London — Orange has taken the unusual step of buying a Gambian company with an ISP license to its name in order to enter the market. The normal front door would be to buy an existing telecoms operator or simply pay for a license and invest. Russell Southwood looks at the implications of this move and takes the temperature of a small market under some pressure.
On 4 April 2019, the owner and CEO of soon-to-be Gambian ISP Xoom Wireless announced on his Twitter feed: "I am pleased to announce that Xoom Wireless has been acquired by Sonatel operating the Orange brand and Teranga Capital SN in a multi-million dollar takeover. With this takeover, Sonatel will build a state of the art network infrastructure to deliver reliable and high-speed internet for Residence and businesses in the Gambia at affordable prices."
In his tweet he thanked the regulator PURA and the Gambia Chamber of Commerce and Industry for their critical contribution to "creating the environment for making this investment happen." He also thanked the President for "giving his Government's ultimate support to the realization of the project. Your vision for Gambia to go digital will be championed by leveraging on the technologies Orange will launch in Gambia."
According to one local industry source:" There was lots of noise though from the public and operators on the issue of just buying up someone with license and no infrastructure. Post was taken down after the noise". Gambians are sensitive about Senegalese influence as their country is completely surrounded by Senegal. Under the last president there was a spat with Senegal and it closed the ferry link for a while to make a point.
Having cleared the corporate processes in Sonatel, a press release was issued announcing the purchase on 29 April 2019. Sonatel has bought 91.6% of the company's share capital and Teranga SN, a Senegalese VC company launched by the former CEO of start-up hub CTIC bought a minority state. Local sources told me last week that Teranga took the investment proposition to Sonatel. According to the release:" The agreements obtained are subject to approval by the Gambian authorities".
Buying an ISP licence from a company not yet operating is novel but if (as seems likely) it gets regulatory approval, it gives Sonatel entry into a market that is currently undergoing a shake-up.
The state-owned fixed line telco Gamtel has been the subject of a World Bank options study that concluded that it and the other state asset, mobile operator Gamcel, should both be privatized. Both need a strategic investment partner and local industry sources note that they have invested less than US$200,000 in the last few years. The reason? US$200 million was taken out of the companies under the previous regime:"There have been so many years of mismanagement and lack of investment." The local telecoms private sector is talking to the Minister about creating a local investment consortium (as happened with the landing station) to operate Gamtel.
In the mobile sector, Comium is under severe financial pressure and is rumored to be up for sale. As ever, the sticking point is that the price is too high. The big winners have been locally owned QCell and Africell. The latter is number one with over 1 million subscribers and QCell is number 2 with around 300,000. Both have 4G consumer offers. QCell has also bought a license in Sierra Leone and plans to roll out there:"The market is very fluid. Gamcel and Comium need to be bought to change the dynamics."
In terms of the ISP sector, revenues are down:"Customers are pushing for better quality and higher speeds." The consortium licences for the international gateway have not been finalized, although most have made their investment payments. The ISPs are asking for licences that will allow them to do VoIP , Triple Play and FTTH and they will be 15 years in duration. A second international submarine cable is being talked about as a back-up.
There is some pushback from the management of Gamtel but it looks like it will happen. Gamtel is still trying to hold on to links at the local level by not delivering beyond ISP's POP sites. There is considerable skepticism about Gamtel's abilities at the retail level:"When they get to retail, they lose everything they've made." One ISP has started rolling out local fibre in Banjul but was asked to stop by the Ministry.
Taking too long to resolve the Gamtel/Gamcel sale will mean that the next wave of innovation will be slowed down. Orange may be the grit in the oyster that will begin to add some fresh competitive impetus to the market.