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Africa Defeats World’s Biggest Mobile Carriers

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Telecommunications - Investors King
  • Africa Defeats World’s Biggest Mobile Carriers

Back when African countries were auctioning off mobile licenses by the boatload to serve the region’s young, tech-savvy population, investing in the continent’s fast-growing economies seemed like a no-brainer. Some of the world’s biggest wireless carriers rushed in.

Now they’re wondering if they made a mistake. Increasing government and regulatory scrutiny, as well as a lack of expansion opportunities in sub-Saharan Africa, are making it harder for operators such as Vodafone Group Plc, Orange SA and Bharti Airtel Ltd. to grow. Their choice: Pull back or double down.

Two companies beating at least a partial retreat are Millicom International Cellular SA, which disposed of its Senegal and Democratic Republic of Congo units, and India’s Airtel, which sold businesses in Burkina Faso and Sierra Leone to Orange earlier this year. Reducing its exposure to Kenya, Vodafone transferred most of its $3.6 billion stake in Nairobi-based Safaricom Ltd. to majority-owned South African unit Vodacom Group Ltd. in May, and may pare further. That leaves Vodafone Ghana as the U.K. company’s sole own-branded African operation.

“At this point it is becoming clear who has a chance of making it in Africa and who does not, and it essentially boils down to scale, as well as government sway,” said Baha Makarem, an analyst at Arqaam Capital. “It’s just a question of who is ready to weather the storm.”

The shift in sentiment comes as governments across sub-Saharan Africa are losing favor with investors. The fall in commodity prices has reduced tax revenue in many countries, and average economic growth slumped to 1.4 percent last year from 3.4 percent in 2015, according to the International Monetary Fund. That’s encouraged lawmakers in countries including Tanzania and Ghana to look to international companies for revenue opportunities—both have ordered foreign wireless carriers to cede shares to local investors.

“The regulatory challenges are top of our mind at all times,” MTN Group Ltd. Chairman Phuthuma Nhleko told shareholders at the annual meeting of Africa’s biggest wireless carrier on May 25. “It’s just part of the environment in which we operate.”

Nhleko has firsthand experience with that. A Nigerian watchdog fined the carrier $5.2 billion in 2015 for missing a deadline to disconnect unregistered subscribers, leading to a slump in the share price that’s yet to turn around. The penalty was reduced to $1 billion after months of negotiations and Nhleko has since overhauled management and corporate governance. Even so, MTN was fined $8.5 million in Rwanda in May for non-compliance with its license obligations. The company hasn’t yet delivered on a promise to list its Nigerian unit in Lagos.

Vodacom, 70 percent owned by Vodafone, has complied with Tanzania’s demand to sell shares on the Dar es Salaam stock exchange. It had to delay the listing when a surge in demand from retail investors slowed the processing of applications from outside the country.

IPOs are the only way to force the wireless carriers to share their profits with local investors in the East African country, Tanzanian President John Magufuli said last month, adding that licenses could be withdrawn if they refuse the order.

“It is not enough to just subject the mobile-phone companies to fines and allow them to continue minting billions of money in profits,” the local Daily News quoted him as saying.

Not everyone is down on Africa, where GSMA Intelligence expects mobile revenue will reach $43 billion in 2020. Orange, France’s market leader, in February called Africa a priority region and has focused most of its investment in French-speaking markets such as Cameroon and Ivory Coast.
That’s partly to offset stagnating growth in Europe and to take advantage of a younger population demanding faster and cheaper data, according to Bruno Mettling, the Paris-based company’s head of operations on the continent. A lack of obsolete infrastructure that would need to be removed or upgraded is also underlying the business case, he said.

Some operators “are withdrawing from Africa in the face of the enormous investments to be made—3G, 4G, but also in the fiber to connect the antennas to each other,” Mettling said. “At Orange, we invest an average of 1 billion euros ($1.1 billion) in Africa each year.”

Areas of expansion for Orange include mobile banking, where Nairobi-based Safaricom blazed a trail with its M-Pesa product in Kenya. Orange Money reported a 74 percent increase in customers, to more than 30 million, in the first quarter, and plans to extend the service into its home market this year. Orange’s francophone markets have so far stopped short of ordering share sales to local investors.

Vodacom, based in Johannesburg, is another considering further expansion following the Safaricom deal. The tougher market and increasing willingness of some rivals to sell may have brought down prices, Chief Executive Officer Shameel Joosub said at the company’s results presentation in May.

“The days of you going in with a new greenfield license are gone,” Joosub said. The price of potential acquisition targets is, however, “becoming more reasonable,” and there “are not that many buyers.”

The first wave of second-generation digital mobile licenses in Africa started in the late 1990s, with Nigeria being one of the last countries to issue its first permit in 2001. While those markets have since been growing—more than half the continent’s population is seen owning a smartphone by 2020—the only country yet to auction licenses is Ethiopia.

“Africa is a market of growth, but also a very difficult environment to operate,” said Dobek Pater, managing director of Pretoria-based Africa Analysis. “Costs of operation are often high, disposable income levels of large segments of the society low, and the regulatory environment not always predictable. Only companies with “increasing economies of scale will succeed.”

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Fintech

From Trading to Credit: Robinhood Launches No-Fee Credit Card with Gold Membership Perks

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Robinhood

Robinhood Markets Inc. has announced the launch of its highly anticipated no-fee credit card and it was accompanied by exclusive perks for Gold membership subscribers.

This bold move is a step in the company’s mission to evolve into a comprehensive financial services provider.

The Robinhood Gold Card boasts an array of enticing features. Chief among them is the absence of annual costs or foreign transaction fees, positioning it as an attractive option for consumers seeking financial flexibility.

Moreover, cardholders stand to benefit from a generous 3% cash back on all categories of purchases, a competitive offer in comparison to industry rivals.

Vlad Tenev, CEO of Robinhood, emphasized the company’s commitment to innovation and industry leadership in an interview.

He expressed the intention to not merely introduce a credit card, but to revolutionize the market with a product that sets new standards for customer satisfaction and financial empowerment.

The announcement has sparked enthusiasm among investors, with Robinhood’s shares witnessing a 6.9% surge in early market trading following the news.

This surge further underscores the market’s confidence in the company’s strategic direction and its potential to disrupt traditional financial services.

Beyond the credit card venture, Robinhood has been steadily diversifying its offerings. With the introduction of retirement products and the expansion of commission-free trading services internationally, the company is positioning itself as a formidable player in the global finance landscape.

As Robinhood continues to innovate and expand its suite of services, its trajectory suggests a promising future as a leading force in democratizing access to financial tools and services.

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Telecommunications

NCC Files Copyright Infringement Charges Against MTN Nigeria and Others

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Karl O Toriola - Investorsking.com

The Nigerian Copyright Commission (NCC) has taken legal action against MTN Nigeria Communications Ltd. and four individuals, including its Chief Executive Officer, Karl Toriola, over alleged copyright infringement.

The charges, filed in the Federal High Court, Abuja Division, revolve around the unauthorized use of musical works belonging to artist Maleke Idowu Moye.

According to the NCC, the defendants are accused of offering for sale, selling, and trading musical works of Maleke without his consent between 2010 and 2017. These works were allegedly used as Caller Ring Back Tunes without proper authorization.

The musical pieces in question include popular tracks such as “911,” “Minimini-wanawana,” and “Stop racism,” among others.

The commission further alleges that the defendants distributed these musical works to subscribers without authorization, infringing upon the rights of the artist.

The charges are based on provisions of the Copyright Act, Cap. C28, Laws of the Federation of Nigeria, 2004.

As the case awaits assignment to a judge and a fixed date for mention, it marks a significant development in the ongoing efforts to uphold copyright protection in Nigeria’s telecommunications sector.

This legal action underscores the NCC’s commitment to safeguarding the intellectual property rights of artists and creators within the country.

MTN Nigeria, a major player in the telecommunications industry, now faces a legal battle that could have broader implications for how intellectual property rights are respected and enforced within Nigeria’s digital landscape.

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Telecommunications

MTN’s MoMo Sees 32.2% Surge in Transaction Volumes

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MTN Nigeria - Investors King

MTN Group’s mobile money platform, MoMo, has experienced a 32.2% surge in transaction volumes.

With 72.5 million active users, MoMo continues to solidify its position as a leading fintech service provider in Africa, tapping into the continent’s burgeoning mobile banking sector.

The company’s success underscores the growing trend of Africa’s young and tech-savvy population embracing mobile technology to address financial needs.

Mobile phones are increasingly becoming a tool for bridging gaps in services, particularly in banking, presenting a lucrative opportunity for wireless carriers like MTN to capitalize on the burgeoning fintech market.

MTN’s achievement comes as it finalizes a deal with Mastercard Inc., valuing its fintech business at an impressive $5.2 billion.

This strategic partnership further enhances MTN’s position in the digital finance space, positioning it for continued growth and innovation.

However, MTN is not alone in its fintech endeavors. Rivals such as Airtel Africa Plc, Safaricom Plc, and Vodacom Group Ltd. are also making strides in digital transformation, with plans to separate and monetize their fintech businesses in the long term.

Airtel Africa, for instance, is reportedly considering an IPO for its mobile money unit, indicating the high stakes and intense competition within the sector.

Despite the remarkable success in its fintech ventures, MTN faced challenges in its core telecommunications business, with service revenue growth slowing to 6.8%.

Inflation and currency devaluation in key markets, particularly Nigeria, impacted profitability, highlighting the complexities of operating in diverse African markets.

As MTN continues to expand its fintech footprint and invest in infrastructure to enhance connectivity across the continent, it remains poised to capitalize on the immense potential of Africa’s digital economy.

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