Connecting Africa is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 3099067.


African Mobile Capital Expenditure Makes a Fragile Recovery

Article Image
Data from the Xalam Analytics Africa Mobile Operator Dashboard shows that, following three years of consecutive decline, African mobile capital expenditure stabilized in 2016, staying flat at around US$8 billion.

While not quite a rebound, the improvement indicates that mobile operators are slowly plowing money back into capital investments (networks, supporting systems and spectrum licenses).

Of the eight pan-African operator groups analyzed as part of Xalam's Capex Index, five showed a marked increase in capital expenditure in 2016 -- by 15-20% in some cases. For the most part, capex actually increased in local currency terms, only to be pegged back by sharp currency depreciation. Capital intensity (the percentage of revenues assigned to capex) even increased slightly, from 21% of sales to 22% as operators increased spending despite decline in their top line revenue when measured in US dollars.

It is quite notable that capex intensity has continued its rebound, even as top line revenue has continued to decline.

Sources: The companies, Xalam Analytics Research 
Estimates based primarily on Xalam pan-African Mobile Index, including mobile capex by main pan-African players - MTN Group, Orange Group, Vodafone affiliates (incl. Vodacom, Safaricom, Egypt), Airtel Africa, Millicom Africa, Etisalat (incl. Maroc Telecom), Ooredoo and Sudatel.
Sources: The companies, Xalam Analytics Research
Estimates based primarily on Xalam pan-African Mobile Index, including mobile capex by main pan-African players – MTN Group, Orange Group, Vodafone affiliates (incl. Vodacom, Safaricom, Egypt), Airtel Africa, Millicom Africa, Etisalat (incl. Maroc Telecom), Ooredoo and Sudatel.

There are material variations by country; South Africa, Egypt and Morocco are recovering, mostly driven by accelerated 4G investments and spectrum acquisition. The Nigerian market, by contrast, remains in the doldrums: capex there has declined by an average of around 20% during the past four years, with 2016 mobile operator capital expenditures at only around 40% of 2012 levels.

There are also critical differences by operator. MTN Group Ltd. , which spends more than any other operator in Africa, increased its spend in US dollar terms by about 3% in 2016, as did Orange (NYSE: FTE)'s African operations.

MTN has indicated that it will increase its capital spend, which totaled 34.92 billion South African Rand ($2.58 billion) last year, further in 2017.

By contrast, Airtel Africa -- the African operations of Bharti Airtel Ltd. (Mumbai: BHARTIARTL) -- and Millicom Africa were responsible for the sharpest cuts in capital spend -- slightly more than 30% in both cases -- in another sign that the two groups are gradually narrowing their scope and refocusing their African businesses. (See Data Uptake Drives Return to Growth for Airtel Africa and Millicom Africa Exit on the Cards After Positive 2016.)

The African mobile infrastructure transition towards more "cloudified," virtualized platforms has started slowly, with operator focus remaining on basic connectivity. Outside of spectrum acquisition, the large majority of capital spend is going to urban area capacity build, 4G deployments, metro fiber and the upgrade of IT systems.

Despite the top line improvements, some underlying weaknesses remain. For one, the top line numbers are slightly inflated by 4G spectrum acquisition, notably in Egypt. Excluding spectrum acquisition, we estimate that top line African mobile capex actually fell by around 10%.

Some of the fundamentals that have led to the previous declines in capex persist: Consolidation has reduced the discrete number of high-capex players; uncertainty hovers over the African mobile business model; and under current revenue and margin trajectory, $1 invested today will return less than half of what it did in 2010.

Further, the investment outlook is largely indecipherable in many markets, due to a number of factors including lack of 4G spectrum, increased tax pressure and uncertain regulation. In turn, operators are holding back, only doing what is strictly necessary until they have better visibility.

— Guy Zibi, Principal, Xalam Analytics

Innovation hub


Hot startup of the month: Pan-African fintech KamaPay

This month's hot startup is pan-African fintech KamaPay, which helps individuals and businesses make cross-border payments on the continent.


Afretec awards $3.3M in grants to African research teams

The African Engineering and Technology Network (Afretec) has awarded grants worth $300,000 each to 11 university research teams across Africa to advance digital technologies.

More Innovation hub

Latest video

More videos

Sponsored video

More videos

Industry announcements

More Industry announcements

Flash poll

All polls

Africa Tech Perspectives


Deep dive into East Africa's tech startup ecosystem

New survey reveals a lack of access to investors, reliance on international VCs and global recession trends as the biggest barriers for East African tech startups to access funds.


Challenges and opportunities for women's tech careers

A new survey reveals that COVID-19, the cost-of-living crisis, skills shortages and a lack of mentorship have negatively affected women's career development over the past two years.


Survey: Opportunities for Women in Tech

Take our new survey for women across Asia, Europe and Africa looking at the biggest challenges and opportunities for women-led enterprises and trends in tech careers for women.

More AfricaCom perspectives

Upcoming events

London Tech Week
June 13-16, 2023
Queen Elizabeth II Centre, Broad Sanctuary, London SW1P 3EE
Cybertech Africa 2023
August 1-2, 2023
Kigali Convention Center, Kigali, Rwanda
Africa Tech Festival, Home of AfricaCom and AfricaTech
November 13-16, 2023
CTICC, Cape Town
More Upcoming events

Guest Perspectives


Omdia View: February 2023

By Omdia Analysts

In February 2023 key events in the Middle East and Africa included a major Internet project for Africa's underserved by Liquid Intelligent Technologies and Microsoft as well as a 5G launch in Tanzania – that and more in this month's Omdia View.


Omdia View: July 2022

By Omdia Analysts

Kenya and Zambia move towards 5G with new spectrum allocations while Tunisie Telecom plans to shut down its 3G network - that and more in this month's Omdia View.

More Guest Perspectives

Partner perspectives

All Partner Perspectives

Like us on Facebook

Newsletter Sign Up

Sign Up