The Africa 4G Spectrum Value Report: 4G Valuation. Outlook and Business Models in African markets

This study finds that Africa is sitting on some USD 5 billion worth of 4G spectrum, and over the next 18 months, markets from Egypt to South Africa, Nigeria, Senegal and others will sell or seek to value these frequencies to pave the way for next generation digital services.

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Market Study ~ May 2016 ~ Xalam Analytics ~ from GBP 1,019

 

How much is African wireless spectrum worth? African governments have sold around $15bn worth of wireless spectrum since 1998, in three waves of awards covering 2G, 3G and now, 4G frequencies. By our estimates, Africa is sitting on around $5bn worth of 4G spectrum, and over the next 18 months, markets from Egypt to South Africa, Nigeria, Senegal and others will sell or seek to value a trove of frequencies that will pave the way for next generation digital services.

And yet, even as they seek to precisely assess the value of the 4G spectrum on offer, buyers and sellers alike have surprisingly few independent tools for intra-African spectrum transaction benchmarking and value analysis. This report provides such a tool.

For the Xalam Africa 4G Spectrum Value Report, we have developed what is arguably  the most extensive independent, African-focused analysis of 3G and 4G spectrum value available.

We have analyzed 60 spectrum transactions across 20 African markets over the past 10 years (2006-2016), included in around 35 separate processes covering 1100MHz worth of 3G and/or 4G spectrum.

 The Xalam Africa 4G Spectrum Value Report assesses the value of various 4G bands in African markets and offers a qualitative and quantitative framework for estimating 4G spectrum value in the African context. In addition, the report provides projected value ranges for upcoming and/or anticipated 4G spectrum auctions, including for markets such as Nigeria, South Africa, Egypt and Senegal. Further, the report explores a range of issues related to 3G and 4G spectrum, from the business feasibility of 4G at current spectrum value points to the future of so-called spectrum asset companies.nb

Sample graphics from Xalam Analytics' THE AFRICA 4G SPECTRUM VALUE REPORT: 4G VALUATION, OUTLOOK, AND BUSINESS MODELS IN AFRICAN MARKETS

The insights derived from that effort are distilled in this report, covering critical spectrum value questions and key points, including:

> What is the state of 4G LTE rollout on the African continent? Which spectrum bands dominate?

> Which bands are proving the most valuable in the African context? What is the TDD/FDD split?

> Which African markets have generated in the most in spectrum proceeds?

> What are the key drivers of 4G spectrum value in Africa?

> How does African 4G spectrum value compare to 3G? 2G?

> Why is African 4G spectrum valued higher than 3G spectrum?

> Should the 2.6GHz band be valued as 4G, or as FWA?

> How does African 4G spectrum value compares to 4G transactions in Western Europe?

> What is the estimated value of South Africa’s 4G spectrum (2.6GHz, 700MHz, 800MHz)?

> What is the estimated value of Nigeria’s 4G spectrum (2.6GHz, 700MHz, 800MHz)?

> Did Nigeria get fair value for the 700 MHz sold to MTN Nigeria?

> What is the fair value for upcoming 4G transactions in Senegal, Egypt?

> Did investments in 3G spectrum pay off?

> Are investments in 4G spectrum, at current price points worth it, given the business challenge of monetizing data?

> Who are Africa’s spectrum 4G plays (companies whose primary value lies with their spectrum assets), and are they likely to sell?

And more..

The Corporate/Premium version of this report includes a Pivot table covering 2G, 3G and 4G transactions, along with detailed value for each on a Price/MHz/Pop/Year benchmark basis, along with more than 50 supporting charts and data points in Excel format (See Report Specs).

 

Table of Contents

 

EXECUTIVE SUMMARY
4G IN AFRICA: AN OVERVIEW
4G in Africa - Overview
Africa 4G Overview – 2016, the Year African 4G Took Off
Tracking the Pace of African 4G Roll-Out
Africa 4G vs. the World: Not Quite Dovetailing Global Trends (Yet)
4G Licensing Status in a Number of Key African Markets
AFRICA SPECTRUM OVERVIEW: WITH 4G, THE THIRD WAVE OF SPECTRUM IS HERE
Africa spectrum Licensing: $16bn in Proceeds So Far, and More Is Coming
Africa spectrum Licensing: Africa Sitting on ~$5bn in 4G Spectrum Value
Analysis of African 4G Spectrum Proceeds by Band
Markets that Have Generated the Most Proceeds from Selling Licenses
PARAMETERS OF VALUATION, OUR BENCHMARK SAMPLE AND DRIVERS OF VALUE
Africa 4G Spectrum Valuation – General Parameters
Our Benchmark Valuation Sample: 60 Spectrum Transactions, More than 100 Value Points
Our Valuation Sample: In Africa, “Auctions” are a Fluid Concept
Mapping Our 3G/4G Transaction Sample
Africa 4G – Drivers of Value
Africa 4G – A Review of Spectrum Bands
Mapping of Spectrum Bands in the African Context
A VISUAL MAPPING OF AFRICA’S 3G AND 4G VALUATION
Mapping Africa Spectrum Value – Transaction Value vs. GDP/Capita @ PPP
Mapping Africa Spectrum Value – Transaction Value vs. GDP/Capita @ PPP by Band
Mapping Africa Spectrum Value – Transaction Value by Band – 2G vs. 3G vs. 4G
Blocks of Spectrum Matter to Value – And 4G will be Pricier than 3G Was

VALUE ANALYSIS: THE 2100 MHZ (3G) BAND
2100 MHz – The Second Most Prolific Phase of Spectrum Sales – For Now
Breaking Down 3G Spectrum Value: The 2100 MHz Band
Breaking Down 3G Spectrum Value: The 2100 MHz Band
VALUE ANALYSIS: 800 MHZ BAND – THE RESURRECTION OF A BAND
Africa 4G: 800 MHz [Band 20] – The Resurrection of a Band
Nigeria 800 MHz Band – The Evolution of a Band
Breaking Down 4G Spectrum Value: The 800 MHz Band
Mapping Out Africa’s 800 MHz Band
The 800 MHz Band – More Expensive in Sub-Saharan Africa
The 800 MHz Band’s Value Inflation
Africa’s 4G 800 MHz Values – A ~4x Discount from European Levels
VALUE ANALYSIS: THE 2.6 GHZ BAND – BETWEEN 4G AND FWA VALUATION
The Rise of the 2.6GHz Band – 2016 Is the Year
The Other Upper 2GHz Bands – From African WiMAX to African LTE-TDD
The 2.6 GHz Band – The Largest Amount of Capacity Sold but the Lowest Proceeds Generated
Breaking Down the 2600 MHz Band Value
The 2.6 GHz Band – Should it be Valued as 4G, or as FWA/WiMAX Spectrum?
Africa’s 2.6 GHz Band – In Some Cases Pricier than in Europe..
MAKING THE CASE: WAS AFRICAN 3G WORTH THE MONEY?
Assessing 3G Returns in African Markets
The Nigeria 3G Case – Leader Returns vs. Challenger Returns
The Egypt 3G Case – Terrible Returns, but that Hardly Matters
The Cote-d’Ivoire 3G Case – Some 3G Investments Do Generate Positive Returns
A Summary View of 3G: The 4G Timing Problem, and Looking Beyond Economics

MAKING THE CASE: IS AFRICAN 4G WORTH THE MONEY?
Is African 4G Spectrum Worth the Money?
The Case for 4G – More than the Net Present Value of Cash Flows
Assessing 4G Value: “Is It Worth It” vs. “Can You Handle It”
The Case for 4G Spectrum
A BENCHMARK VALUATION OF UPCOMING 4G SPECTRUM SALES
10.1. BREAKING DOWN OUR BENCHMARK VALUATION APPROACH
How We Estimated Spectrum Value – On a Benchmark Basis
10.2. VALUING NIGERIA’S 2.6GHZ SPECTRUM
Nigeria 4G Comparables – Ghana and Morocco Come Closest
Nigeria 2.6 GHz Auction – Value Assessment
How Much for Nigeria’s 2.6 GHz?
Nigeria 2.6 GHz – A Challenging Market Context Will Make it Tough to Justify the Valuation
The Problem with Stand-Alone 2.6 GHz Spectrum and the Lack of First Mover Advantage
Nigeria 2.6 GHz – Making the (Difficult) Case for GSM, FWA Operators
10.3. NIGERIA: SCANNING THE 700 MHZ SALE TO MTN NIGERIA – HOW MUCH IS IT REALLY WORTH?
MTN Nigeria’s 700 MHz Spectrum – Genesis of a Conflict
MTN Nigeria’s 700 MHz Spectrum – Was the Value High..or Too Low?
Nigeria – What’s the True Value of MTN Nigeria’s 700 MHz Spectrum

10.4. HOW MUCH FOR SOUTH AFRICA’S 4G SPECTRUM?
South Africa’s 4G Auction – Any Time Now..
South Africa 4G Auction – Looking for Comparables
South Africa 4G Auction – Assessing the Value of the Proposed 800 MHz Lot
South Africa 4G Auction – Assessing the Value of the Proposed 2600 MHz Lot
South Africa 4G Auction – Assessing the Full Value of the Non-Wholesale Lots
South Africa 4G Auction – The 700MHz Should be the Priciest – Except Not
10.5. SENEGAL – A SQUABBLE OVER 4G SPECTRUM VALUE
Senegal 4G Spectrum – A Conflict Over 4G Value
Senegal 4G Value – Finding the Right Comparables
What is the Fair Value for Senegal’s 4G Licence?
10.6. EGYPT 4G LICENCE – ONCE AGAIN LOOKING TO BE AFRICA’S HIGHEST VALUATION
Egypt 4G Context – Waiting for Godot
Valuing Egypt’s 4G Licence – How Much is Too Much?
Africa’s 4G Spectrum Plays: Visafone, Smile Communications, Intercellular and Others
Acquiring a Spectrum Play vs. Acquiring a Spectrum Licence
4G Spectrum Plays - Breaking Down Visafone’s Value
4G Spectrum Plays – Smile Communications Nigeria
4G Spectrum Plays – In Nigeria, a Narrow Window to Sell
Intercellular Nigeria – First Protect the Asset, then Sell the Asset

APPENDIX
Africa 4G Spectrum Licensing Table
LTE FDD Band Table
LTE TDD Band Table

TABLE OF EXHIBITS & CHARTS

Africa 4G Commercial Networks Mapping – 2016
Africa Mobile Internet Subscriber Base – From 2G to 4G
Africa 4G Commercial Network Roll-Out – 2012-2016
Africa 4G Networks by Spectrum Band
Distribution of Prime 4G LTE Bands – Africa vs. Global
Africa 4G Networks - TDD vs. FDD
Table – Summary Review of 4G Licensing Status in Key African Markets
Main Phases of African Spectrum Licensing
The 3G and 4G Phases of African Spectrum Licensing
Distribution of Africa 4G Transaction Proceeds by Spectrum Band – 2010-2016
Distribution of Africa 4G Bandwidth Sold by Spectrum Band – 2010-2016
Average Revenue per MHz Generated in African 4G Transactions – by Spectrum Band
Africa Top Markets for Radio Spectrum License Proceeds – 2G, 3G and 4G
Our 3G/4G Transaction Sample by Frequency Band*
Distribution of 3G/4G Transactions by Type in African Markets
Mapping Our 3G/4G Transaction Sample
Spectrum value is affected by a variety of factors
Summary Review of the Key 4G Bands in the African Context – Availability, Value Potential
Table – Summary Review of the Key Bands in the African Context – Ecosystem, Coverage Capabilities and General Availability
Median Value for Sample Frequency Bands in African Markets
Median Value by Technology Generation and Spectrum Blocks in African Markets
Proceeds from 3G Spectrum Sales in Key African Markets
Africa 2100 MHz Spectrum Sales – Summary Review
Africa 2100 MHz Spectrum Value Ranges – Per GDP/Capita/PPP Grouping
Africa 3G: Transaction Values vs. GDP per Capita @ PPP
Mapping of Africa 4G LTE Networks in the 800 MHz Band
Mapping of Africa 4G LTE Networks in the 800 MHz Band
800 MHz Spectrum Value in Nigeria – 2007 to 2016
Africa 800 MHz Spectrum Sales – Summary Review
Africa 800 MHz Spectrum Value Ranges – Per GDP/Capita/PPP Grouping
800MHz Band: Transaction Values vs. GDP per Capita @ PPP
Africa 800 MHz Spectrum Sales – Summary Review
How African 4G 800 MHz Spectrum Band Values Compare to Europe’s
Mapping of Africa 4G LTE Networks in the 2.6GHz Band
Mapping of Africa 4G LTE Networks in the 2.3GHz/2.5GHz and 3.5 GHz Bands
Africa 2600 MHz Spectrum Sales – Summary Review
Median Value for Sample Frequency Bands in African Markets
Africa 2600 MHz/2300 MHz Spectrum Value Ranges
2600MHz Band: Transaction Values vs. GDP per Capita @ PPP
Valuation of 2.6GHz, 2.3 GHz in Sample African Markets - Value per PoP per MHz per Year
Nigeria – 3G Market Leader Evolution of Cumulative FCF
Nigeria – 3G Market Challenger Evolution of Cumulative FCF
Egypt 3G Returns Assessment – Market Leader Evolution of Cumulative FCF
Cote-d’Ivoire 3G Returns Assessment – Market Leader Evolution of Cumulative FCF
Number of Years of 3G Service When 4G Launched – Sample Markets
% Remaining Useful Life of the 3G Spectrum Asset at the Time 4G Launched – Sample Markets
The African 4G Predicament
Licence Value as a Proportion of Operator Revenue – Sample African Transactions
Depreciated Licence Value Impact on EBITDA – Annual Licence Cost Depreciation as % of Sales
African Country Mapping – by GDP per Capita @ PPP
African Country Mapping – Mobile Services Market Size vs. Mobile Internet Contribution to Revenue
Nigeria Mobile Market Size and Data Impact in the African Context
Nigeria Africa Comparables on GDP/Capita @ PPP Basis
Nigeria 2.6GHz Licensing Framework
Nigeria 2.6GHz: Nigeria Reserve Price Valuation vs. Sample Africa Transactions
Nigeria 2.6 GHz – Valuation Assumptions
Nigeria 2.6GHz Band: Valuation Summary (for 4 lots of 10 MHz)
Amount of MHz Sold in the 2.6GHz Band
The Others Paid Less - Nigeria 2.6 GHz vs. Sample Nigeria Transactions
Valuation of MTN’s 700 MHz vs, Other Markets
What MTN Paid, vs. What MTN Would Have Paid if Valued as per Benchmark Africa Transactions – Assuming 10 MHz
What MTN Paid, vs. What MTN Would Have Paid if Valued as per Benchmark Africa Transactions – Assuming 20 MHz
South Africa Licensing Framework (Proposed)
South Africa Mobile Market Size and Data Impact in the African Context
South Africa Comparables on GDP/Capita @ PPP Basis
800 MHz – South Africa Value vs. African and European Transactions
2600 MHz – South Africa Value vs. African and European Transactions
Low/Median/High Valuation for South Africa’s 4G Spectrum* - Per Year
South Africa Estimated Value vs. Sample Comparable Transactions
South Africa’s 4G Spectrum Valuation by Available Bands
Value Range of South Africa 700 MHz Wholesale vs. Non-Wholesale Blocks *
Senegal 4G Licensing Framework – January 2016
Senegal 4G Reserve Price vs. 3G and 2G Value
Senegal Mobile Market Size and Data Impact in the African Context
Senegal Comparables on GDP/Capita @ PPP Basis
Senegal 4G Licence: Key Valuation Assumptions
How Our Estimate of Senegal’s 4G Value Compares to the ARTP’s
Senegal Overall Licence Block Value vs. Other Markets
Egypt Mobile Market Size and Data Impact in the African Context
Nigeria Africa Comparables on GDP/Capita @ PPP Basis
Valuation of Egypt’s 3G Spectrum vs. North African Comps
Potential Price Points for Egypt’s 4G Licence
Sample Africa LTE Spectrum Plays
Visafone Nigeria Subscriber Base
Breaking Down Visafone Nigeria’s Valuation

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