Burkina Faso - New telecom licence offered in high-growth mobile market

Telecom Investment Research Note

Synopsis

Burkina Faso in West Africa has one of the fastest growing mobile markets in the region with a penetration rate that stands at only about half the African average. The country’s telecommunications regulator has now announced an international tender for a combined fixed and mobile network operating licence, including the provision of third generation (3G) mobile services in the country for the first time, which will allow the licensee to enter the lucrative and virtually untapped broadband market. The licence will be valid for a period of ten years, bids are due by 19 October 2010.

The new operator will compete with Onatel, the partly privatised incumbent fixed-line telco which also operates the Telmob GSM mobile network and the country’s leading Internet service provider (ISP) FasoNet. The second mobile operator is Zain which was recently taken over by Bharti Airtel of India. Etisalat-owned Moov is the third and smallest mobile network in Burkina Faso.

This BuddeComm Investment Research Note outlines the opportunity but also points at risks associated with the new licence such as declining ARPU, a history of non-transparent bidding processes in the region and difficulties with spectrum allocation and international connectivity. However, the enormous potential in subscriber growth and new services will ensure strong interest in the licence from international bidders.

Brief profiles of the existing market players are presented, including financial results from 2006 to 2010, current pricing of broadband services, recent takeovers and IPOs, and recent valuations of other operating licences in the region which will be helpful to potential bidders for the licence evaluating the opportunity.