INTERNATIONAL TELECOMMUNICATION UNION Opening presentation for Africa TELECOM '94 FORUM Cairo, April 25 1994 Dr Pekka Tarjanne Secretary-General, International Telecommunication Union Slide 1: Welcome On behalf of the organisers of Africa TELECOM '94, I would like to welcome you to this Special Session of the World Telecommunication FORUM. Over the next five days we will be hearing a wide range of opinions of experts from telecommunications ministries, from telecommunications operators, manufacturers and users, and from regional and international organisations concerning the future development of telecommunications in Africa and the Middle East. It is a region with clear problems, but also one with immense potential. This FORUM is probably unique in bringing so many of the leading thinkers and players in this field together to discuss the problems of the region. I hope that we will all profit from the opportunity to exchange views and to share information. In total, there are some 15 sessions dealing with policy-making, network development, technology, financing and regional co-operation as well as 14 workshops dealing with more detailed issues. It is a highly ambitious programme and one to which I personally am looking forward with great expectations. Slide 2: Theme The theme of the FORUM is "Regional and global integration: a challenge for telecommunications and development". Perhaps the clearest message that should come out of this FORUM is that, while many of the nations of the region are individually strong, they are much stronger when working together. Telecommunications is a way of bringing nations together. The sharing of information -- whether it be voice, data, text or image, is an important step towards understanding, and understanding is an important step towards co-operating. As the volume of telecommunications traffic grows, so does the volume of trade and as trade grows, so does the level of economic development. The level of international traffic per subscriber in Sub-Saharan Africa (200 minutes per year) is the highest of any region in the world, partly as a legacy of the colonial history of the region. But the level of traffic per inhabitant (less than one minute) is the lowest in the world. This is a simple problem of supply not keeping up with demand. Resolving this contradiction, and making access to telecommunication services more widely available, is one of the main problems facing the region over the coming decade. Slide 3: Teledensity in Africa, Middle East and the World Across the world as a whole, there are some 575 million telephone subscribers, or one for every ten people. In Sub-Saharan Africa there are just over 2 million telephone subscribers, or one for every 250 people. Only a handful of African countries have more than one telephone subscriber per 100 population and these are mainly in the North of the continent, in the South or on one of the islands. In the Middle East the situation is better, but there is a big gap between the level of development reached in the oil-rich Gulf States and that of the other Arab States. There is an even bigger gap between the fortunes of the Africa and Middle East regions and the 24 advanced industrialised countries of the OECD which have one telephone subscriber for every two people. Slide 4: Financial state of public telecom services in the region These same disparities are evident also in the financial state of public telecommunication services. Overall, the Public Telecommunications Operators (PTOs) of the region generate revenues of around US$10 billion per year, equivalent to one of the Regional Bell Operating Companies (RBOCs) in the US. But a high proportion of this revenue comes from just three operators, Telkom of South Africa, The Saudi Ministry of Posts and Telecommunications and Cable and Wireless of the UK. Elsewhere, revenues are rather more thinly spread. Telecommunications investment amounted to some US$3 billion in 1992, equivalent to around 30 per cent of revenue. This figure is not sufficient to sustain a rapid development of telecommunications networks and this problem of under-investment needs to be addressed in a number of countries. Slide 5: New lines added and growth rates, 1987-92 During the last five years, some 4.7 million new main lines have been installed in the region, of which just over three million were installed in the Arab States. The case of our host country, Egypt, is exemplary in this respect. Since 1987 Egypt has added an extra one million new mainlines under ARENTO's five-year plan. Egypt has also developed a local manufacturing capability and has managed to keep the average cost per new line added below US$1 200. By contrast, the average price per new line added in sub-Saharan Africa was more than US$5 600 or almost five times higher. There are important reasons why this is so: for instance, the poor state of development of the network, the fact that everything has to be imported and paid for in hard currency and the lack of economies of scale in purchasing. But some steps could be taken to improve the efficiency and transparency of the procurement processes and, through regional co-ordination of purchasing, to gain volume discounts. Slide 6: Teledensity map for Africa The map shows the current state of geography of telecommunications in the African continent. The yellow colour indicates those countries with less than one telephone subscriber for every two hundred people. This covers the broad mass of sub-Saharan Africa. The countries in Green are somewhat better off but still have a teledensity of less than one line per 100 population. The countries in red have passed the barrier of one line per 100 population and include some of the mineral rich economies of southern Africa plus the Gabon as well as the five states in Northern Africa. Finally, the countries in blue are those that have at least one line for every twenty people. These countries include South Africa plus a few off-shore islands and territories such as Réunion or the Seychelles. The pattern of teledensity reflects the history of the continent, its mineral wealth and to a certain extent new growth industries such as tourism. But much more investment would be needed before the map begins to reflect the indigenous enterprise of the African people which is the continent's greatest resource. Slide 7: Investment requirements ITU research has shown that a minimum investment of US$25 billion is required by the end of the decade in order to sustain the current, relatively modest, levels of growth in the region. A much higher level of investment would be necessary to make a significant impact in the African continent, particularly in sub-Saharan Africa where most countries are unlikely to reach the symbolic target of one telephone line per 100 inhabitants even by the start of the next decade. Evidence from other parts of the world has shown the transition from ten to thirty lines per 100 inhabitants can be achieved relatively quickly, in less than a decade. Within the region, the United Arab Emirates and the island of Réunion have already achieved this transition and some of the Gulf States will probably complete the transition in the next few years. But few countries anywhere in the world have achieved the transition from less than one mainline to ten mainlines per 100 in the same time frame. Unless there is a substantial increase in investment in Sub-Saharan Africa, there is little likelihood of this being achieved. Slide 8: Success stories But rather than focus on the problems, it is better to look for regional role models which are showing the way forward. In this slide, three criteria for success are presented: passing the symbolic barrier of one mainline per 100 population, installing more than 100'000 new lines in a year, and establishing a fully digital network. In each category there are examples of successful case studies from the region. Earlier I touched on the case of Egypt. A second example is Botswana which now has the third highest telephone line density in mainland Sub-Saharan Africa, after South Africa and Namibia. Even though Botswana is listed among the Least Developed Countries recognised by the United Nations Development Programme (UNDP), nevertheless its telecommunications infrastructure is one of the most modern and extensive in Africa. The network has grown at the rate of 20 per cent per year since 1987. The Botswana Telecommunications Corporation (BTC) is investing in a fibre optic backbone network due for completion in 1994. This will link the main cities and will supplement the existing microwave inter-exchange network. Investment in new technology has enabled the BTC to offer packet-switching services (BOTSPAC) since June 1992 and radio-paging (BTC Paging) since May 1992. A cellular radio service is under development. Slide 9: Sector restructuring Clearly Botswana is not representative of developing countries as a whole. Its economy is based on diamonds and other natural resources and it has a growing income from tourism. It also has a small population, 1.4 million, spread over a very wide area. Nevertheless, there are certain steps which Botswana has taken since independence which show how it has been restructuring the telecommunication sector. - In 1980, it separated the Public Telecommunications Operator from the state. Even though BTC is currently government-owned, it operates as if it were a private company. - BTC has benefited from technology transfer, both of technical and managerial skills, through its relationship with Cable & Wireless. - BTC has continued to invest at a heavy rate. Investment as a percentage of revenue has been consistently above 40 per cent throughout the last decade and in 1992 investment actually exceeded revenue in preparation for the introduction of the new packet-switching and radio-paging services. - While concentrating initially on providing services to the business community, BTC is now widening its reach. In 1992, for the first time, more than 50 per cent of all lines served residential subscribers and the number of payphones installed grew by 10 per cent. BTC has publicly announced a policy of providing at least one payphone in every village of the country with more than 500 population. As this slide shows, many other African countries have taken steps to restructure the telecommunication sector, but relatively few to date have followed Botswana's example of forming a partnership with the private sector to do so. Slide 10: Investment opportunities The theme of this presentation has been that the demand for telecommunications services in the region greatly outstrip the supply. For this reason, there are many different types of investment opportunity. The most obvious is the privatisation programmes currently being established in several countries including Rwanda and Tanzania. Other countries have taken the path of issuing new licences for mobile communications services, for instance in South Africa and Ghana. In addition, there are more conventional schemes such as technical co-operation programmes, build-operate-transfer schemes or multi-lateral aid programmes such as those funded by the African Development Bank or the European Investment Bank. Slide 11: Problems and pitfalls These investment opportunities must be seen in the context of the sometimes difficult operating environment of the region. As those who do business in the region will testify, there are a number of problems associated with lack of foreign exchange, limited technical expertise, restrictive market structures and inefficient procurement practices. Perhaps the final line of the slide summarises the situation: political, financial and commercial risk. Some moves can be made within the governments of these countries to improve the situation, for instance by establishing clear regulatory responsibilities. Nevertheless, the responsibility for taking the risks must lie with the private sector. During the 1980s, there was a net flow of capital from Africa to the donor nations as debt repayment greatly outweighed fresh capital. But in the 1990s there are signs that this flow of capital has been reversed and that foreign direct investment is once again flowing into Africa, particularly to those countries which have established stable democratic systems. Slide 12: How can ITU help? The International Telecommunication Union is not a direct investor itself. But it can play an important catalytic role in bringing together project planners with potential investors. This is the role played by the ITU, for instance, in the RASCOM project to create a regional African satellite system. This project is now entering the operational phase. Also the ITU can provide independent advice on financial, regulatory and market issues. A good example of this is the work that has been carried out under the auspices of ITU to draft an African Green paper. The ITU is also assisting the African National Congress in South Africa in developing a system of telecommunication performance indicators for post-apartheid South Africa. Thirdly, the ITU can help by focusing attention on the needs of the region and by co-ordinating the efforts of the different multilateral, regional and national development efforts. In this respect, this FORUM organised by ITU TELECOM and the World Telecommunication Development Conference held last month in Buenos Aires are further examples of the practical and timely assistance that ITU can provide. I would like to take this opportunity to thank the organisers and hosts of this FORUM in creating what, I am sure, will prove to be a major contribution to the understanding of the telecommunication development issues in the region. Slide 13: Conclusions Finally, I would like to conclude with a number of simple points which I hope will guide your discussions over the next few days. Firstly, that the demand for telecommunication services in the region greatly outstrips the level of supply and that a further US$25 billion will need to be invested before the end of the decade just to maintain current levels of network growth. Secondly, the need to emphasise the positive aspects of telecommunication development in the region by focusing on successful role models and new opportunities for trade and investment. Finally to emphasise again the overall theme of the FORUM, namely the need for integration of the economies of Africa and the Middle East into the regional and global economy. This FORUM provides an ideal launchpad for such a regional initiative and I hope that you will join me in making every effort to see that it succeeds.