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Ericsson to Expand Africa Network Services Amid Growth

Ericsson AB, the world’s largest maker of wireless-network equipment, plans to expand its network-management services in Africa as more phone companies outsource the technical side of their business.

Ericsson, which has contracts to manage Africa network services for New Delhi-based Bharti Airtel and Atlantique Telecom, is in talks with more operators on the continent, Kamar Abass, managing director of Ericsson Nigeria Ltd. and head of regional accounts for sub-Saharan Africa, said in an interview on Aug. 27 in Lagos, the commercial capital. Atlantic Telecom is a unit of Abu Dhabi-based Emirates Telecommunications Corp. (ETISALAT), known as Etisalat.

“Having the two contracts today gives us a solid baseline,” he said. “We are discussing very seriously with three or four customers.”

Services managed by Stockholm-based Ericsson include building telecommunications networks, running them and upgrading when necessary to increase network speed and capacity for new consumer services, an industry that will probably grow globally to $25 billion by 2017 from $14 billion last year, according to New York-based ABI Research. It’s relatively new in Africa where most operators manage their own networks.

In June, the company opened two regional service centers in the Democratic Republic of Congo and Nigeria as it tries to convince operators in the continent that it’s more efficient to have their networks managed, according to Abass.

Growth Room

Ericsson, which makes 40 percent of its global revenue from such services, announced in May that it had reached one billion connections out of an estimated 6.5 billion connections worldwide, meaning that almost one in six mobile lines are managed by the company.

Its 2011 contract with Airtel gives it responsibility for managing part of a network with 55.8 million subscribers in Africa. For Atlantique Telecom it runs a network of about 10 million subscribers. With about 65 million connections under the company’s management on a continent with more than 454 million connections in 2012, Africa offers room for growth, with the GSM Association estimating that there will be 700 mobile phone connections in the continent by 2016.

Service Centers

Ericsson’s competitors in the managed-services market include Zoetermeer, Netherlands-based Nokia Siemens Networks, Paris-based Alcatel-Lucent SA, and Shenzhen, China-based Huawei Technologies Co. Its new service center in Congo caters to French-speaking clients and another in Nigeria serves English-speaking customers in Africa, with Ericsson workers trained on various technologies used by the operators, according to Abass.

Nigeria has the biggest mobile-phone market in Africa at 117.4 million subscribers as of June 2013, according to the Nigerian Communications Commission, from a population of more than 160 million. With many subscribers acquiring more than one line, the numbers will grow to more than 200 million subscriptions in 2017, London-based research company Informa Telecoms & Media predicts.

There are concerns the business model might lead to loss of jobs in the West African nation’s telecommunications industry, which employs 15,000 people directly and as much as 70,000 others indirectly, according to Gbenga Adebayo, chairman of the Association of Telecommunications Operators of Nigeria. There should be clear guidelines on “what the protection will be for” employees.

Worsening Insecurity

Two of the four biggest phone companies in Nigeria use networks managed on contract, with the others running most of theirs. All are investing a combined $5 billion to expand their network capacity for data with Nigerian smartphone users expected to increase to more than 35 million by 2017 from 5.6 million at the end of last year, according to Informa.

Major challenges include frequent power cuts and worsening insecurity since telecommunications facilities became targets of Islamist militants engaged in a violent campaign in the mainly Muslim north and Abuja since 2009 for Shariah rule.

“That ability to keep a network site up-and-running is a basic capability, it’s a kind of entry to the club” of serious competitors, said Abass.

To contact the reporter on this story: Yinka Ibukun in Lagos at yibukun@bloomberg.net

To contact the editor responsible for this story: Dulue Mbachu at dmbachu@bloomberg.net

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