A marriage made in heaven

Zain Mobile is coming. The question is, will they partner with Telkom?

As you watch the coverage of the Beijing Olympics you may be wondering about Zain Mobile as their logo burns itself into the back of your mind.

Zain Mobile is a Kuwati-based mobile operator that expanded into Africa in mid-2005 by purchasing African mobile leader Celtel International for $3,36-billion (R26,2-billion) and is in the process of re-branding its operations in Africa.

Zain operates in 22 countries across the Middle East and Africa with a subscriber base of 45,7-million customers, with operations in Madagascar, Malawi, Zambia, Tanzania, Uganda, Kenya, the Democratic Republic of Congo, the Republic of Congo, Gabon, Nigeria, Chad, Sudan, Niger, Burkina Faso, Sierra Leone, Lebanon, Jordan, Iraq, Kuwait, Bahrain and Saudi Arabia.

Its biggest rival is the MTN Group, which operates in 21 countries across the Middle East and Africa with a subscriber base of more than 40-million.

MTN operates in Botswana, Cameroon, Côte d’Ivoire, Nigeria, the Republic of Congo, Rwanda, South Africa, Swaziland, Uganda, Zambia, Iran, Afghanistan, Benin, Cyprus, Ghana, Guinea Bissau, Guinea Republic, Liberia, Sudan, Syria and Yemen.

While Zain is remaining tight-lipped about how it would enter the South African market and which company they would partner with, its executive management has made no secret of the fact that they are interested.

Celtel chief executive Chris Gabriel told Reuters in June that it would be very interested in getting into the South African market to take on the Vodacom and MTN groups in their own backyard.

Gabriel said reports that South Africa would license a fourth mobile operator had piqued their interest.
He was referring to comments made in May by Parliament’s communications portfolio committee chair, Khotso Khumalo, saying the government would look to license a fourth mobile operator and a third fixed-line operator in 2009.

However, anybody who paid attention to how the department of communication had severely delayed the licensing process of the second network operator, Neotel, would be wary of the time this could take to implement. But for Zain there is another option.

The two things Zain would require in South Africa to begin operations is a licence and access to the crucial spectrum needed to run a mobile network.

Luckily for the company, Telkom has both and is currently in negotiations to offload its 50% stake in mobile partner Vodacom.

Telkom and the United Kingdom-based Vodafone, which owns the other 50% of Vodacom, have been at each other’s throats for years over differences in opinion about how Vodacom expands into Africa.

The result has been a fractious relationship between Telkom and Vodacom, which has come to a head in the current negotiations.

Telkom CEO Reuben September told the Mail & Guardian in June this year that Telkom would be rolling out its own mobile offering once it had offloaded its share in Vodacom.

September said Telkom had recently gained access to the critical spectrum required, the 1800MHz to 2100MHz band, which would allow it to roll out a fixed wireless network for mobile.

In fact, Telkom has been entitled to this crucial spectrum since 2001—as a result of the Telecommunications Amendment Act of that year—and could have requested that Icasa issue the licence at any time since then.

September said Telkom would work with partners in rolling out its mobile offering.
“I can tell you there will be partners available,” he said.

So short of jumping into bed with Cell C, what options does Telkom have? Telkom has the licence and the spectrum that Zain needs to get going in South Africa, and Zain has the mobile expertise and the footprint in Africa that Telkom is looking for—it seems like a marriage made in heaven.

Telkom’s executives went to great lengths at their recent results announcement to express the success of their Nigerian business, Multilinks.

The success of Multlinks in Nigeria points the way forward for Telkom and, with an established African mobile partner like Zain, it could take the dual fixed-line and mobile strategy to the rest of the continent.

Meanwhile, Telkom has contracted Chinese firm Huawei to build its fixed wireless and mobile data network in South Africa, which it expects to be connecting pilot customers to in September.

However, regarding a potential partnership with Zain, Telkom chief of strategy Naas Fourie said: “While Telkom will continuously explore all avenues at all times in its endeavour to enhance shareholder value, it does not deem it prudent to disclose the entities with which it has entered into discussions.”

Zain spokesperson Antoine Aboukhalil told the M&G that any rumours about Zain launching in South Africa in the coming months were “pure speculation at this stage”. “Zain is interested in operating in South Africa if an additional mobile licence is offered by the South African authorities and subject to us attaining such a licence,” he said.

Regarding the possible partnership with Telkom, Aboukhalil said there was no foundation “just yet” to draw any conclusions.

Lloyd Gedye

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