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Sun 1 Apr 2007 01:10 PM

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Hit or Miss

Another private equity company with funding from deep-pocketed Middle Eastern individuals and institutions has identified Africa's telecoms sector as a viable investment. The CEO of UAE-based Middle East and African Investment Company (MEAIC) tells Tawanda Chihota and Ronan Shields how the company is aiming to have 10 million subscribers in place in Africa within 24 months.

"We are not going to pay billions for licences like some operators from this region have been doing," emphasises Edwin Rowell, the genial chief executive of Middle East and African Investment Company (MEAIC), who also heads up the company's telephony business. "However we believe 80% of subscriber growth in telecoms will be generated from emerging markets like Africa, and so there is a great opportunity there," he adds.

MEAIC is a private equity company registered in the UAE, and backed by 16 high profile individuals and institutions of significant means, predominantly from within the Gulf region. Given the private nature of some of the individuals involved, Rowell is not too keen to place the spotlight on them too significantly at this point, though he would confirm on the record that a number of the individuals are influential figures from the Saudi, Kuwaiti, Bahrain and UAE establishments.

MEAIC is involved in the execution, conception and funding of ventures throughout the Gulf and Middle East region, and is also keen to remain involved to help shape the strategic direction of the investments it enters. A recent strategic decision was taken at board level to focus on investment in Africa, with a specialised focus on telephony, energy, mining and real estate.

The investment firm's plans for telephony expansion are bold. The target is 10 million subscribers connected to networks across the continent of Africa within two years, and the first peg along that path is the recent award of a universal service licence in the East African country of Uganda. Last month, MEAIC announced that its Ugandan operation, Hits Telecom Uganda, took possession of a service licence, allowing it to operate a range of access technologies including CDMA, GSM, WCDMA and WiMAX.

"We are looking to launch commercial services toward the end of this year, or early next at the very latest," comments Rowell. "Our aim is to immediately work on our broadband rollout. The short-list for setting up a GSM operation exists and we have a second rollout team scheduled to arrive in the country on April 3, consisting of 17 people." Hits Telecom has already pledged an investment amounting to US$150 million into the network, though Rowell divulges that he has recourse to an additional US$50 million from MEAIC investors should he require it, though he is confident he won't.

Hits Telecom Uganda's local partner is a company called Veritas Communications, which represents a number of companies operating in the country, and whose chairman Abu Mukasa is a well-established entrepreneur with deep connections all the way to president of Uganda.

"At the moment, telecoms services in Uganda are appalling," Mukasa asserts. "The opportunity in the country is significant. Uganda has the youngest population in the world with an average age of 15 and-a-half years, and only 2.4 million people as subscribers to telecoms services." Mukasa believes the remaining addressable market for telecoms connection in the country is at least a further 7-8 million.

"A point I would like to make clear is that we are not entering this market just to make money," Mukasa says. "The development of people and economies is also something that is an objective of ours." Rowell concurs. "We are investing in markets for the long-term, we are not speculators, we're there to do the business."

Given the strong objections raised by Uganda's incumbents telecoms providers - Uganda Telecom Limited, MTN and Celtel - to the liberalisation process that has ushered in more players into the market, Hits Telecom and other new entrants like it will be under pressure to demonstrate the government's choice of direction in developing the communications sector is a positive one.

Warid Telecom, a company not too dissimilar to Hits Telecom in that it is backed by a UAE-registered investment company, the Abu Dhabi Group, which is backed by the ruling family of the UAE. Warid is also in line to move into Uganda's telecoms arena, having been awarded a similar concession as Hits Telecom's. However, Rowell and Mukasa believe the prospects for Hits Telecom are a little more favourable given the company's allocation of GSM spectrum in the 1800MHz band, as compared to Warid's allocation in that space.

"There is a limit to the number of operators that can enter the market, and this limitation is spectrum availability," comments Mukasa. "After Hits Telecom, I believe there is space for only one more operator in the market," he adds, which is likely to be Warid Telecom by all accounts.

Rowell envisages the 10 million subscribers MEAIC is pursuing in Africa over the next 18-24 months to be added across 6-7 networks on the continent. The company is already at various stages of discussions with a series of interested parties for investment in telecoms opportunities including in Nigeria, Niger, Burundi, the Democratic Republic of Congo and Ethiopia. "So I expect this target to be achieved through acquiring new licences as well as by taking over existing operations."

In terms of the Ugandan market, Rowell is planning to utilise his experience of having been involved in the telecoms sector in Saudi Arabia for a number of years to great effect. He has a large amount of personal as well professional admiration for Khaled Al Kaf, CEO of Saudi mobile operator Mobily, as well as for Mobily itself, given its achievement of adding more than 6 million mobile subscribers in under two years of operation. Rowell believes strength in retail channel development and the active segmentation of the market will be a winning proposition in Uganda. "We expect to bring value to the market," Mukasa agrees. "For the first time in the country, a subscriber will be able to know what he or she is paying for, and will not be expected to pay any more than what he or she has used," he adds, alluding to programmes such a per minute billing. "Innovative" bundled offers will be devised for Uganda's corporate and governmental sectors.

Rowell reveals that Hits Telecom already has 1 million mobile handsets on order with leading handset manufacturer Nokia, and that penetrating into the heart of the economic profile of the country would be a priority for the operator. "Many Ugandan subscribers are annoyed at the poor coverage currently on offer from the incumbents."

Rowell also maintains that the market reaction has been positive thus far for Hits Telecom. "The market response has been tremendous, as both the press and governmental officials have eagerly welcomed our entry in the market. They know that a fourth operator will undoubtedly result in levels of service going up with premiums coming down at the same time."

"Making a success of things in Uganda is only the beginning. Within a few years East Africa is going to operate like one country, and we would like to be a part of that growth and unification," Rowell states.

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