One year on, they accounted for 36.4%, 8.1% and 20.1%, respectively, and 64.6% overall. Hence, despite a 34% overall increase in the size of the market, these three operators had increased their combined market share by over 8%. Even so, the disparity in the size of the three operators remained very large. 3.4. The situation in 2006 Given the above, there was not expected to be much M&A activity in the first half of 2006. However, this expectation proved to be somewhat unfounded when, in April, Ame´rica Mo´vil and its parent Telmex provisionally acquired from Verizon Communications its assets in the Dominican Republic, Puerto Rico (52% of TELPRI) and Venezuela (28.5% of CANTV). Ame´rica Mo´vil was expected to attempt to raise its initial stake in CANTV to a majority although in the event the government decided to renationalise and the deal was aborted. The retreat of the formerly acquisitive US operators from their ‘backyard’ was hence largely complete. Meanwhile, as noted, Telecom Italia finally disposed of its Venezuelan subsidiary to Telvenco in January 2006, and in September it became clear that it would be selling TIM’s assets in Brazil as part of a restructuring designed to turn itself into a media company (Mocenni & La Monica, 2006). As of the end of November, informal offers were alleged to have been by both Ame´rica Mo´vil (amounting to $7.7 billion) and Telefońica although in the latter case this was promptly denied (Stewart, 2006; Wang, 2006). On the one hand, Telefońica seemed to be tiring of having too many eggs in a Latin American basket and preferred to devote its spare resources to developing O2 which it finally acquired in full in March 2006 as well as looking to acquire a bigger stake in China Unicom. On the other, the mobile sector in Brazil was ripe for consolidation and Telefońica was bound to play some role in this, possibly exchanging its stake in Portugal Telecom for the latter’s stake in Vivo. 4. Review of Latin American restructuring As previously noted, there are no prospects of any other international operators moving into the Latin American mobile space other than as peripheral players—the only recent example is Digicel, previously a


355

Table 3 Latin American proportionate subscribers, end-2005 Ame´rica Mo´vil

Telecom Italia

Telefońica

855,000

21,432,000 120,000 2,534,000 86,950,000 11,270,000 21,847,000 1,099,000 119,000 6,246,000 2,333,000 4,117,000 282,000 1,261,000 46,626,000 1,120,000 1,690,000 1,778,000 5,583,000 2,064,000 274,000 1,155,000 12,677,000 232.577,000

Argentina Belize Bolivia Brazil Chile Colombia Costa Rica Cuba Ecuador El Salvador Guatemala Guyana Honduras Mexico Nicaragua Panama Paraguay Peru Puerto Rico Suriname Uruguay Venezuela

6,627,000 – – 18,246,000 1,884,000 13,664,000 – – 4,100,000 822,000 1,895,000 – 427,000 35,914,000 742,000 – 172,000 1,950,000 – – 168,000 –

777,000 15,430,000 – – – 28,000 – – – – – – – – – – – – – 1,700,000

7,251,000 – – 9,299,000 4,875,000 5,574,000 – – 1,741,000 492,000 962,000 – – 5,844,000 344,000 781,000 – 3,130,000 59,000 – 387,000 6,050,000

Total Latin America

84,611,000

18,790,000

46,829,000

–

Total

Source: Compiled by authors from annual reports and a wide variety of websites.

fairly modest pan-Caribbean operator. Furthermore, although some familiar names outside the big three are present as shown in Table 1, these are also all fairly modest operations and the rest of the networks are controlled locally. On the whole, departures are more likely than arrivals to take place among international operators, with their assets being sold off to local companies. The big three, which can more appropriately now be considered to be the big two in the aftermath of the restructuring of Telecom Italia, are unlikely to play such an important role as asset buyers in the future for a variety of reasons. In the first place, as noted, Ame´rica Mo´vil is only interested in controlling stakes. It remains interested in Bolivia and Panama in particular, and to a lesser extent in Chile and Costa Rica, but may have to be patient. The simple fact is that there is a lack of quality assets left to buy. Secondly, although regulators have largely been accommodating so far, in part because the number of willing and able buyers has been short on the ground, they are unlikely to be sanguine at the prospect of an effective duopoly in their respective countries and will generally try to ensure that such smaller operators as remain are not driven out of business or acquired by the big two. The prospects for competition have undoubtedly been damaged by the withdrawal of the large US operators. As noted, this had a short-term rationale in the need to raise funds for the takeover of AT&T Wireless, and US operators generally believed that they were disadvantaged by the regulatory climate (Mariscal & Rivera, 2005, p. 767), but there are those who believe that there is also a longer-term underlying issue that has affected the likes of Verizon Communications, namely the introduction of pre-paid tariffs by Telecel in 1996. The US mobile model was traditionally based upon contracts and credit, and there was little interest in expansion based upon pre-paid. Although this is much less true today, the clock cannot be turned back and the departure of BellSouth is likely to mean that there will be no return of US operators in the forseeable future. A further factor, which may well influence who stays and who leaves is the very low level of data revenues once SMS is stripped out. This is to be expected given the relatively recent arrival of high-speed networks and



the relatively low levels of average income, but it does need addressing in the medium term since it has required a huge investment to upgrade analogue networks first to 2G (GSM/cdmaOne) and then to 2.5/2.75G (GPRS/cdma2000 1x/EDGE) and occasionally to 3G (cdma2000 1xEV-DO/W-CDMA/HSDPA). This investment has itself been a major factor in discouraging the entry of international giants like Vodafone and Deutsche Telekom with no cultural ties to the region—it has always been regarded as the hegenomy of US or Spanish/Portuguese-speaking operators. As for Telefońica, this was something of an oddity because it was the only large operator based in the pre-accession European Union (EU) to have no EU networks outside its home market. It has acquired a small stake in Portugal Telecom and taken over O2, and it has also begun to cast its eye upon networks in the accession countries, acquiring a majority stake in the Czech Republic in 2005 and a 2G/3G licence in Slovakia. It is also developing an interest in South-East Asia which suggests that a departure from Latin America where it is losing money might even be on the cards (with Portugal Telecom as a willing buyer in Brazil) although Telefońica denies this. Does this mean that Ame´rica Mo´vil will face a less-focused competitor over the next year or two? Certainly in Mexico, its home market, where Telefońica is making little headway, and Telefońica’s own home market is becoming increasingly competitive—for example, MVNOs are about to be launched for the first time. However, Telefońica probably has too much of its capital tied up in Latin America to afford to take its eye off the ball there and hence it may well be keen, despite its protestations, to generate further economies of scale by buying TIM’s assets in Brazil. Its difficulty is that GSM is making considerable headway against CDMA on the continent. As a result, Telefońica has decided to sink a huge sum of money into switching many of its Latin American assets over to GSM, and its return on capital is bound to be depressed for some time. The pursuit of additional, increasingly poor subscribers is unlikely to present the optimum way forward for either operator, and hence there is likely to be a period of consolidation with an emphasis upon making money out of the highspeed networks that are being put in place. 5. Background to Africa It is evident that with market penetration at very high levels, especially relative to incomes, in most of Europe and increasingly in Asia and the Americas, the attention of mobile network operators was bound to be drawn towards the low penetration levels typically found in African countries, especially given the accompanying low levels of fixed-wire penetration. Starting from scratch, a new mobile network will almost certainly be cheaper to roll out—possibly by as much as a factor of 1–10—compared to a fixed-wire network in such countries. It is sensible to begin by considering the subscriber numbers in the 55 countries and islands that are included in our definition of Africa. Using 31 December 2005 as our point of calculation, and limiting ourselves to round numbers as the subscriber count is less than perfect in most cases, we discover that there are only a handful of countries with large subscriber bases: in descending order we have South Africa (30 million), Nigeria (18 million), Algeria (13.5 million), Morocco (13 million) and Egypt (12.5 million). Kenya and Tunisia have somewhat over 5 million and those countries having between 1 and 4 million subscribers comprise Angola, Cameroon, Coˆte d’Ivoire, DR Congo, Ghana, Kenya, Mozambique, Seńe´gal, Sudan, Tanzania and Uganda. A good many of the rest comprise fewer than half a million subscribers. This suggests, inter alia, that there is plenty of potential for subscriber growth which is nevertheless likely to remain constrained by income levels despite the likes of Motorola being contracted to produce a new range of very simple and cheap handsets. Next consider which international operators are present in the 55 countries sampled. Whalley and Curwen (2005a, b) have undertaken an extensive study of internationalisation in the mobile telecommunications industry, and have identified 40 companies with a presence in at least three countries. Table 4 is based upon this study and identifies international mobile operators with a substantive investment in Africa at the end of 2003, 2004 and 2005. It is important to emphasise the use of the term ‘substantive’ since there is potentially an element of double counting involved where, for example, a European operator has a stake in an African operator which in turn has multiple investments in Africa. For this reason, Table 4 only counts countries if either the investment is direct or the stake in the other operator exceeds 50%, although in the case of Etisalat the 50% stake in Atlantique Te´lećom is treated as a majority for convenience.


357

Table 4 Mobile operator presence in Africa, 31 December 2003–31 December 2005 Mobile operator

Home market

Countries 31/12/03a

Countries 31/12/04a

Countries 31/12/05a

African mobile subscribersb

MTC France Te´lećom MTN Etisalat Millicom Atlantique Te´lećom Investcom Vodacom Orascom Portugal Telecom Vivendi Universal Vodafone Telekom Malaysia TeliaSonera Telefońica Hutchison Whampoa Deutsche Telekom AT&T (SBC)

Kuwait France South Africa Emirates Luxembourg Coˆte d’Ivoire Lebanon South Africa Egypt Portugal France UK Malaysia Sweden Spain Hong Kong Germany USA

0 10 6 2 5 5 5 5 8 5 4 3 4 2 1 1 1 1

0 10 6 2 5 6 4 5 7 4 3 3 3 1 1 1 1 0

14c 10 10 8d 7 6 5 5 4 4 4 3 3 1 1 1 1 0

5,330,000c 5,555,000 18,294,000 418,000 1,640,000 481,000 2,234,000 20,123,000 9,572,000 1,634,000 9,405,000 11,332,000e 141,000 295,000 1,199,000 34,000 100,000 0

Celtel International

Netherlands

13

13

14c

6,270,000c

Source: Whalley and Curwen (2005b) updated to the end of 2005. a This column takes account of all agreed transfers of assets up to the specified date. These had not necessarily taken place in practice by that point due to such matters as approvals by the relevant company boards and regulators. b As of 31 December 2005. By subscribers we refer here not to gross subscriber numbers but to ‘proportionate’ or ‘equity’ subscribers: that is, the gross figure is weighted according to the proportion of the equity held by the company in question. c In March 2005, MTC made an agreed offer for 85% of Celtel, with the other 15% to follow within two years. The subscribers attributed to MTC are therefore 85% of the total for Celtel. d The six additional networks were the result of taking a 50% stake in Atlantique Te´lećom in April 2005. e Including 35% of the total for Vodacom.

It is useful to remind ourselves that with the exception of MTN, Orascom, Vivendi, Vodacom and Vodafone, the number of subscribers controlled by each of the companies identified in Table 4 at the end of 2005 was quite modest. In some respects this was only to be expected given that mobile telephones came late to Africa, and the position will undoubtedly change in the future as the rapid expansion in penetration grows the number of subscribers. The first observation that can be made is that nearly one-half of the 40 most internationalised mobile operators identified by Whalley & Curwen were present in at least one African country. As Table 4 demonstrates, the number of countries in which these operators were present varied considerably, ranging from 14 to 0 at the end of 2005. Those companies with a single African investment have focused their attention on other regions; for example, the limited African presence of Telefońica contrasts with its substantial investments in South America, although it does have an additional indirect presence in several African countries via its minority stake in Portugal Telecom. A second observation is that the companies are drawn from a wide range of home markets in Europe, the Middle East and Asia but not the Americas. The European involvement is not unexpected from a historical perspective, and largely explains the specific countries where France Te´lećom’s African investments are to be found (see Table 5). However, Vodafone originally emerged as a competitor to the incumbent in the UK and its direct presence in Africa was accordingly limited to just three investments: in South Africa, Kenya and Egypt. As noted, it also has an indirect presence in a further four African markets via Vodacom. The remaining European involvement in Africa was relatively small scale other than for Celtel International and Millicom International, but as both are based in Europe but operate elsewhere they are European in name


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Table 5 Location of networks (main African operators, 31 December 2005)a Country

MTC/ Celtelb

Etisalatc,d

France Te´lećom

Investcome

Millicom

MTN

Orascom

Portugal Telecomf

Telekom Malaysiag

Vivendi Universal

Vodacom

Vodafone

Algeria Angola Benin Botswana Burkina Faso Cameroon Cape Verde Is. Chad Congo-Brazz Coˆte d’Ivoire DR Congo Egypt Equat. Guinea Gabon Ghana Guinea GuineaBissau La Reúnion Lesotho Liberia Madagascar Malawi Mali Mauretania Mauritius Mayotte Morocco Mozambique Niger Nigeria Rwanda Saõ Tome´ Seńe´gal Sierra Leone South Africa Sudan Swaziland Tanzania Togo Tunisia Uganda Zambia Zimbabwe

– – – – Y

– – Y – Y

– – – Y –

– – Y – –

– – – – –

– – – Y –

Y – – – –

– Y – – –

– – – – –

– – – – –

– – – – –

– – – – –

– –

– –

Y –

– –

– –

Y –

– –

– Y

– –

– –

– –

– –

Y Y – Y – –

– – Y – – –

– – Y – Y Y

– – – – – –

Y – – Y – –

– Y Y – – –

– – – – Y –

– – – – – –

– – – – – –

– – – – – –

– – – Y – –

– – – Y Y –

Y – – –

Y – – –

– – – –

– Y – Y

– Y – –

– – – –

– Y – –

– – – –

– Y Y –

– – – –

– – – –

– – – –

– – – Y Y – – – – – – Y – – – – Y – Y – Y – – Y Y –

– – – – – – – – – – – Y – – – – – – Y – Y Y – – – –

Y – – Y – Y – Y – – – – – – – Y – – – – – – – – – –

– – Y – – – – – – – – – – – – – – – Y – – – – – – –

– – – – – – – Y – – – – – – – Y Y – – – Y – – – – –

– – – – – – – – – – – – Y Y – – – Y – Y – – – Y Y –

– – – – – – – – – – – – – – – – – – – – – – Y – – Y

– – – – – – – – – Y – – – – Y – – – – – – – – – – –

– – – – Y – – – – – – – – – – – – – – – – – – – – –

Y – – – – – Y – Y Y – – – – – – – – – – – – – – – –

– Y – – – – – – – – Y – – – – – – Y – – Y – – – – –

– Y – – – – – – – – Y – – – – – – Y – – Y – – – – –

Total

14

8

10

5

7

10

4 (5)

4

3

4

5

3 (7)

Source: Compiled by authors from a wide variety of (mainly operators’) websites. a The entries in lower case are subsidiaries of operators in which a minority stake is held as follows (the extended totals are given in the brackets):

Orascom—in Ghana via stake in Hutchison Telecom International. Vodafone—in DR Congo, Lesotho, Mozambique and Tanzania via stake in Vodacom. b

During 2006, MTC/Celtel began to operate in Nigeria. Including Atlantique Te´lećom. d During 2006, Etisalat sold its operation in Sudan and bought a licence in Egypt. e During 2006, Investcom began to operate in Guinea. f During 2006, Portugal Telecom began to operate in Namibia and bought a licence in DR Congo. g During 2006, Telekom Malaysia sold its operation in Malawi. c


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only and, in practice, Celtel has recently been acquired by an operator based in the Middle East while Millicom, despite coming under offer by various parties, remains independent for now (see below). Some additional light can be shed on this matter by comparing the number of African investments with the overall number of international investments. In a good many cases (for example, Celtel, Orascom, MTN, Atlantique Te´lećom and now MTC and Etisalat) the great majority of all investments are in Africa, whereas for the likes of Vodafone (28 overall in 2005), France Te´lećom (27 overall), Millicom (16 overall) and TeliaSonera (14 overall), the African section of their portfolios is of much less significance. What is of particular interest is the relatively recent appearance of Middle Eastern investors in Africa. Although there are many reasons why African markets could be attractive to these investors, a key factor would appear to be the differential growth rates that exist between their home markets and Africa. Quite simply, Africa is more populous as a region and it is growing faster as a market than the Middle East (Baker, 2005). 6. Location of networks At this point it is useful to identify where the main African operators (with three or more networks) had their networks at the end of 2005, as set out in Table 5. Given that there are 55 countries/islands in the sample, it is perhaps less than surprising that these operators largely kept out of each others’ way—either deliberately or by default—competing only in Benin, Botswana, Burkina Faso, Cameroon, Chad, Congo-Brazzaville, Coˆte d’Ivoire, DR Congo, Egypt, Gabon, Ghana, Guinea-Bissau, Kenya, La Reúnion, Madagascar, Malawi, Mauritius, Morocco, Niger, Sierra Leone, South Africa, Tanzania and Uganda. What is most surprising, perhaps, is that there has been so little competition among these companies in the largest African markets outside South Africa, namely Algeria, Egypt, Kenya, Morocco, Nigeria and Tunisia. On the face of it, inspection of the companies in Tables 4 and 5 suggests that Africa, other than in South Africa, could until the end of 2005 be described as a tale of two groupings, one the Africa ‘specialists’ such as Etisalat, MTC/Celtel, MTN and Vodacom, and the other a heterogeneous group of international telcos such as France Te´lećom with a limited interest in Africa relative to elsewhere. However, there was, as ever, the exception to the rule as Orascom appeared intent upon reducing its reliance upon Africa. In other respects, Africa was a tale of small networks mainly financed by local interests. 7. Operator strategies Etisalat has signalled its intention to expand outside of its home market by establishing a dedicated international subsidiary and stating that it will invest $10 billion overseas by 2008 (McSheehy, 2005). In April 2005, the company expanded its presence into western Africa by acquiring half of Atlantique Te´lećom. Subsequently, despite losing out in the pursuit of a stake in Tunisie Te´lećom/Tunicell in March 2006 and withdrawing from the bidding for a 3G licence in Morocco, it won 66% of the 3rd mobile licence (including 3G) in Egypt in July 2006. The Transnational Corporation consortium in which Etisalat was an initial participant won 75% of Nitel/M-Tel in Nigeria in July 2006 but Etisalat subsequently withdrew. It has also expressed an interest in licences and/or stakes available in Algeria and Libya. In March 2005, Celtel agreed to a takeover by Kuwait-based Mobile Telecommunications Co. (MTC) which happens to co-brand (for the time being at least) with Vodafone even though the latter has no equity stake. In total, this two-stage deal valued Celtel at $3.4 billion (Odell, 2005). The takeover was completed in May, with MTC emphasising how it contributed to its key strategic objective of becoming a global operator (MTC, 2005). Subsequently, MTC and subsidiary Celtel have led semi-detached lives. Prior to purchasing Celtel, MTC only operated in the Middle East. However, post-Celtel it agreed to buy 65% of Nigeria’s Vmobile in April 2006 with an option to purchase the rest and is engaged in talks to buy a Madagascan operator, probably Madacom. It is uncertain whether it tabled a bid for Millicom International but if so it did not succeed. It may be noted that it has a so-called 3 3 3 strategy—a nine-year three-phase plan moving it from regional to international to global status. This will seemingly be partly realised via Celtel which intends to launch in Liberia during 2006 and has declared its desire to enter Angola and Ethiopia via stakes in operators and in Ghana and Seńe´gal via new licences. Interestingly, it was MTC which bought 61% of Sudan’s Mobitel in May 2006 although Celtel already owned the other 39%.



For its part, Orascom is technically African. It is, however, commonly perceived as a Middle Eastern operator although it is not behaving in a similar manner to the likes of Etisalat despite increasing its holdings in Algeria and Tunisia during 2005. In mid-2005 it had a presence in seven African countries, but it had already sold off its assets in the Coˆte d’Ivoire in April 2004, following on from the sale of stakes in nine other African countries to Atlantique Te´lećom and the Gloria Trust during 2003, and it subsequently disposed of stakes in Chad, Congo-Brazzaville and DR Congo during the latter half of 2005. Furthermore, the acquisition of Italy’s Wind for h12.1 billion in May 2005 by Weather Investments, which will henceforth also control all Orascom holdings and be 74% owned by Orascom’s owners, the Sawiris family, suggests that its attention is no longer tightly focused upon Africa. This view is fostered by its recent decision to acquire licences in Bangladesh and Iraq and by its current lack of interest in acquiring African licences and/or assets subsequent upon its failure to acquire either Nitel/M-Tel or Millicom in 2006. These comings and goings necessarily attract most attention, but a further factor worth remembering is that in the future, as the rapid expansion in penetration serves to grow the number of subscribers, the dependency of the internationalising mobile operators on their home markets will be lessened. For example, just over onehalf of MTN’s subscribers were to be found in South Africa at the end of 2005 (compared to two-thirds one year previously), but as the company was growing relatively rapidly in Nigeria, easily its second-largest market accounting for one-third of its subscribers in 2005, this dependency on a single market was rapidly being reduced. Nevertheless, MTN was struggling to expand since it failed to acquire either Celtel or half of Atlantique Te´lećom in 2005; failed to win 51% of Nigeria’s Nitel/M-Tel in December 2005; failed to buy 35% of Tunisie Te´lećom in March 2006; failed to buy 34% of Namibia’s MTC in March 2006 and failed to win a licence in Egypt. However, in early May 2006 it appeared to have put these disappointments behind it when it bid successfully (subject to a raft of regulatory approvals) to take over Investcom—there are no overlaps in their respective country coverage—receiving an irrevocable acceptance for an initial 70.6% stake. It is also interested in taking a stake in Zimbabwe. The irony was that Investcom had just been declared to be the provisional highest bidder for Millicom International which had put itself up for sale in early 2006. Not surprisingly, Investcom withdrew its offer and it remained to be seen who would acquire Millicom, although the clear favourite was China Mobile. However, discussions broke down and Millicom decided to remain independent. It subsequently held back from pursuing any further interests in Africa. As for Vodacom, given that it obtained 87% of its proportionate subscribers from its home market in 2005, it will benefit from rapid growth in Tanzania (its only other market with over 1 million proportionate subscribers) and elsewhere, but will find it much harder to bring this percentage down unless it makes further acquisitions. However, it terminated its interest in buying Nitel/M-Tel in December 2005 because it only wanted the mobile operations and rejected the offer of a 51% stake in Vmobile of Nigeria as too expensive. Until well into 2006, its only remaining interest was in gaining a licence in Angola, but this mainly reflected the fact that Vodafone was in a position to veto ventures in northern Africa where it operated on its own behalf. When this restriction was lifted in November 2006, Vodacom announced that it would also be looking at opportunities in Algeria, Ghana and Nigeria. Change is also afoot at Portugal Telecom which bought 34% of Namibia’s MTC in March 2006 and obtained a licence in DR Congo in February 2006 via a minority stake in a consortium. It has expressed a general interest in acquiring additional African assets. However, not quite everyone is seeking to build up African assets: for example, Telekom Malaysia—which had previously sold out of Vodacom at the end of 2004—reached an agreement with the government of Ghana to hand over its assets there once they had been repurchased in installments and in February 2006 sold its stake in TNL Malawi to Econet Wireless. It also failed to win a licence in Egypt. 8. Review of African restructuring As we have seen, the situation in respect of mobile telephony in Africa appears to be undergoing a significant process of structural change as certain operators either become, or cease to be, Africa ‘specialists’. However, it is frankly rather difficult to understand why some of the non-specialists are in Africa at all, although their original entry may well have had nothing to do with their present strategies, and there was


361

always the ‘growth potential’ argument to keep them there. One would have expected, therefore, that some of them would take advantage of relatively buoyant equity markets and credit conditions in 2006 to offload investments outside the ‘big five’ markets to the specialists. These would appear to have a clear interest in expansion over the medium term, although financing that expansion where billions of dollars are involved may still be problematic, especially in the case of the private companies—for example, Orascom’s offloading of its Telecel subsidiaries was in order to reduce its indebtedness. Nevertheless, as holds true elsewhere in the world, owning stakes in operators that are not numbered among the top two in a given country is unlikely to be an attractive strategy even for Africa specialists. In summary, it can be seen that the African mobile market has attracted considerable FDI from outside the continent (Southwood, 2006). Nevertheless, as of the end of 2005 the two largest operators as judged by subscribers were both South African, while the company present in the most countries was controlled from Kuwait. Up to that point in time consolidation had been relatively limited, though the takeover activity of MTC and Etisalat suggested strongly that this was about to change because scale had become such an important determinant of competitiveness. This expectation is clearly turning out to be true. With MTN acquiring Investcom (as it did in practice in July 2006), it will have established itself as the regional powerhouse and it will be of interest to see how arch-rival Vodacom responds, especially since it has been curiously inactive on the acquisition front. The evidence suggests that any other major regional operators are likely to be based elsewhere, at least partly in the Middle East, but these operators will have a lot of ground to make up unless they move into the handful of markets where the numbers of subscribers are relatively large— which is why the 2G/3G licence on offer in Egypt had so many potential bidders. Perhaps the biggest surprise was the sudden emergence of China Mobile although it made sense for it to commence a programme of overseas asset acquisition by buying a package based around emerging markets. The fact that the governments of several countries where Millicom was active did not want it to enter may, however, curb its ambitions for some time to come.

9. Conclusions As can be seen from the above discussion, both Latin America and Africa spent the two-year period commencing at the beginning of 2004 undergoing an extensive process of restructuring. The liberalisation of telecommunication markets in both continents initially created the opportunity for inward foreign direct investment. Operators, both from within and from outside the two continents, used this opportunity to enter new markets and thus expand their geographical footprint. Subsequent rounds of restructuring have seen some of these operators exit markets, whereas others have expanded into additional markets or consolidated control over their various operations. As the various rounds of restructuring have been played out, two broad categories of operators have emerged. On the one hand, there are those operators, based in Africa or Latin America, which have used the opportunity presented by liberalisation to expand into other markets in the home continent. On the other hand, African and Latin American liberalisation attracted foreign direct investment from operators based elsewhere. With this in mind, the first observation that can be made is that more countries are involved in the African case and hence, unsurprisingly, many more operators have been involved as both buyers and sellers. However, in both Africa and Latin America there was an established status quo by the early part of the decade. In Latin America, there were four fairly dominant players—Ame´rica Mo´vil, BellSouth, Telecom Italia and Telefońica—while in Africa there were five—MTN, Orascom, Vivendi Universal, Vodacom and Vodafone. Interestingly, because of the huge disparities between the size of the various African markets, these latter players did not need to be present in a large number of countries to achieve their status and certain operators that were widely present such as France Te´lećom were nevertheless in the second tier. A second observation is that common to both continents was a colonial heritage. Operators based in America, Italy, Portugal and Spain invested in Latin America while France and UK-based operators invested in Africa. Common to both continents was the presence of investors that were based outside of the continent yet heavily committed to developing markets. However, the only significant member of this group of operators was Millicom International whose subscriber numbers were small.



There were clear differences in the protagonists involved in the restructuring that occurred during 2004 and 2005. In the case of Latin America, the process did not involve new entrants. In effect, with BellSouth and, to a lesser extent, Telecom Italia ready to pull out, Ame´rica Mo´vil and Telefońica stepped in and expanded their presence in Latin America. In principle, any further reduction in operators is likely to impact significantly on the level and nature of competitiveness within Latin American mobile markets. Should markets seek to consolidate around fewer operators, regulators will need to rethink how the benefits of liberalisation and competition that presumably encouraged them to liberalise in the first place can continue to be delivered. The evident solution is to enforce conditions in situations involving mergers and acquisitions that prevent networks from being amalgamated. This will not be ideal from a prospective purchaser’s point of view since it will reduce potential economies of scale and scope, but it will nevertheless be accepted as the minimum price to be paid in exchange for significant market power. By way of contrast, although certain domestic African operators are expanding, by far the most significant recent feature is the appearance of non-African operators and, in particular, those from the Middle East such as Etisalat and MTC. These two operators are behaving very aggressively and see their entry into Africa, where unlike Latin America there are an unusually large number of licences available as well as assets for sale, as a key component in their quest for (a form of) world domination. Indigenous operators such as MTN and Vodacom are evidently not prepared to fight their corner to the same extent—in Vodacom’s case (with Vodafone as a major shareholder) it is clearly unwilling to ‘overpay’. During the period under consideration MTC paid $3.4 billion in cash for Celtel, $1.3 billion for 61% of Mobitel in Sudan and $1 billion for 65% of Vmobile in Nigeria while Etisalat paid $1.9 billion for its 66% share of the 2G/3G licence in Egypt. Whether the cost of these licences and stakes will come back to haunt their purchasers is a moot point, but what is evident is that prices of this magnitude are deterring the long-standing African investors. Indeed, as noted, Orascom, which was widely regarded as a future African powerhouse, now has other ambitions. As a consequence, it is likely that the non-African investors will continue to play a key role in restructuring. The situation in Africa is interesting because the oil-rich nations that have spawned the aggressive new entrants are going to continue to boost the net cash flow of the likes of MTC and Etisalat. Hence, they can be expected to continue their attempts to become global. Having said this, operators such as MTC and Etisalat face numerous challenges as they seek to become global operators. In the first place, they will need to devote a substantial part of their limited managerial resources to integrating together all the companies and stakes that they have acquired. Secondly, other Middle Eastern operators—in Tunisia, for example, Tunisiana is partowned by al-Wataniya Telecom of Kuwait (which is also present in Algeria) and Tunicell is a subsidiary of Tunisie Telecom in which Dubai-based Tecom/DIG acquired 35% in March 2006—as well as the likes of China Mobile, MTS and VimpelCom (both from Russia) have expressed their intentions to become global operators. Their experience dictates that they look to emerging markets which anyway have the best prospects for growth. However, it is to Africa rather than Latin America that they will be looking. Thirdly, although controlling stakes and licences currently on offer are unusually extensive as governments, especially in Africa, seek to cash in while the going is good, those in the most desirable countries such as Egypt and Nigeria will necessarily become scarce beyond 2007. There is a general view that assets of all kinds are already over-priced due to the behaviour of well-funded new entrants, although it can be argued that the low levels of penetration and high pent-up demand in the more populous African markets will nevertheless allow operators to recoup their investments. While this may be true, operators will also need to develop innovative ways of encouraging uptake in economies with low per capita incomes and a large degree of informality. This will add an additional demand on the already limited and stretched managerial resources of the Middle Eastern operators. While those thinking of selling stakes and licences will undoubtedly welcome the likely continuation of high prices, it raises several related questions. In the first place, will they be tempted by the opportunity to offer further licences in the many countries where there is insufficient demand to justify them, thereby creating discord among existing licensees? Secondly, will some operators over-extend themselves and subsequently be forced to retreat in order to focus on a smaller number of potentially more lucrative markets? Any tendency to over-licence, or failure to generate sufficient revenue for whatever reason, will ultimately lead to one or more of the operators concluding that they have over-extended themselves and thus trigger their exit from some markets, so a secondary round of restructuring in Africa cannot be ruled out. If so, this is likely to benefit the


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well-established operators such as MTN and Vodacom. In other words, the current high prices for stakes and licences may lead to another round of African restructuring at the end of the decade with the major difference from the current round being that the resulting market structure will become stabilised around a smaller number of larger operators. It is evident that, in contrast, the Latin American market has largely passed through this phase and that its structure is already relatively stable. Hence, as noted, the crucial issue in Latin America is how to regulate markets that are increasingly turning into duopolies. Finally, on a broader level, it may be asked whether the current bout of Latin American and African restructuring will have repercussions for the rest of the world, to which the answer is ‘probably not that much’. So far as Latin America is concerned, almost all of the flagged-up departures have now taken place and the main departees, the American operators, have settled back into their domestic businesses and with minor exceptions intend to stay put. Ame´rica Mo´vil has no significant plans for expanding beyond the continent so the crucial unresolved issues are concerned with how regulators will deal with Telefońica’s further incursions into the continent and with the uneasy relationship between Telefońica and Portugal Telecom. References Baker, J. (2005). Competitive pressures aid growth as new services launch in region. Global Mobile, 12(8), 14ff. Bevan, A., Estrin, S., & Meyer, K. (2004). Foreign investment location and institutional development in transition economies. International Business Review, 13(1), 43–64. Braithwaite, J., & Drahos, P. (2000). Global business regulation. Cambridge: Cambridge University Press. Chan-Olmsted, S., & Jamison, M. (2001). Rivalry through alliances: Competitive strategy in the global telecommunications market. European Management Journal, 19(3), 317–331. Curwen, P. (2005). The prospects for 3G in the USA: The view from Europe. Info, 7(3), 16–32. Fang, T., Fridh, C., & Schultzberg, S. (2004). Why did the Telia-Telenor merger fail? International Business Review, 13(5), 573–594. Gerpott, T., & Jakopin, N. (2005). The degree of internationalization and the financial performance of European mobile network operators. Telecommunications Policy, 29, 635–661. Manner, J. (2002). Global telecommunications market access. Boston, MA: Artech House Publications. Mariscal, J., & Rivera, E. (2005). New trends in the Latin American telecommunications market: Telefonica and Telmex. Telecommunications Policy, 29, 757–777. McSheehy, W. (2005). Etisalat has its sights set outside the Gulf. Financial Times (Vol. 22), 27 June. Mocenni, A., & La Monnica, G. (2006). Telecom Italia to sell TIM Brazil immediately, 11 September. Available at: /www.cellular-news.com/story/19258S. MTC. (2005). MTC completes its acquisition of Celtel. Press release of 4 May. Odell, M. (2005). Celtel accepts Kuwait offer. Financial Times (Vol. 30), 26 March. Sarkar, M., Cavusgil, S., & Aulakh, P. (1999). International expansion of telecommunication carriers: The influence of market structure, network characteristics and entry imperfections. Journal of International Business Studies, 30(2), 361–382. Smith, A., & Zeithaml, C. (1998). Garbage cans and advancing hypercompetition: The creation and exploitation of new capabilities and strategic flexibility in two Regional Bell Operating Companies. In A. Y. Ilinitch, A. Y. Lewin, & R. D’Aveni (Eds.), Managing in times of disorder. Hypercompetitive Organisational Responses. Thousand Oaks, CA: Sage Publications. Southwood, R. (2006). The new scramble for Africa—acquisitions reshaping the communications landscape, 29 April. Available at: /www.allafrica.comS. Steinbock, D. (2002). Wireless horizon. New York: Amacom. Steinbock, D. (2005). The mobile revolution. London: Kogan Page. Stewart, A. (2006). TIM bids signal new phase of Brazil moble consolidation, 22 November. Available at: /www.totaltele.comS. Walden, I., & Angel, J. (2005). Telecommunications law and regulation (2nd ed.). Oxford: Oxford University Press. Wang, M. (2006). America Movil in pole position to buy TIM Brasil—sources, 15 November. Available at: /www.totaltele.comS. Whalley, J., & Curwen, P. (2005a). An investigation into internationalisation among mobile telecommunications companies in 2003. Info, 7(4), 21–29. Whalley, J., & Curwen, P. (2005b). Internationalisation among mobile telecommunication companies: The position in 2004 and strategic options for the future. Paper presented at ITS Africa-Asia-Australia regional conference, Perth, Australia, 28–30 August. Whalley, J., & Curwen, P. (2006). Whatever happened to the Baby Bells? Paper presented at ITS Europe regional conference, Amsterdam. Zacher, M. (1996). Governing global networks. Cambridge: Cambridge University Press.