Management Report : December 2016 : Xalam Analytics
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Africa is in the midst of an FTTH boom – an increasingly loud FTTH revolution that is made even more notable by the unique nature of some of its characteristics. Between 2014 and 2016, the number of homes and premises passed by fibre has more than tripled. The cumulative number of African homes/premises passed by fibre crossed the 1m mark in 2016. We expect it to hit the 2 million mark in 2017.
The total number of FTTH connections in Africa passed the 500k mark in 2016. Recent growth has been strong: around 75% of Africa’s FTTH connection growth since 2010 has occurred over the past two years. Last mile Fibre is upending
Africa’s retail broadband market dynamics – from bandwidth speeds to user experience, pricing models and market share upheavals, it’s a whole new game. These dynamics are analyzed in our new report, “The African FTTH Boom, Last
Mile Fibre Dynamics, Economics and Outlook in African Markets” - arguably the most comprehensive analysis developed on the rise and impact of FTTH in African markets.
The African FTTH Boom takes an extensive look at FTTH adoption patterns across the continent, including key infrastructure, market structure and regulatory drivers along with current and projected levels of homes passed and connected.
The report provides a mapping of which markets appear most attractive for an FTTH rollout; it offers an in-depth analysis of the addressable market for FTTH in Africa, from businesses in central business districts to gated communities and
beyond. Finally, the report takes a close look at African FTTH economics, from cost of deployment to ARPU, profitability and potential returns, along with the implications of those dynamics on projected rollout and adoption
The insights derived from that our research on African FTTH are distilled in this report, covering critical key questions and points, including:
> The rise of last mile fibre is transforming Africa’s broadband retail market dynamics – from bandwidth speeds to user experience, pricing models and market share
upheavals, it’s a whole new game.
> The total number of FTTH connections in Africa passed the 500k mark in 2016. Recent growth has been strong: around 75% of Africa’s FTTH connection growth since 2010
has occurred over the past two years.
> Five markets account for 85% of Africa’s FTTH/P homes passed – South Africa, Kenya, Nigeria, Morocco and Mauritius. But this boom is about more than the top 5.
> Supply and demand fundamentals are coming together to push African FTTH. Only around 45% of Africa’s Fixed broadband addressable demand has been reached by fixed broadband access solutions – and only 2% is currently reached by FTTH.
> We find the notion of an almost mobile-only African connectivity marketplace to be largely fallacious. The rise of FTTH is built on a realization that 3G/4G, ADSL and other technologies just aren’t going to cut it for some use cases.
> Regulation has been a problem for African FTTH; for the most part, African market structures are not optimized for FTTH roll-outs. That African FTTH is picking up as much as it has been is really more a testimony to the bottled-up potential of demand for ultra high speed connectivity.
> Africa’s mobile operators have traditionally ignored FTTH. As a result, they have fallen behind. Strategically, we do not believe top tier operators can afford to lose too much ground on FTTH.
> African FTTH economics are good in the first 1-2 phases of rollout, and much tougher thereafter. Along with regulation, these economics are the biggest risk to all the projections we have made in our report.
> Our business case analysis reinforces the fact that FTTH at scale is a long, long term game. Investors looking for quick returns and payback periods will not find them here. But providers that stick to it over the long run will hold a nearly unassailable position in Africa’s digital infrastructure market.
African FTTH – The 1m Homes/Premises Passed Rubicon Has Been Crossed
Five Markets are Driving 85% of African FTTH Deployments
The Half a Million FTTH Connection Mark Has Been Crossed
Country View: Mauritius is Africa’s Largest FTTH Market – but SA is About to Take Over
Africa’s FTTH Take-Up Rates – Building Where the Demand Is
Africa’s Largest Broadband Markets are Not Necessarily its Largest FTTH/P Markets
FTTH Penetration – A Mauritius Outlier, and Few Markets are Above the 1% Household Penetration Mark
Early Days: FTTH has Touched Only 2% of the African FBB Addressable Market
Early Days: There is a Material Penetration Gap Between FBB and FTTH
Sharp Contrasts – A Few Markets Go all FTTH, While Some of the Largest FBB Markets Have Virtually None
How African FTTH Compares to Other Regions’ – Still Smallish, but Rising Fast
1. AFRICAN FTTH MARKET DRIVERS, MARKET STRUCTURE & THE IMPACT OF REGULATION
What Is Driving Recent African FTTH Growth?
“ADSL Doesn’t Cut It” – Wholesale Fibre, Netflix Effect and the Rising Middle Class
Other FTTH Drivers – Key Player Strategies and Government Broadband Push
African Regulation is a Significant Obstacle to the Rollout of Ultra fast Broadband Infrastructure
In Many Markets, Regulatory Action Seems Designed to Prevent Competition in the Broadband Space
With a few Exceptions, African Market Structure is not Optimized for Ultra Fast Broadband Growth
Breaking Down Optimal FTTH Market Structures
What Works Best for FTTH? NBN Models vs. Last Mile Unbundling
What Works Best for FTTH? Open Access Wholesale FTTH vs. Closed Access Network Build
2. BREAKING DOWN AFRICAN FTTH DEMAND, FROM PARKHURST TO YOPOUGON
African FTTH Demand: From a Population of 1.2bn to an FTTH Addressable Market of ~10m
Understanding African FTTH Demand – Households and Businesses, from Parkhurst to Yopougon
African FTTH Outlook: In the Short Run, Two Main Phases of Deployments
3. EXPLORING SOME BURNING FTTH QUESTIONS
Which African Markets are Ripe for FTTH?
-The Best FTTH Opportunities are where Broadband is and Fibre Isn’t (Quite Yet)
-Mature African Broadband Markets Offer the Best Opportunities for FTTH – Others Will Leapfrog
How do ADSL, MBB, FWA Impact FTTH - & Vice-Versa?
FTTH vs. ADSL - The Self Cannibalization Case
FTTH vs. ADSL - The Competitive Cannibalization Case
FTTH vs. ADSL – When (and Where) ADSL Keeps Up with FTTH
The Last Stalwarts – ADSL Will do Just Fine, Thank You
Does MBB Help or Hurt the Fibre Case?
FBB Is more of a Precursor of FTTH Potential than MBB is…
…But MBB Helps Build the Economic Case for FTTH
4. AFRICAN FTTH CAPEX, PRICING AND CHALLENGING ECONOMICS
At a Macro Level, a ~$9bn African Retail Broadband Opportunity
African CapEx/Home Passed – Mostly Within Expected Range
Africa Needs ~$1bn in Annual CapEx to Hit Our FTTH Roll-Out Projections – High, but Hardly Excessive
FTTH Economic Levers – The CapEx/Home Passed Problem
FTTH Economic Levers – ARPUs and FTTH Take-Up Rates
FTTH Economics – Manageable in Phases 1 & 2, Rather Complicated Thereafter
5. AFRICAN FTTH: PRICING, COMPETITIVE DYNAMICS & MAPPING OUT FUTURE GROWTH
FTTH Pricing – No Fibre Premium Here
How FTTH Pricing and Speeds Compare to ADSL, Mobile
Competitive Dynamics: Top Tier Telcos Can No Longer Ignore FTTH
Mapping Out the Outlook for FTTH: East and Southern Africa
Mapping Out the Outlook for FTTH: West & North Africa
Sample FTTH Deployment Plan
6. AFRICAN FTTH: JUST THE FORECAST, PLEASE
African FTTH Homes Passed – Towards the 5m Mark – Perhaps even 10m
Africa FTTH – A ~2m FTTH Connection Target for 2020
Where is the FTTH Growth?
Africa FTTH 2020 – At Least 6 Markets Above the 1% Household Penetration Mark
7. SAMPLE AFRICAN MARKETS FTTH SNAPSHOTS
Mauritius FTTH: On Path to Become Africa’s First Gigabit Economy
South Africa: Africa’s Deepest Combination of FTTH Demand and Supply Fundamentals
Kenya FTTH: Has Done Very Well, but there’s Room for More
Tanzania FTTH: Fibre Wholesale Economics Hold Up Potential
Zimbabwe FTTH: Somehow Thriving Despite Terrible Macro-Economic Environment
Nigeria: An African FTTH Tragedy