THE STATE OF AFRICAN 4G

4G Progress, Spectrum Value and the Precarious Case for African

Data Monetization

OCTOBER 2018

REPORT SUMMARY & TABLE OF CONTENTS

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Report summary: African 4G rollout, spectrum value and business models

On the surface, 4G service rollout in African markets appears to be going well. Around 115 LTE networks are commercial, or expected to launch in the continent before the end of 2018. On average, since 2015, around 20 new 4G networks launch in Africa every year. The African 4G subscriber base has been doubling every year (though from a small base) and operators are reporting double-digit traffic growth numbers.

The reality, however, is more nuanced. Despite the positive growth, the African market is falling behind on 4G. The region accounts for ~5% of global mobile broadband connections, but only ~2% of 4G connections. African 4G penetration (of overall mobile subscriptions, or the population) is the lowest in the world, as is 4G network coverage of the population. Spectrum allocation has been a challenge, and 4G business models remain in flux.

Building on Xalam Analytics’ extensive market trackers and 4G dashboards, this report provide the most extensive analysis available on the current state of African 4G markets. It provides insights on the nature, pace and size of 4G deployments, the nature, and value of 4G spectrum used, critical obstacles to African 4G monetization and more.

The report also explores critical 4G questions, such as the future of Rwanda’s 4G wholesale model, the impact of upcoming 5G on 4G, the impact of 4G on operator EBITDA and cash flows and more.

A reference report for all stakeholders and investors in African mobile broadband markets.

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Sample key points explored in this report

The insights derived from our research on African 4G markets are distilled in this report, covering critical key questions and points, including:

What is the state of 4G LTE rollout on the African continent? What is the current state of 4G adoption across countries, sub-regions? Where are Africa’s largest 4G markets? Who are Africa’s top 4G providers? Which spectrum bands dominate in African markets, and why? What is the status of availability of 4G lower bands? Which 4G bands are proving the most valuable in the African context? Which African markets have generated in the most in spectrum sales? How does African 4G spectrum value compare to 3G? 2G? Are investments in 4G spectrum, at current price points worth it, given the business challenge of monetizing data? Can 4G overtake 3G in African markets? Has Rwanda’s 4G model worked? Does the arrival of 5G make 4G moot? And more..

The Enterprise-wide/Premium version of this report includes 30 supporting charts and data points in Excel format, along with access to the Xalam retail broadband/LTE dashboards (See Report Specs).

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Table of Contents

EXECUTIVE SUMMARY - THE DIFFICULT CASE FOR AFRICAN 4G

PART I BREAKING DOWN THE AFRICAN 4G MARKET: STATE OF ROLLOUT, SPECTRUM VALUE, AND ADOPTION

STATE OF ROLLOUT: 100+, UNEVENLY DISTRIBUTED 4G NETWORKSAfrica 4G – More than 100 4G networks are now operationalAfrica 4G – Not evenly distributedAfrica 4G network deployment – Increasingly a large MNO gameAfrica 4G network deployment – Striking Regional DifferencesAfrica 4G network coverage – a slow and steady expansionAfrica 4G network deployment – Major pan-African groups are catching up

AN ANALYSIS OF AFRICAN 4G SPECTRUM ALLOCATIONAfrica 4G spectrum allocation progress: mostly complete, with lots of work in progressAfrica 4G spectrum allocation progress: roadblocks aboundAfrica 4G spectrum allocation progress: a digital switchover failureSpectrum allocation – an over-reliance on refarmingShowing the money: African 4G spectrum sales have surpassed 3GShowing the money: Egypt, West Africa make the most of 4G spectrum salesAfrica 4G spectrum value – 800 MHz valued like 2G, 4G pricier than 3G was

AFRICA’S 4G ADOPTION: BREAKING DOWN THE NUMBERSAfrica’s mobile Internet addressable baseAfrica 4G Connections – to grow 4x over the next five yearsAn uneven uptake – African 4G adoption by region, and the West Africa gapAfrica’s top 20 4G markets – a country viewAfrica’s top 4G providers – a top line view

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Table of Contents

PART II ANSWERING CRITICAL 4G QUESTIONS

WHY IS AFRICA BEHIND ON 4G - AND CAN THIS BE FIXED?African LTE in global context(Sub-Saharan) Africa is falling behind on 4G4G coverage and penetration are lagging global trendsWhy Africa is falling behind – A financially-prolific, yet disastrous 4G spectrum allocationWhy Africa is falling behind – Inflexible, befuddling and self-defeating spectrum regimesWhy Africa is falling behind – Terrible terrestrial fibre economicsMobile leased capacity demand rising by ~30% annuallyAfrica terrestrial fibre – Not competitive everywhere

THE RWANDAN 4G MODEL: SUCCESS OR FAILURE?The Rwandan 4G case – an overviewThe Rwandan 4G case – 4G is here, but nobody’s using itThe Rwandan 4G case: coverage, pricing and adoptionWhy the Rwandan 4G model hasn’t worked

DOES THE ARRIVAL OF 5G MAKE AFRICAN 4G MOOT?The 5G caseThe African 5G impact: Not here yet, but already a potential game changerThe African 5G impact – 4G will do fine for now

CAN AFRICAN 4G BE MONETIZED? The 4G impact on data revenueThe 4G impact on ARPU4G – not a panacea for mobile revenue pressureThe 4G EBITDA case – for many MNOs, there isn’t oneThe keys to 4G success: low spectrum costs, owned fibre, market scale

PART III APPENDIX & TABLES

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Charts & Tables

STATE OF ROLLOUT: 100+, UNEVENLY DISTRIBUTED 4G NETWORKSNumber of Africa LTE Commercial Networks – 2012-2019F Africa 4G Network availability – December 2018 (Forecast) Distribution of African 4G Network availability – December 2018 (Forecast) Number of Africa LTE Commercial Networks by Provider Type – 2012-2019F Africa Mobile Networks by Region – 2018 E % of MNOs that have a 4G Network – Regional average 2018 E Africa 4G Networks by Region – 2018 E 4G network coverage of the population in sample African markets – 2018E* Number of Africa LTE commercial networks by major operator group – 2018E*

AN ANALYSIS OF AFRICAN 4G SPECTRUM ALLOCATIONAfrica 4G spectrum allocation – View by status of the process Africa 4G spectrum allocation – View by status of the process Digital switchover status in Sub-Saharan Africa – February 2018Distribution of Prime 4G LTE Bands – Africa vs. Global (% of Commercial LTE Networks)*Key Phases of African spectrum licensingFinancial proceeds from 4G spectrum sales across African marketsMedian Value for Sample Frequency Bands in African MarketsMedian Value by Technology Generation and Spectrum Blocks in African Markets

AFRICA’S 4G ADOPTION: BREAKING DOWN THE NUMBERSEvolution of African mobile broadband connections – 3G vs. 4GRegional contribution to 4G and selected macro-indicatorsAfrica 4G connections and penetration – a country viewAfrica Top 20 4G Providers – based on active connections - 2018FAfrica 4G connections by pan-African telco group – 2018F

WHY IS AFRICA BEHIND ON 4G - AND CAN THIS BE FIXED?LTE Connections Around the World – 2017-18EAfrica contribution to key global industry indicatorsAfrica contribution to global LTE connections4G Penetration of mobile subscriptions – How Africa fares vs. the world4G networks coverage of the population – How Africa fares vs. the worldNigeria – 800 MHz spectrum allocation vs. Mobile CapExGhana – 2600 MHz spectrum allocation vs. Mobile CapExEvolution of Fibre Sites – Sub-Saharan Africa*Evolution of Mobile Leased Capacity Requirements – Sub-Saharan Africa*Africa Terrestrial Fibre – Competitive Context Map - 2017 ESSA Fibre Country Distribution - by Market Context - 2017 E% of SSA installed fibre - by Market Context - 2017 E*

THE RWANDAN 4G MODEL: SUCCESS OR FAILURE?Rwanda 4G network coverage vs. African markets - 2018 ERwanda 4G adoption vs. African markets – 4G as % of mobile baseRwanda 4G data pricing vs. African markets – Q4 2018ERwanda 4G adoption vs. 3G

DOES THE ARRIVAL OF 5G MAKE AFRICAN 4G MOOT?Cell site capacity requirements by technology generation

CAN AFRICAN 4G BE MONETIZED? Data contribution to revenue vs. MBB penetration – 3G vs. 4G MNOs – 2018 EEvolution of ARPU vs. 4G Penetration (2014-18) – South AfricaEvolution of ARPU vs. 4G Penetration (2014-18) – ZimbabweAverage mobile services revenue growth – 4G MNOs vs. 3G-Only MNOsEBITDA margin vs. 4G Penetration – 4G MNOs vs. 3G-Only MNOs

TABLE: 4G CONNECTIONS BY COUNTRY

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