The Telecoms Insurance Opportunity in Sub Saharan Africa

24 April 2015

For a number of years, the global telecommunications (telecoms) industry has recognised the importance of emerging markets as an area representing some of the greatest growth opportunities – particularly as revenue from developed telecoms markets in North America and Western Europe begins to plateau.

For a number of years, the global telecommunications (telecoms) industry has recognised the importance of emerging markets as an area representing some of the greatest growth opportunities – particularly as revenue from developed telecoms markets in North America and Western Europe begins to plateau.

Telecoms is a growth industry in most emerging markets, but the opportunity in sub-Saharan Africa over the next five years will continue to be of particular interest to investors. Firstly, booming population growth and increased levels of urbanisation will deliver a growing consumer base, secondly, as sub- Saharan Africa further embraces data services there is wider scope for per user revenue to increase as consumers switch from 2G voice services to more costly data options, and thirdly, governments across sub-Saharan Africa are increasingly supportive of telecoms innovation for a plethora of new services and media offerings – particularly advancements in the mobile financial services space.

Inevitably with this scale of opportunity comes a level of risk; both from an industry and a country risks perspective. Those telecoms companies that can evolve their strategies accordingly will be set to retain, or improve their market share, in their territories of operation. The market leaders will be those that transition to offering a full suite of data services above purely 2G voice and messaging services, and those that shed assets in a bid to reduce costs and to free up funds to divert towards product innovation and a refinement of services. The market losers will be those that have historically focused on 2G, that continue to own physical assets, such as towers, in order to manage a network, and those that retain only a diminutive market share.

The need for corporates to be agile and to outperform their peers by delivering improved services or developing new product lines with greater revenue potential is applicable across all industries. The challenge for telecoms investors is that by providing increasingly integral services to the public and government alike, the level of political scrutiny attached to this strategic industry is set to heighten. Challenges include regulator interference, changing fiscal regimes, and forced renegotiation of licences. Telecoms leaders will instinctively know how to outclass the competition; the difficulty is when unpredictable government policies, or broader political volatility, leads to unanticipated changes in the operating environment which clouds strategic decision-making or unravels best laid plans.

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