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DEMOCRATIC REPUBLIC OF CONGO HOW NOT TO LOSE YOUR SHIRT
Marina Bidoli Vodacom leads the way for SA investments Things are starting to look up in the Democratic Republic of Congo (DRC), which has been racked by poverty and decades of neglect, corruption and civil war. Though the recent Inter-Congolese Dialogue stumbled in Sun City (Current Affairs April 26), businessmen believe the peace process will lead to a transitional government. With this new optimism, investment has started trickling back in. At the forefront is SA cellular firm Vodacom, which launched Vodacom Congo last weekend. Vodacom's US$94m investment is expected to spur further SA investment. Partners such as Dimension Data and NamITech have already followed Vodacom into the DRC. Others could follow, but it all depends on peace. Rich in mineral and natural resources, and with more than 60m people, the DRC borders nine countries. The opportunities for trade, electrification and infrastructure development are enormous. Initiatives by the World Bank, European Union and International Monetary Fund could pump as much as $20bn into Africa's third-largest country, says SA-based African investment broker Seedy Lette. DRC Finance Minister Matungulu Mbuyamu Ilankir, a former World Bank official, wants a new investment code that promotes transparency. International Telecommunication Union consultants are helping to devise an investor-friendly telecoms policy. All this is encouraging, says Vodacom Group deputy CEO and Vodacom Congo chairman Andrew Mthembu. Still, Vodacom is treading cautiously. Top of mind is that Telkom, which owns
50% of Vodacom, is preparing for an initial public offering. “We have no plans
to lose our shirts in the DRC,” says Mthembu. Vodacom has entered the DRC
through a joint venture with Congolese Wireless Networks (CWN), which retains
49% of the new company. CWN started up in 1999. It immediately provided Vodacom
DRC, the joint venture company, with a 20-year licence, 12000 subscribers and
some fixed assets. Since Vodacom became involved three months ago, it has
invested $39m to expand the network to 52000 customers in Kinshasa, Lubumbashi
and Mbuji-Mayi. Vodacom Congo plans to expand further and have 200000
subscribers by March 2003. It expects the total capital exposure to be
$110m-$130m. Vodacom will guarantee 51% of this. Bridging finance was provided
by infrastructure supplier Alcatel and SA banking group Absa. Standard Bank of
London is acting as financial arranger and adviser for longer-term project
funding. Vodacom Congo's peak funding will be around $200m after three to four
years, says Mthembu. “Our expansion is driven by market potential and peace
prospects. We've made this clear to government.” Though there are as many as
10 companies (many offering old analogue systems), Mthembu says Vodacom Congo
can q capture half the total market, which could increase to 6m users within10
years. The late Laurent Kabila handed out licences widely as political favours
when he was DRC President, say analysts. Mthembu had to spend six months
checking that Vodacom Congo had a national licence, that there would be no
interference in its spectrum and that this would not be challenged by other
operators. Vodacom Congo's main rival is Celtel. Owned by pan-African operator
MSI-Cellular, it has 160000 subscribers and has been investing heavily in recent
months. Other Building a network there is a logistical challenge. Vodacom has had to hire bulk-carrier Antonov aircraft for 52 flights to bring in equipment. It has also installed back-up diesel generators for base stations, which are guarded 24 hours a day. Alieu Conteh, the entrepreneur who formed CWN in 1999, struggled to find substantial investment because of the civil war. Vodacom has provided the gravitas he needed to approach risk-averse international banks. Investors in CWN include Conteh, private US investors and controversial SA businessman Jonty Sandler. Despite the difficulties and political risks, the DRC is potentially a gold mine. Vodacom Congo expects an average revenue per prepaid user of $25-$30, more than triple SA's $8 monthly average. Average revenue per contract customer is expected to be $150-$200. “We want an internal rate of return of 29%,” says Mthembu.
FOR IMMEDIATE RELEASE VODACOM PUTS DRC ON THE M.A.P.10 December 2001 The African Renaissance has moved a step forward with the launch of Vodacom Congo (DRC) s.p.r.l. This follows the ratification last week of a joint venture agreement between Congolese Wireless Networks (CWN) and Vodacom International Holdings (Pty) Ltd by the Vodacom Group (Pty) Ltd board. CWN operates a GSM network in the Democratic Republic of the Congo (DRC) with some 22 000 customers and has 18 years remaining of its 20 year license. “Vodacom’s US$ 39 million (Approx. ZAR 370 million) investment will take CWN’s coverage of the DRC beyond Kinshasha and Lubumbassi and well into the potentially very profitable mining areas where people are thirsting for reliable access to telecommunications,” said Joan Joffe, Vodacom Group Executive - Corporate Affairs. Ms Joffe said that Vodacom's success in Tanzania and Lesotho had given it great confidence to pursue other commercially viable license opportunities in Africa. “The DRC has always been of particular interest to Vodacom International primarily because there are only 100 000 phones for more than 60 million people. Challenges there may be, but a teledensity of about 1.6 telephones per 1 000 people strongly suggests that opportunities abound for GSM operators in Africa’s third biggest country.” “What really clinched our interest in the DRC was the visit by President Joseph Kabila to South Africa a few months ago and his subsequent invitation to South African businesses to invest in his country. President Kabila’s tireless peace efforts and his call for immediate elections upon completion of inter-Congolese dialogue impressed us immensely. “Add the optimistic outlook for the DRC to President Thabo Mbeki’s call for South African businesses to spur on the African Renaissance and there is no way Vodacom could ignore the potential of an untapped giant,” said Ms Joffe. The agreement was signed by Mr Mthembu, Managing Director of Vodacom International Holdings (Pty) Ltd and Deputy Group CEO of Vodacom Group (Pty) Ltd, and Mr Alieu Conteh, Chairman and CEO of CWN. Vodacom will have a 51% stake in the joint venture while CWN will have a 49% stake. Mr Mthembu will occupy the chairman’s position and Mr Alioume Dieng will become CEO of the new consortium. Vodacom International believes that the total potential market for cellular stands at 5% of the DRC’s 60 million inhabitants and the company is confident that its new joint venture will capture a significant market share. Existing GSM cellular players in the DRC besides CWN are Sait with 30 000 customers and Celtel with 60 000 customers. There is also an analogue network called Starcell with approximately 20 000 customers. Between them, the incumbents primarily cover Kinshasha, Lubumbassi and the mining area of Mbuji Mayi. On the benefits of cellular for the African continent as a whole, Ms Joffe said: “Mobile and wireless technologies are already having a direct and positive impact on the African continent through the economic growth that reliable access to telecommunications stimulates.” Ms Joffe said a team of about 20 Vodacom specialists in various fields would be dispatched to the DRC to facilitate skills transfer, after which the majority of them will return to South Africa, leaving the day to day running of the network in the hands of the Congolese. “This will be a significant boost to an economy largely depleted of skilled people,“ she said.
For More Information Contact: African Wireless, Inc.
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