TWO market-shifting deals this week have deep implications for the African cellphone and telecoms markets.
Vodafone’s $130bn sale of its 45% stake in the American mobile network operator Verizon Wireless is the third-biggest corporate deal in history in any sector.
The fact that the biggest to date was Vodafone’s $203bn takeover of Mannesmann in 2000 says much about the massive flow of revenue in the telecoms industry.
Across Africa, telecommunications is fast replacing mining as the most lucrative sector, and part of Vodafone’s windfall from the deal will be pumped into bolstering its opportunities on the continent.
In a Vodafone presentation to investors on the deal, CEO Vittorio Colao lifted the lid on Project Spring: a “new programme of additional organic investments in 4G, 3G, fibre and broadband, enterprise services and improved customer experience across all of our markets”.
The “deal dividend” means Vodafone will commit at least €6bn to high-speed broadband infrastructure in emerging markets, with a strong focus on Africa.
“Project Spring will strengthen and accelerate our existing Vodafone 2015 strategy, enabling us to take even greater advantage of the growing global demand for ubiquitous high-speed data,” he said.
While its South African subsidiary, Vodacom, is investing about R7bn a year in infrastructure, the local market is also expected to benefit from the parent group’s investments.
Vodacom CEO Shameel Joosub would not be drawn on details, limiting his public response to a single sentence: “This is definitely a positive development for Vodacom, and will further enhance our competitive positioning.”
In the context of Vodafone’s focus on high-speed data, the investment will probably enable Vodacom to speed up its roll-out of Long-Term Evolution (LTE) the precursor to 4G, or fourth-generation mobile broadband.
With new Communications Minister Yunus Carrim committing to a March 2014 deadline for delivering “a spectrum policy to facilitate the deployment of wireless technologies in support of universal access” — shorthand for issuing 4G licences — the investment could not be better timed.
Meanwhile, a somewhat smaller deal this week — Microsoft’s acquisition of Nokia’s devices and services division for $7.2bn — will have equally far-reaching implications for Africa.
Both Microsoft and Nokia have made substantial investments in innovation across Africa. Microsoft’s 4Afrika project, designed to accelerate growth on the continent, this week saw the start of a partnership with the Government’s Jobs Fund to help create up to 600 technology start-ups over the next three years.
At a Nokia product showcase event in Johannesburg on Thursday, vice-president for Nokia in South and East Africa Gerard Brandjes announced that the mobile device manufacturer would once again be lead sponsor of the Demo Africa event in Nairobi in October.
The event provides exposure to African start-ups on a global stage. “Our core strength comes from our local presence,” he declared.
He also presided over the formal launch of Nokia’s new phone line-up in Africa.
The flagship Lumia devices — running Microsoft’s Windows Phone operating system — were the most dazzling of the new devices demonstrated.
The Lumia 1020 has the most advanced camera ever integrated into a standard smartphone, while the Lumia 925 has one of the sharpest screens yet on a Nokia device.
However, for Africa, the more significant news was the introduction of low-cost, high-powered devices.
The Asha 210, a crossover between a feature phone and a smartphone, but with a QWERTY keyboard, has a dedicated WhatsApp button among the keys.
This, says Mr Brandjes, is in recognition of the tremendous appeal of instant messaging in emerging markets. The lower-cost Nokia 208, using the company’s older S40 operating system, will be the first basic phone to offer 3G connectivity.
The appeal of such low-cost devices is underlined by the success of the Nokia Lumia 520, the first of the Windows Phone devices to sell for under R2,000. The pricepoint and the smartphone capability has turned it into the bestselling phone in South Africa at present.
Representing as it does the fruits of Nokia’s collaboration with Microsoft, and falling halfway between the company’s flagship phones and it’s low-end devices, the success of this model is the real clue to the bargain Microsoft has picked up.
While much has been made of the challenge of integrating a company with almost as many employees as Microsoft itself, a more significant aspect of the deal is Microsoft’s ability to dig into its deep pockets to ensure Nokia continues investing in research and development.
The Seattle-based software giant has $77bn available in cash and investments.
The $7.2bn it spent on Nokia is clearly just the beginning of its evolution into a devices business.
Going by Microsoft’s regional track record and the evidence presented by Nokia this week, Africa will be one of the big beneficiaries of the deal.
• This article was first published in Sunday Times: Business Times