CHAPTER 4
The telecommunications industry in the rest of the world
‘I think there is a world market for maybe five computers.’
– Thomas Watson, president of IBM, 1943
By 1920 over two thirds of all the world’s phone lines were still in the USA, where the total had risen to over 16.5 million. But the phone had also reached such disparate places as the Belgian Congo (now the Democratic Republic of the Congo, DRC), Ceylon (now Sri Lanka), French Guiana, French Indochina (now Vietnam), Iceland, Ireland, Madagascar, Mozambique, Senegal, Somalia, Sudan, Tunisia, Uruguay and the West Indies.
By the end of the 1920s the US accounted for over 20 million lines, still some two thirds of the total. But the number of phones in service around the world had increased to more than 30 million. Albania, Angola, Cameroon, Cape Verde, Cote d’Ivoire, Cyrenaica (now part of Libya), Czechoslovakia (now two separate countries), Erythrea (now Eritrea), Kenya, Morocco, Southern Rhodesia (now Zimbabwe), Tanganyika (now Tanzania), Uganda, Upper Volta (now Burkina Faso) and Yugoslavia had all joined the club, making telephony effectively a global phenomenon.
Not all of these networks were based on fixed connections. Wireless telephony was alive and well and was being deployed in some countries where the cost of fixed lines would have been prohibitive. In Chile, for instance, the country’s unusual topography precluded the use of fixed lines outside the main metropolitan areas of Lima and Valparaiso.
By the late 1920s average global penetration had reached 1.5%, up from 1% in just a decade. The utility of the telephone system was improving all the time, as more subscribers connected, while the technology in the networks and quality of the subscriber equipment were heading in the same direction.
By the end of the 1920s, the telephone systems in most developed-world countries (with the exception of the USA and Japan) were operated by a state-controlled entity, which often, if not invariably, had links to the country’s postal system. In other markets, there was less uniformity.
China
The first telegraph networks were built in China in 1877 to provide better communications for the military in the event of possible future hostilities with the Japanese. A submarine cable linked the Chinese mainland to the island of Formosa (now Taiwan, or the Republic of China) to which the Japanese had laid claim. When the Chinese lost the first Sino-Japanese War in 1895 it had to cede control of Formosa to Japan, and the excellent communication system that had been built up ahead of foreign aggression now, ironically, fell into the hands of the aggressor.
The first mobile service in China was launched in Guangdong in 1987 by the Ministry of Posts & Telecommunications, with the aim to increase the number of telephones from one for every 300 people to something nearer three for every hundred by the end of the century. Early progress was slow; the new network (based on the Total Access Communication System, or TACS, standard) was very much the preserve of the elite. But, remarkably, by 2000 there were just over 85 million mobile subscribers.
China Mobile (Hong Kong) Limited came into being in 1997 when the mobile operators in two regions of China were transferred from the regional post and telecommunications bureaus to the new company. The following month the company was listed on the Hong Kong Stock Exchange. Over time, networks in the other 29 regions of the country were transferred to the new company; the process was completed at the end of 2004.
Later, two other operators were awarded mobile licences. China Unicom and China Telecom were, notionally at least, competitors of China Mobile; but a majority of the shares in these former companies were and are also owned by the state.
The process of privatising the Unicom network began in 2000 when ownership of the GSM networks in 13 regions was transferred from the Unicom Group to its mobile subsidiary, China Unicom. By 2002 Unicom had launched a second network based on CDMA technology, which operated in parallel to the GSM network. It seemed that the state was interested in assessing the attractions of both of the world’s main standards This impression was later strengthened when the country awarded 3G licences: China Mobile was given a licence to operate a home-grown non-standard network (TD-SCDMA), Unicom got W-CDMA, while China Telecom drew the short straw and got CDMA 2000 1X EV-DO.
At the time of writing there are 1.6 billion mobile connections and a further 588 million fixed, making China by far the world’s largest telecommunications market. China has also created one of the world’s largest telecoms-equipment manufacturers, Huawei Technologies Company.
Japan
The first telephone service was available in Japan as early as 1877 – but only to employees of the government, public bodies, the police and a handful of selected private businesses. The public had to wait until 1890, when lines were laid between Tokyo and Yokohama.
Japan is divided into 10 administrative regions, three of which – Tokyo, Kansai and Tokai – are urban and account for the majority of the population, while the other seven are more rural, with much lower population densities. When mobile was first introduced to Japan in 1979, NTT was given a licence to operate in each of the 10 regions. It transferred these to DoCoMo (Do Communications Mobile), which is today the largest mobile operator in Japan.
In 1987 and 1994 additional competitors were licensed: Nippon Idou Tsushin (IDO) in Tokyo and Tokai, and Daini Denden (DDI) everywhere else.
DDI was the brainchild of Kazuo Inamori, the chairman of Kyocera Corporation, which had begun life as a ceramics company, but had diversified into various other businesses that today we might call IT-related stuff – computers, digital switches and the like. By 1987 DDI had built and launched a long-distance network, put a strong management team in place, and begun to establish a reputation for quality as well as value for money. DDI then won mobile licences in the various Japanese regions. Looking to differentiate the new business’s offering from that of NTT, DDI opted for the ‘foreign’ (European) TACS standard, and used equipment provided by Motorola, because it was better and cheaper than Japanese equipment.
DDI began operating in 1989, and by the end of 1992 it had completed its national network and negotiated a national roaming agreement with IDO. It acquired nearly 350,000 subscribers, giving it a 42% share of the market in its eight regions, while IDO’s base of 288,000 equated to 36% of its available market.
IDO was to prove less of a success than its competitor, especially in the earliest years. Although it was the first to launch, in 1988, it had a far smaller geographic area and was hampered to a degree by the demands of Toyota, a main shareholder, which required it to focus on car phones rather than the newer hand-portables.
In the 1990s the Japanese government issued two licences for the new PDC digital technology in each of the big three urban regions, to subsidiaries of Digital Phone and Tu-Ka; and one additional licence in each of the seven rural markets, to six separate subsidiaries of a joint venture between the two new entrants, called Digital Tu-Ka. AirTouch was a founder shareholder in the three Digital Phone businesses and all six of the others. (In typical Japanese fashion, none of the 12 new operating companies had exactly the same shareholding structure as any of the others. Numerous large corporations had interests, including Hitachi, Marubeni, Matsushita, Nissan and Sony, along with various regional railway and electricity companies.)
In mid-2000 the Japanese government announced that it was going to award only three 3G licences, rather than four. One of the operators would therefore be excluded. DoCoMo and KDDI were probably safe, leaving the choice between J-Phone (in which Vodafone had a stake) and Tu-Ka. In response to this, J-Phone announced that it was reorganising itself into three regional holding companies and taking control of the six regional businesses. A new entity, J-Phone Communications, was created to act as a holding company for these, 54% owned by Japan Telecom, with the balance split between Vodafone with 26% and BT the remaining 20%. After several more byzantine and subtle deals, Vodafone emerged victorious as the controlling shareholder in both Japan Telecom and J-Phone.
In 2001 DDI merged with the international fixed-line operator Kokusai Denshin Denwa (KDD), and IDO, creating KDDI, today the number-two operator in Japan. Since then, although the enlarged business has grown substantially, KDDI has lost ground to both DoCoMo and J-Phone.
SoftBank is Japan’s third-largest telecom operator – and much the most adventurous of the three. Founded in 1981 by Masayoshi Son, it began as a distributor of personal computer (PC) software. The company grew rapidly, riding the crest of each successive wave in the IT revolution, from software to the internet, e-commerce and eventually telecommunications. In the 1990s Son founded Yahoo! Japan in conjunction with the American company.
In 2003 SoftBank became a 27.6% shareholder in a new Chinese e-commerce business, the Alibaba.com Corporation, which is today the world’s second-largest online-commerce business.
In 2004 SoftBank acquired Japan Telecom, the fixed-line business Vodafone had sold nine months earlier. This took SoftBank into the big league. Two years later SoftBank acquired Vodafone KK, the third mobile operator in the country, an acquisition that propelled SoftBank into the top tier of the world’s mobile operators.
By 2008 SoftBank Mobile had taken the lead in terms of net new connections, with 47.7% of the total. Churn had dropped, the customer mix had improved, and network performance was much improved; and so, naturally, was the profitability of the business.
In 2012 the company bought an 80% stake in another number-three operator – Sprint, in the US market. Son was confident that the experience he’d gained from transforming Vodafone KK could be brought to bear with Sprint, but so far this hasn’t happened. At the time of writing, Sprint is preparing to merge with T-Mobile, the US subsidiary of Deutsche Telekom.
Russia
In Russia, the government permitted the first privately owned telephone companies to begin operating in 1881, before entering the business itself in 1884. After 1917 the phone business was entirely controlled by the state, right up until 1990.
The phone system was in poor shape when the Soviet regime collapsed. ‘At the end of 1997 the number of access lines in Russia was 18.6 lines per 100 people, approximately three times lower than in developed countries such as the United States, the United Kingdom and Japan.’4 Russia had fewer than 20 million fixed lines and no mobiles; its telephone-line-installation waiting list was approximately 11 million, indicating serious pent-up demand. The average penetration across the empire was just over 12%. There was clearly huge potential but this was a part of the world where Western operators generally trod carefully.
The first Russian cellular licences had been awarded on a regional basis, in most of the 89 regions into which the country was divided at that time. The new operators were required to operate NMT-450 networks, which were, by that time, obsolescent if not actually obsolete. Happily, parts of the 800MHz and 900MHz bands – the frequencies used in the rest of the world for mobile communications – became available in 1993, and at this point further licences were awarded, for networks using AMPS and GSM respectively.
However, uptake was very slow and by 1995, five years after the first network was launched, there were still fewer than 100,000 subscribers in the country – which had a population of nearly 150 million. By the end of 2000 the number was still only 3.26 million, about 2.2% of the population.
Then, suddenly, the market came to life, driven by the emergence of three national or near-national operators – MegaFon, MTS and VimpelCom. Competition between the three drove down prices and raised the quality of the service, at a time when GSM handsets were becoming more and more affordable.
The number of mobile connections rose to 7.75 million in 2001, and to 17.6 million in 2002 – in just two years Russia had gone from being the world’s 39th-largest market to its 14th largest. Increases in subscriber numbers in 2003 and 2004 took it to 74 million, and by 2005 it had become the world’s third-largest mobile market with nearly 120 million connections.
VimpelCom launched an AMPS/D-AMPS network in Moscow in 1994. By 1997 VimpelCom had obtained a listing for its shares on the New York Stock Exchange, the first Russian company to do so.
The company strengthened its position in 1998 when it was awarded GSM-1800 licences to operate in four new regions in addition to Moscow, giving it access to some 68% of the total population. At the end of that year, its finances were helped by a $162-million cash injection from Telenor, which took a 31.6% interest in the business.
By the end of 1999 VimpelCom had over 350,000 subscribers in Moscow, 132,000 of whom had opted for the GSM-1800 service launched only a year earlier. The regions had grown strongly too, with a total of 145,000 connections.
VimpelCom made its first move into a foreign country in 2004, when it acquired control of a network in Kazakhstan. By 2006 it had bought a second international business in Ukraine; a third in Tajikistan; a fourth and fifth in Uzbekistan; a mobile business in Georgia; and (its largest acquisition up to this point) a 90% interest in Armentel, the national telephone company in Armenia.
VimpelCom has continued to grow, in part by acquisition. In 2010 it took control of the Egyptian multinational Orascom and Italy’s Wind, in a deal that made it one of the world’s 10 largest mobile companies. Wind was merged with Hutchison’s 3 Italia in 2015, but VEON (as VimpelCom was known from 2017) wasn’t happy with the performance of the business or, indeed, the regulatory setup in Italy, so it sold its interest to its partner and dropped back out of the top 10.
MTS was formed in 1993 by a consortium of Moscow City Telephone Company, three other Russian telecoms operators and two German companies, Siemens and Deutsche Telekom. It began operating a GSM network in Moscow in 1994, immediately after VimpelCom had launched its AMPS network.
Between 1997 and 2001, MTS was awarded licences to operate GSM systems in 46 regions of Russia, nearly half the national total; and by the end of 2003 it had 13.4 million subscribers, a 37% market share and two million more than VimpelCom. By 2005 MTS had over 58 million customers and was generating annual revenues of $5 billion.
That year MTS acquired Barash Communications Technology, the largest mobile operator in Turkmenistan. Two years later, it bought K-Telecom, a similarly well-positioned company in Armenia.
In 2009 MTS bought Comstar, a Russian fixed-line operator. Two years later it took control of the Moscow City Telephone Company that had been one of its original founder-investors.
Since then, the company has increasingly looked outside the mobile-telecoms industry. It began to acquire regional ISPs and cable-TV companies, then took a stake in a Russian bank to allow it to provide mobile financial services through MTS Money. In 2014 it bought a minority stake in OZON, a Russian e-commerce business, and then bought out the company that supplied its billing system, the NVision Group.
Today, its targets are ‘fintech, Internet of Things, big data, systems integration, OTT, e-health, e-sport, cybersecurity, clouds, and e-commerce’.5
The third company that emerged from Russia at this time was MegaFon, whose story began in 1994 when two telecom operators in St Petersburg formed a joint venture company called Telecominvest. Two years after its inception Commerzbank became a shareholder, and three years later Telia got involved.
Telecominvest acquired stakes in several new GSM operators and also took stakes in fixed-line and internet companies, and by 2001 it was able to provide full national coverage and compete on equal terms with MTS and VimpelCom. In 2002 it merged all of its various regional operations and renamed itself MegaFon. By the end of that year the enlarged company had connected more than three million customers.
In 2004 the company made its first move into international markets, acquiring a 75% stake in Tajikistan’s TT Mobile. MegaFon’s customer base doubled that year to 13.65 million, and by 2005 this had risen to 22.8 million. Over the next few years MegaFon focused on increasing its market share, slowly chipping away at the lead VimpelCom and MTS had established. By the middle of 2007 it accounted for more than 20% of the national subscriber base, having connected its 30-millionth customer. By the end of 2009 this total had increased to just over 50 million.
In 2013 it acquired a company called Yota and obtained approval to use it for LTE, the new 4G standard. That year also saw the launch of MegaFon’s mobile financial-services product. Three years later it acquired voting control of Mail.ru, the largest social network in Russia.
MegaFon has now become a private company and has been delisted from the Moscow Stock Exchange. It has formed an alliance with Rostelecom, the former state-controlled PTT, to develop 5G services in Russia. An alliance with the Chinese e-commerce giant Alibaba that was concluded in 2018 has now resulted in a new joint-venture e-commerce initiative, AliExpress.
India
In several countries around the world, the first telephones were introduced by the British, in part to facilitate colonial administration. The British established the first phone network in India, with the formation of the Bombay Telephone Company in 1882. It still exists today, as Mahanagar Telephone Nigam Ltd.
After the British left, the phone system began to decay and by the end of the 1980s it was in a dire state. In 1994, the Indian Department of Telecommunications set a target of 10% penetration by the end of the decade and settled on a combination of mobile and fixed wireless, opting to use the GSM standard for the first and CDMA for the second. It invited private investors to bid for two licences to operate new mobile systems in each of four large urban areas, and the list of winners read like a who’s who of the world telecom industry – AirTouch, Bell Atlantic, BellSouth, France Telecom, Hutchison, Millicom, Mobile Systems International (MSI), Swisscom, Telekom Malaysia, Telstra from Australia, Vivendi, and CCI International, a subsidiary of Cellular Communications, AirTouch’s partner in certain US franchises.
The country’s first mobile network was launched in 1995 by RPG Cellular, a company controlled by an Indian conglomerate but in which Vodafone had a 20% interest. By this time, the government had begun the process of awarding licences for some of the more rural areas. Eventually, licences were granted in 23 regions and the industry began to grow.
In 1992 CK Hutchison had made an investment in an Indian partner to create Hutchison Max Telecom, which won a licence to operate a mobile service. This business expanded rapidly in the early 2000s until it had achieved full national coverage, at which point Hutchison sold the business to Vodafone.
By mid-2006 there were more than 100 million mobile connections, and the market was still growing at a phenomenal rate. By that time only five companies had significant shares of the market: Bharti Airtel, a publicly quoted subsidiary of Bharti Enterprises, enjoyed the number-one position with 23 million customers, just ahead of Reliance Communications with 22.5 million, and the state-owned Bharat Sanchar Nigam Limited with 21 million. Hutchison Essar was fourth with 17.5 million, while IDEA Cellular came in at just under 10.6 million.
By the end of 2007 Bharti accounted for more than 55 million of the country’s 235 million mobile subscribers, 15 million more than Vodafone India, the former Hutchison Essar and by now the nation’s second-largest player. By the end of 2010, when there were nearly 750 million mobile connections in India, Bharti had more than 150 million subscribers, 25 million more than its closest rivals, Vodafone and Reliance.
By March 2011 there were over 800 million mobile connections, and throughout the rest of that year and into 2012, the industry averaged 10 million new connections a month, raising penetration to over 75% and the market total to 923 million.
Then it started to unravel. It transpired that there had been some sort of fraud associated with the award of a number of new licences, as a result of which the industry experienced its first-ever reduction in subscriber numbers with the loss of 800,000 connections. Then the Indian Department of Telecommunications obliged owners to register their SIMs, and this culled a further massive 72.1 million, taking the total back down to 850 million by the end of 2012. Nonetheless, by mid-2014 the old record of 923 million had been reached once more, and pretty soon, in early 2016, the billion milestone was passed.
Then a new company called Reliance Jio entered the market. Jio decided to offer voice over internet protocol (VoIP) and data services over a soon-to-be built national 4G network. Under the benign mission ‘to connect everyone and everything, everywhere – always at the highest quality and the most affordable price’, the company launched an aggressive marketing campaign, offering free data, voice and text with the purchase of a Jio SIM. By the end of 2016, after less than four months, Jio had 72 million subscribers.
In mid-2017 the regulator obliged it to start charging for its services, but the company still added more than 15 million new customers. Jio had the lowest call-drop rate, the fastest download speed and, at 100%, the best network availability.
The consequences of Jio’s entry into the market are still being felt today. There’s been a sharp contraction in the number of operators active in the market: two of the largest, Vodafone and IDEA, have merged; two others, Telenor and Sistema, have pulled out; and two others, Aircel, a company backed by the Malaysian mobile operator Maxis, and Reliance Communications, have gone bankrupt. Bharti, the one-time market leader, has been pushed into third place, behind the merged Vodafone IDEA and Jio, which now has 348 million customers out of a national total of 1.17 billion.
Rest of Asia
The Hong Kong-based conglomerate CK Hutchison (formerly Hutchison Whampoa) has been a significant player in the telecoms market for over 30 years, first becoming involved in the industry through a mobile licence in its home territory back in 1985. Hutchison then took a stake in Microtel (later Orange). That proved to be a spectacular success and in late 1999 Hutchison sold its interests in the business to Mannesmann, triggering a sequence of events that would lead to Vodafone’s acquisition of Mannesmann.
Hutchison began life as a trading company. Over the years many businesses that were presumed ‘core’, such as Orange, have been flipped for a profit. Following Orange, Hutchison sold its VoiceStream business in the US to Deutsche Telekom, while Vodafone bought its Indian mobile subsidiary in 2007. That disposal signalled a change of strategy, and today it seems that the telecoms market is no longer a primary focus for the group. It retains interests in the 3 Group in Europe and in various Asian markets, but it is not the force it once was.
Singapore Telecom (SingTel) and Telekom Malaysia had been vying with each other for some years to see who could secure the best assets, not just in the region but farther afield as well.
SingTel had been the first to venture into the international market, in 1992, taking a 16.7% stake in the NetCom consortium in partnership with Kinnevik and Ameritech. The team was later awarded the second mobile licence in Norway.
Its next moves were closer to home: in 1993, SingTel bought a 38% stake in Globe Telecom, the second mobile operator in the Philippines. The next year it made a small investment in the Thai Shinawatra Group, through which it gained an economic interest in AIS Thailand, a publicly quoted mobile operator controlled by Shinawatra. (SingTel subsequently, in 1998, bought a direct stake in AIS.)
Late in 1995 SingTel and Ameritech reprised their Norwegian partnership when they formed the ADSB Consortium with TDC of Denmark to bid for a 49.9% stake in Belgacom.
In Australia, SingTel acquired 100% of Optus, the second fixed and mobile operator in the country.
Its last deal of any size was the acquisition of a 44% stake in Pacific Bangladesh Telecom, in the final quarter of 2007.
Two years after SingTel’s first international acquisition, in 1994, Telekom Malaysia followed it on to the international stage, completing a number of deals over the next three years. Early in 1995 it bought a 23% stake in the Indonesian operator Excelcomindo from NYNEX; later that year it took a 60% controlling stake in Telekom Networks Malawi, the national phone company in the East African state.
In 1995 Telekom Malaysia formed Dialog, a new mobile operator in Sri Lanka, and followed this with an investment in Spice Communications, an Indian company that had won licences to operate in two of the country’s regions. The following year, it was awarded a licence to operate a new mobile system in Bangladesh through a company called Robi Axiata; and it teamed up with SBC to acquire a 30% stake in South Africa’s Telkom.
SingTel responded to these developments by moving into Telekom Malaysia’s two largest international markets, making bigger investments in both. In 2000 it bought an initial 15.5% stake in what would soon become India’s largest mobile operator, Bharti Airtel (this stake is now at 39.5%). The following year SingTel bought 35% of the shares in Telkomsel, Telekom Indonesia’s mobile subsidiary.
Eventually, in 2008, Telekom Malaysia spun off its mobile and international mobile assets in a separate listed company, the Axiata Group. By that time it had launched a new network in Cambodia known as Hello, and four years later Axiata acquired Telia’s 80% stake in N-Cell in Nepal.
In 2014 Axiata’s publicly listed Indonesian subsidiary, renamed XL Axiata, acquired Axis, a smaller domestic competitor, from STC, the Saudi PTT. Two years later it merged its operations in Bangladesh with those of Warid, a business that had previously been bought by Bharti Airtel.
Today, Axiata and Singapore Telecom are among the largest mobile companies in the world.
Africa and the Middle East
According to Telkom South Africa, the first dozen telephones arrived in South Africa in 1878. They were a gift from the Bell Telephone Company, sent to the new commander of the British forces, Sir Garnet Wolseley, to assist in the Zulu War. The Post Office in the Cape Colony realised the importance of the new invention almost immediately, and by 1880 a commercial service was in place.
Nearing the end of the next century, Africa had a great need for modern communications, as the existing fixed infrastructure was aging and unreliable where it existed at all. Yet the first mobile networks on the continent were greeted with something close to disdain. Tunisie Telecom was the first to launch the new service, in 1985, but by the end of 1987 it had just 224 subscribers. It took over five years to connect the 1,000th line – equivalent at that stage to 0.012% penetration.
Africa’s second network was opened by Telkom in South Africa during the first half of 1986 and didn’t fare much better. It reached that same 1,000-line milestone by the end of the year, but progress thereafter was painfully slow, with just 400 new customers in 1987. Five years after the launch, penetration was still less than 0.025% of the country’s 36-million population.
By the end of 1993 there were still fewer than 45,000 mobile connections in the whole of Africa. By that time, new networks had been launched in Egypt (1987), Morocco and the DRC (1988), Algeria and Mauritius (1989), Botswana (1991), Cote d’Ivoire, Ghana, Nigeria and Senegal (1992), and Kenya and Tanzania (1993). And by the end of 1996 there were still fewer than 1.5 million mobile subscribers.
Then the arrival of digital technology reduced the cost of the service and began to alter the way mobile was perceived, and by the end of the century, just three years later, there were nearly five times as many connections – and penetration exceeded 1%. Africa began to attract the attention of some imaginative entrepreneurs, and several multinational telecoms groups emerged at around this time.
The first was Telecel International, the company credited with launching Africa’s first mobile network in what was then Zaire (now the DRC), in 1988 (although there’s some debate about this – the Tunisians and Egyptians both claim prior launched dates). By 2000 Telecel was operating in 11 African countries.
Egyptian company Orascom Telecommunications Holdings won its first mobile licence in 1987: a 51% stake, in collaboration with France Telecom and Motorola, in MobiNil, a company controlled by the Egyptian state. The new business began operating the country’s first GSM system in 1988 and expanded rapidly. In 1999 Orascom acquired a controlling stake in Fastlink in Jordan; six months later it was awarded a new licence in Yemen and also bought a 39% stake in Motorola’s Mobilink network in Pakistan.
Orascom then acquired an 80% interest in Telecel International, which took it into 11 more African countries. In 2001 Orascom was awarded one of two franchises in Syria, and it bought out Motorola, thereby increasing its stake in both Jordan and Pakistan. And it was awarded a new licence in Algeria. Tunisia followed in 2002.
At this point, Orascom began to contract, selling off operations until it was left with just Pakistan, the North African properties and two new businesses, in Bangladesh and Iraq. In mid-2005 Orascom’s majority shareholding was transferred to Weather Investments to finance the purchase of Wind, the third-largest operator in Italy.
In 2008 Orascom was awarded a licence to operate a new mobile network in North Korea – the country’s first and a monopoly. The new company, Koryolink, would be 75% owned by Orascom, with the state PTT holding the balance. It launched a W-CDMA network that year, attracting 5,300 subscribers in its first month. This number passed the 3-million milestone 10 years later, in 2015, and moved into profit. However, the government of North Korea reneged on the deal it had struck with Orascom, refusing to allow it to repatriate any of the dividends.
In 2008 Orascom joined forces with a number of Canadian investors to create Globalive, but this venture also failed. Meanwhile, the situation in Algeria, Orascom’s largest market, was deteriorating, with growing levels of hostility between the government and the company, and at the end of 2010 Orascom announced that the Russian multinational VimpelCom had offered to buy the company. The businesses in Bangladesh and Pakistan would be transferred to a new holding company called Global Telecom Holdings, in which VimpelCom would have a controlling stake, while those in Egypt and North Korea were to be retained by Orascom. VimpelCom would take full ownership of the rest, including the disputed Algerian property Djezzy and Wind in Italy.
Zain, the Kuwaiti telecoms multinational, played a significant role in expanding the telecoms market in both the Middle East and Africa. Following the introduction of competition at the end of 1999, Zain began a sustained programme of acquisitions. First, it bought an interest in Fastlink in Jordan from Orascom and then became the controlling shareholder. In 2003 it was awarded the second licence in Bahrain, and became a member of one of three regional consortia licensed to provide mobile services in Iraq. Then it acquired an 85% stake in Celtel (formerly MSI International), the largest independent operator in Africa, in a deal that gave it access to 14 African markets with a combined population of some 275 million people.
Celtel had begun its collection of licences in 1995 in Uganda, and expanded into a large part of the rest of Africa, including Zambia (1998), the Republic of Congo and Malawi (1999), and Gabon, Sierra Leone, Chad and the DRC (2000). In the new millennium Celtel acquired licences in Burkina Faso, Sudan, Niger and Tanzania (2001), Kenya (2004) and Madagascar (2005). So after acquiring Celtel, Zain suddenly had a presence in 20 countries – the same number as France Telecom. At that stage, only Vodafone had more.
However, by the end of 2006 a Lebanese company called Investcom had taken Zain’s mantle as the most expansive organisation in the African mobile market, operating in territories including Guinea, Ghana, Benin, Liberia, Yemen, Syria, Cyprus and Guinea-Bissau. Two years on Investcom acquired a 55% stake in Bashair Telecom in Sudan. Trading in Investcom began on the London Stock Exchange during 2005. By the end of that year, the company had just under 5 million customers across its eight markets, and in 2006 MTN of South Africa bought Investcom.
MTN had first become involved with mobile communications when a consortium of which it was a member was awarded one of the two GSM licences in South Africa. It began operating in June 1994. The company was originally backed by Cable & Wireless and SBC, but in late 1998 both sold out, allowing Johnnic Holdings, the South African media company, to increase its stake in MTN. This resulted in a new strategy, focused on international expansion within Africa.
A new subsidiary, MTN International, grew rapidly. It was awarded GSM licences in Uganda, Rwanda and Swaziland; in 2000 it acquired Camtel Mobile, the holder of two GSM licences in Cameroon; and in 2001 it acquired a licence in Nigeria. Also in 2001, MTN announced a partnership with the US military conglomerate Lockheed Martin, which would provide internet access in Africa via a satellite system, and within a year it was providing service in Nigeria, South Africa and Uganda (as well as in several other African countries where the group didn’t have a presence).
By 2005 the MTN Group had some 14.3 million connections, and had acquired interests in businesses in Core d’Ivoire, Zambia, Botswana, the Republic of Congo and Iran, closing the year with a total of 23.2 million subscribers. In 2006 it acquired a new licence in Afghanistan, bought a Syrian operation and bid for Investcom. By the end of that year the enlarged MTN had a total customer base of just over 40 million spread across 21 countries. Today, MTN still operates in 21 separate markets, but has grown its subscriber base to more than 240 million.
First incorporated in 1976, Etisalat began as the state-owned telephone company in the United Arab Emirates (UAE) and was partially privatised in 1983. It wasn’t until 1999 that Etisalat took its first steps on to the international stage, acquiring a minority stake in Zantel, the telephone company that served the island of Zanzibar off the Tanzanian coast.
In 2004 Etisalat obtained a 35% stake in Etihad Etisalat, a new mobile operator in Saudi Arabia; the following year it acquired a 23% stake in Pakistan Telecommunications Ltd, the national PTT, which gave it management control; and a 50% stake in Atlantique Telecom, which owned several of the old Telecel companies, in Benin, Burkina Faso, the Central African Republic, Gabon, Togo and Niger.
In 2006 Atlantique launched a new mobile network in Cote d’Ivoire, branding this Moov; Etisalat raised its stake in the company to 70% and took management control. That year also saw the company take a majority stake (66%) in Etisalat Misr, Egypt’s third mobile operator. (Misr was another great success: it had connected over a million customers within just seven weeks of its launch.) Later in 2007 Etisalat bought a 40% stake in a new mobile operator in Nigeria, Emerging Markets Telecommunications Services, and also launched a mobile service in Afghanistan. The combined population of these three new countries – Nigeria, Egypt and Afghanistan – was over 250 million and their addition doubled the group’s total market presence to some 14 countries with a combined population of over 500 million.
In 2009 Etisalat acquired Millicom’s mobile network in Sri Lanka.
In 2013 Etisalat acquired a 53% stake in Maroc Telecom from Vivendi, the French media company, extending Etisalat’s reach into several more countries – Morocco, Gabon, Mali, Mauritania and Burkina Faso.
In 2015 Etisalat transferred ownership of the Atlantique Telecom businesses to Maroc Telecom, making that company the fourth-largest multinational on the continent, behind Etisalat itself, Bharti Africa (which had bought most of Zain’s African properties in 2010, and added businesses in the Republic of the Congo and Uganda) and the overall market leader, MTN.
Latin America
The Latin American market is dominated by two giant multinationals, América Móvil and Telefónica of Spain.
América Móvil was originally a subsidiary of Teléfonos de Mexico, or Telmex. This was originally formed in 1947 by a group of private investors, to acquire the telephone network in Mexico owned and operated by LM Ericsson. In 1950 Telmex acquired ITT’s Mexican telephone business. Telmex operated as a privately owned de facto monopoly until 1972, when it was nationalised by the Mexican state.
The telephone service in the country was truly appalling in the years following the nationalisation so in 1990 the Mexican government decided to attract additional investment through the sale of a controlling stake to a consortium. Enter Carlos Slim, backed by SBC and France Telecom. The introduction of new management and new capital led to dramatic improvements in the quality of Telmex’s service and the size of the network, which in turn facilitated a period of considerable economic growth.
A similar process took place in Brazil. In 1969 the government nationalised the telecoms assets of the Canadian Traction, Light and Power Company, which controlled over 60% of the telephone lines in the country. These were subsequently brought together as Telebras. In 1998, ahead of the introduction of competition, the government of Brazil split Telebras into 12 separate regional operating companies, each of which was then privatised.
Several foreign operators were attracted by the Brazilian opportunity, including Telefónica, Telecom Italia, Portugal Telecom, BellSouth, SBC and América Móvil, a new listed company spun out of Telmex. Other countries in the region provided similar opportunities in the years leading up to the millennium, by which time several of these operators had established a multinational presence.
The race to establish a continental presence accelerated and by 2003 América Móvil seemed to be winning, after it bought BellSouth’s Brazilian interests. However, the following year, the American company sold its remaining Latin American interests to Telefónica, which brought the Spanish company back into contention, but only briefly.
América Móvil’s acquisition in 2012 of its parent Telmex took it into the fixed-line market.
As the continental footprint came closer to completion, it turned its attention to other markets, becoming the largest shareholder in KPN, the Dutch national phone company, in 2012. It followed this in 2014 with the acquisition of a 50.8% stake in Telekom Austria.
Today, América Móvil is the clear market leader in the region and is the world’s sixth-largest mobile operator. As well as an unassailable position in Mexico, it is one of just four operators with coverage of the whole of Brazil.