French firms at heart of race for MEA mobile markets

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French firms at heart of race for MEA mobile markets

By CAROLINE GABRIEL

Published: 21 July, 2009

The scramble for mobile markets in Africa and the Middle East is well underway, and while early activity was driven by expansionist local operators like MTN, the European giants are now stepping up their game, with French players poised to shake up the picture significantly.

There are two key aspects to the multipronged attack by French players from Vivendi and Orange to new start-up Augere. One is acquisition of existing 2G and 3G players or licenses, the other is to establish footholds using new technologies, with WiMAX in the forefront. France Telecom is using WiMAX in many sub-Saharan African territories to expand its Orange brand even before it can gain 3G licenses, and now new company Augere - founded by former Orange CEO Sanjiv Ahuja - is pursuing a similar strategy.

The London-based start-up has raised €88m($125m) in an initial round of funding from France Telecom itself (which holds a 22% stake), plus US venture capitalists New Silk Route and Vedanta Capital. It plans to launch a WiMAX network in Bangladesh and Pakistan in October, with African markets Rwanda and Uganda to follow early next year, and then Indonesia, the Philippines and Nigeria. The overall goal is to make wireless broadband available to one billion people by 2014. The Augere business model is based on discount access with a price point of €7 ($10) per broadband connection per month, with EBITDA break-even expected in each country three years after launch. Five percent of pre-tax profits will be given to charities.

While Orange makes progress, directly and through partners, another French major's plans have hit a roadblock, with Vivendi calling off talks to acquire a majority stake in the African mobile operations of Zain - the Kuwait-based company once tipped, itself, to create a pan-MEA empire. "Vivendi has applied its usual criteria of profitability and financial discipline to this potential investment in emerging markets, in the best interests of its shareholders," the firm said in a statement. The cost of the deal, likely to have been around $10bn, was judged to jeopardize Vivendi's credit rating. According to a report by Kuwaiti newspaper Al Qabas, Zain is now considering bids from Chinese and Indian firms.

And in a reverse pattern, another Middle Eastern wireless player, Orascom of Egypt, has its sights set on France. The company, which already has a foothold in western Europe through its Wind Italy arm, is to partner to bid for France's fourth 3G license. "Yes, I would like to set foot in France... We are open to all sorts of scenarios - acquisitions, mergers, alliances, partnerships," said Orascom chairman Naguib Sawiris in an interview with French paper Le Figaro. "Eight million north Africans live in France and I think it makes sense from an industrial point of view to set foot in the French market."

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