As other firms exit, phone companies enter Sudan

August 15, 2007 (KHARTOUM) — Bright yellow banners sprang up overnight along the banks of the Nile then spread along the ten-lane highways and crowded market streets of Sudan’s traffic-clogged capital, Khartoum.

They were the first steps in a campaign by South Africa’s MTN to stake a claim in one of Africa’s last big undeveloped mobile phone markets.

Foreign investors have steered clear of Sudan in recent years, following the international uproar over the crisis in Darfur and subsequent strengthening of U.S. sanctions against Khartoum.

Britain’s Rolls Royce announced plans to pull out in April, joining Germany’s Siemens , Switzerland’s ABB and Canada’s CHC Helicopter in the queue to exit.

But the newly booming telecoms market in the oil-rich east African country has proved too tempting for mobile phone companies to resist. For them, the vast expanses of Sudan’s western Darfur region are not so much a disaster zone as one more unexploited mobile phone market waiting to be tapped.

Sudan’s biggest mobile name is Kuwait’s MTC , which bought the Mobitel brand last year. “We expect aggressive growth in the next three to five years,” Mobitel’s chief executive Khaled Muhtadi told Reuters. “There is pent-up demand throughout the country.

“Twenty five per cent of the population just got their first mobile signal this year. Whenever you introduce the network to new areas, we experience congestion immediately. There is huge demand for the service.”

South Africa’s MTN is the latest big arrival. It bought the parent company of Sudan mobile operator Areeba in July last year. Late last month it re-branded Areeba as MTN-Sudan and since then it has been busy putting up its posters and stamping its name on the market. The outsiders also compete with Sudani, the mobile subsidiary of the former state telecoms monopoly Sudatel.

Analysts and entrepreneurs believe there may be more new names appearing on new advertising hoardings in the months and years to come.

“Since the arrival of MTC and Areeba, the market has become very competitive,” said Andrawes Snobar, Senior Research Analyst of the Jordan-based Arab Advisors Group. “It is becoming very tempting for regional and global investors.”

Three out of Africa’s six biggest countries by population — Nigeria, Egypt and South Africa — already have competitive and relatively mature mobile markets. Ethiopia’s huge and unexploited telecoms market is barred to all outside operators by a state monopoly. That only leaves the Democratic Republic of the Congo to rival Sudan’s potential.

The calculations are straightforward. Sudan is the largest country in Africa by geographic area, and the sixth largest by population, with around 40 million inhabitants.

But the proportion of the population with a mobile phone is still remarkably low — just 11.5 per cent in the second quarter of 2007, according to figures from British-based analysts Informa Telecoms & Media.

Those low subscriber numbers could soon be heading upwards very fast thanks partly to the country’s new oil wealth and the relative economic stability that followed a north-south peace deal in 2005 in Africa’s longest civil war, said Informa principal analyst Devine Kofiloto.

The low incomes earned by most Africans has done little to slow the spread of mobile phones in Africa, which has one of the fastest-growing telecoms markets in the world.

“Africa was late. Now it is catching up with the rest of the world. Telecoms has become very cheap. It has become accessible for people with very little income,” said Ali Hamad Bin Jarash Al Ghufli, chief executive officer of Canar Telecom, a consortium led by Etisalat of the United Arab Emirates that is currently negotiating for a Sudanese mobile license.

“People’s income in Sudan has increased recently, so it is even easier for them to have a mobile,” he said.

Information and Telecommunications Minister Al-Zahawi Ibrahim Malik said Sudan is in talks with Canar but had not agreed on a price.

Another largely untapped opportunity lies in South Sudan with two of its own tiny mobile operators Gemtel and NOW. Both could be acquisition targets.

But along with the huge opportunities come huge risks, among them getting caught up in the international outrage at the Darfur crisis in Sudan’s remote west.

Sudatel was one of 31 Sudanese companies blacklisted by Washington in May for allegedly “contributing to the conflict in the Darfur region.”

Other potential complications for foreign investors are illustrated by Paris-based telecoms equipment maker Alcatel-Lucent which has contracts with Sudatel.

In January this year, Alcatel sent a memo to U.S. nationals on its own staff warning them that they could be personally liable for any business they did with Sudan and other blacklisted countries through the company.

Alcatel has also been targeted by Darfur-focused campaigners like the Sudan Divestment Taskforce — a pressure group THAT targets large organisations to drop investments in companies it sees as supporting Sudan’s government.

On top of the political problems, there are the security risks to telecoms staff in the field.

None of that, however, has stopped the roll out of Sudan’s current mobile players into Darfur — a region with almost no mobile coverage outside the main cities and with an estimated population of up six million potential customers.

Mobitel, for one, recently stepped up its expansion there after getting security clearance to enter 13 previously closed off areas. “It is a risky situation – that’s why we have to be particularly careful when we are rolling out our network through troubled areas,” said CEO Khaled Muhtadi. “But people need telecoms wherever they are.”

(Reuters)