Structural Adjustment in the Latin American and African Mobile Sectors

Authors: Curwen P, Whalley Jason

Management Science Working Paper No. 3 (2007)

Abstract

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In recent times there has been much discussion about structural changes taking place on the mobile front in Europe and the USA but rather little on developments elsewhere. In the case of Asia, this is simply because of a lack of developments but the same cannot be said of Latin America and Africa where the structure of the mobile sector has recently been undergoing rapid and unprecedented change. This paper sets out to explain what has happened in each case, to explain the underlying rationale and to seek finally to answer the question whether there is a common pattern in both cases or whether they are essentially independent. To this end, the paper begins by examining the literature that might help to explain what is going on. Section two analyses structural changes in Latin America while section three does the same for Africa. The concluding section compares the two cases within the context of the literature review. The first concluson is that many more countries are involved in the African case and hence, unsurprisingly, many more operators have been involved in restructuring as both buyers and sellers. However, in both cases there was an established status quo by the early part of this decade. In Latin America, there were four fairly dominant players ? América Móvil, BellSouth, Telecom Italia and Telefónica ? while in Africa there were five - MTN, Orascom, Vivendi Universal, Vodacom and Vodafone. Interestingly, because of the huge disparities between the size of the various African markets, these latter players did not need to be present in a large number of countries to achieve their status and certain operators that were widely present such as France Télécom were nevertheless in the second tier. What was common to both continents was a colonial heritage ? operators from America, Italy, Portugal and Spain as non-indigenous players in Latin America and from France and (mainly post-colonial) England in Africa. One other common feature was the presence of investors that were based outside the continent yet heavily committed to developing markets ? but in practice the only significant member of this group was Millicom International and even in that case subscriber numbers were small. There have been clear differences in the protagonists in the two restructurings. In the case of Latin America the process has been purely internal. In effect, with BellSouth and, to a lesser extent, Telecom Italia ready to pull out, América Móvil and Telefónica have stepped in to take up the slack. If Telecom Italia exits from Brazil, the inherent duopoly nature of many markets may well be further emphasised although Portugal Telecom is trying to stake its own claim to take control of Vivo. By way of contrast, although certain internal African operators are ?on the march?, by far the most significant feature is the appearance of non-African operators and in particular those from the Middle East such as Etisalat and MTC. These two are behaving very aggressively ? unlike in Latin America there are an unusually large number of new licences on offer as well as assets up for grabs ? and see their entry into Africa as a key plank in their quest for (a form of) world domination. Indigenous operators such as MTN and Vodacom are evidently not prepared to fight their corner to the same extent ? in Vodacom?s case (with Vodafone as a major shareholder) it is clearly unwilling to ?overpay?.