The Telecom, Media & Internet (TMI) group is responsible for the development and management of Rabobank International\'s wholesale banking activities in the TMI sector. The team aims at being recognised as a provider of innovative solutions to the financial needs of prime Telecom, Media and Internet companies in sophisticated markets.

1. Creating Affordable Internet Access
in Sub-Saharan Africa
EMERGING
FEATURE MARKETS
Africa witnessed a phenomenal One of the main challenges in sub-Saharan Africa is to make Internet affordable.
Currently, the costs of Internet access in this region are twice as high as in Europe,
growth in mobile telephony, with the income levels being significantly lower. However, the huge success of
mobile telephony in this part of Africa has proven that low income levels do not
connecting more people than ever on necessarily go hand in hand with low market penetration. By the end of 2008,
average mobile penetration in Africa was already around 40%, and analysts expect
this continent. Internet access remains market penetration in some countries to reach 100% in the next 5 to 10 years.
Internet user penetration levels in sub-Saharan Africa are currently still very low at an
at low growth levels, while there is average of 4%. Broadband Internet penetration is even lower at around 1%. Like the
mobile telephony industry in Africa, the ISP market is expected to grow significantly
no reason to believe Africans have a over the next few years, due to lower costs and innovative business models.
ISOCEL, an ISP operator in Benin, is one of the companies leading the way in reducing
different attitude than other citizens both the entry costs and the cost of service of Internet connectivity.
of this world. They probably have The company, which obtained an ISP licence in 2007, launched its commercial
operations in February 2008 and has grown significantly over the past two years.
different needs to get Internet access ISOCEL currently is the second-largest ISP in Benin with 3,500 subscribers, which
equals a market share of nearly 20% and over 80% market share of the Fixed
in action, as shown by the mission Broadband Wireless Access segment. The ISOCEL network currently covers most
departments of the capital city of Cotonou, the largest city in Benin. Before delving
of ISOCEL, a wireless Internet Service into ISOCEL’s business and strategy, we outline the telecom and intern market
environment of Benin.
Provider in Benin.
The Regulatory Environment and Telecom Market
Benin is one of 15 West African nations the telecoms regulators of which agreed
on a common regulatory framework for their national information technology and
communications markets. This single framework marks a significant step forward
for the region, which is seeking to create a single, harmonized market based on the
European Union model. The National regulator for the telecommunications industry
is the Telecommunications and Posts Regulatory Authority (TPRA). Within the current
framework, the telecom market can be divided into mobile service providers and
data service providers.
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2. EMERGING MARKETS
The regulator has issued 5 GSM licences and several
Key information on Benin ISP licences, acquired by 5 mobile operators. The three
largest operators are MTN of South Africa, UAE-based
Benin is situated in Western Africa on the North Atlantic Ocean, bordering on operator Etisalat, operating under the brand name
Nigeria, Niger, Burkina Faso and Togo. The majority of Benin’s 8.94 million people MOOV, and Glo from Nigeria. Bell Benin and Libercom
live in the south. The population is young, with a life expectancy of 59 years. are local operators, with Libercom being the mobile
From the total population, 45% of the inhabitants is under the age of 14, 52% is division of incumbent Benin Telecoms. In Benin, all
between 15 and 64, and only 3% is over 65 (source: CIA World Factbook). operators use GSM technology, but Benin Telecoms
also has a CDMA 2000 network, specifically designed
The economy of Benin is dependent on subsistence agriculture, cotton for voice with low-speed data access offerings,
production and regional trade. Cotton accounts for 40% of the gross domestic somewhat comparable with a dial-up service.
product and roughly 80% of official export receipts. Benin uses the CFA franc,
which has been pegged to the euro since January 1999. In order to raise In Benin, no 3G licenses have been issued yet, which
further growth and become less dependent on monocultures, Benin is actively means that the GSM operators have not yet moved
encouraging new information and communication technology. beyond GPRS/EGDE offerings in the urban areas. The
data service providers can serve anybody looking for a
faster data connection.
Figure 1: Benin Mobile Operators and Their Customer Base
Internet Market Penetration and
Mobile operators Customers
Development
MTN 1,010,000 The Benin broadband data market is still at an early
MOOV 906,000 stage with only 160,000 users in 2008 (Source: ITU)
GlO 600,000 and 14,000 actual connections (subscribers) out of a
Bell Benin 203,000 total population of almost 9 million. This equates to a
Libercom 103,000 market penetration of only 1.8%, which is low even by
Source: Paul Budde, telecom market analyst, December 2008 African standards. Like in many emerging markets, the
number of subscriptions to an Internet service is low,
0.16%. Due to the high costs of Internet subscriptions,
most people use cyber cafés to connect to the
Figure 2: Benin Internet Service Providers
Internet. Not only cost but also a lack of infrastructure
Benin Telecoms CDMA 200 1x 10,000 is limiting them to access the Net − an estimated 90%
Isocel WLL-Wi-Fi Proprietary Technology 3,300
of the connected people live in Cotonou.
OTI DSL 1,000
Benin Telecoms DSL 500
The main players in the data market are Benin
Alink Telecom Benin WLL-Wi-Fi Proprietary Technology 150
Telecoms, ISOCEL and OTI, which acts as a DSL
Communitec Benin Pre WIMAX 100
reseller for the incumbent, currently in the process of
First Net WLL-Wi-Fi Proprietary Technology 100
privatization after the government recently opened up
Connecteo VSAT 50
its share capital to private investors.
EIT WLL-Wi-Fi Proprietary Technology 30
Source: ISOCEL company analysis
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3. EMERGING MARKETS
Different market studies (by the government and
independent consultant Paul Budde) indicate that
the market for Internet users in Benin is to grow to
anywhere between 1 million and 2.5 million users
by 2015. ISOCEL is determined to be one of the
main players in the Beninese Internet market and is
expecting to benefit greatly from the expected market
growth. Based on both external studies and internal
research, ISOCEL is preparing itself for a significant
growth of the market in terms of Internet subscribers
(see Figure 3).
Factors Hindering the Uptake of Moreover, GSM operators have invested hundreds of millions in the past few years in
Internet Usage the roll-out of their telecommunication infrastructure. This has resulted in available
Why has the growth of the Beninese Internet market transmission infrastructure and passive access infrastructure (tower sites), which can
been so low, and why is it expected to grow so rapidly then be used by the Internet wireless service providers. A national fibre backbone
in the coming years? The answer is related to a range connecting the south of Benin (Cotonou) to the north (border with Niger) and the
of hurdles that are all being significantly lowered. northwest (border with Burkina Faso) was laid by Benin Telecom.
These are:
• a high level of illiteracy (59% according to UNESCO With the increasing level of literacy, availability of ICT equipment in schools and the
data), which hampers usage of the Internet available ICT skills are also likely to improve rapidly in the coming years.
• high costs of international bandwidth (VSAT and
fibre optics) which contributes to high rates for All things considered, the lack of relevant web content targeting the Beninese
end users; population will most likely be resolved by itself through increased literacy levels, the
• expensive equipment (computers, consumer-end growing number of PC equipment and internet connections, and ICT knowledge and
equipment (CPE) like modems, antennas, wireless skills.
cards etc.);
• a lack of physical ICT infrastructure; According to expectations, the affordability of Internet services will also increase
• a lack of ICT skills and knowledge; strongly in the next few years, due to the availability of refurbished PCs (these cost
• a lack of relevant content on the Internet targeting about EUR 60). New access technologies and economies of scale, which pull down
the local population. CPE costs, are expected to become available for less than EUR 40 as from next year.
At the same time, the disposable income of the Beninese has grown, while the
Due to a strong government focus on education and international bandwidth rates have decreased.
with 45% of the population under 15 years, illiteracy
will significantly decrease in the years to come, and International Connectivity is Key
the number of potential Internet users is bound to Competition between expected submarine fibre optic cable operators, such as
increase. In Cotonou, for instance, only 7% of the Main One, but mostly from ACE (France Telecom) will help to bring down prices.
population below 15 years is illiterate. Currently, there is only one submarine cable connecting West Africa to the rest of
the world. A consortium including the incumbent fixed-line operators in Africa,
who use this monopoly to charge other operators high prices, owns this submarine
cable called SAT-3. It is anticipated that Benin will be linked to new submarine fibre
cables as from 2010, operated by different parties. Benin’s newly licensed mobile
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4. EMERGING MARKETS
network operator Globacom Nigeria has finalized building a 8,600km 320Gb/s Glo-1 with a huge amount of goodwill and customer loyalty.
submarine fibre link from the UK to its home market Nigeria, to serve as an alternative ISOCEL is operating a fixed broadband wireless access
to SAT-3. Furthermore, Main One is expected to become operational in the third system (FBWA). The current system delivers wireless
quarter of 2010, and France Telecom ACE is planned to land in Cotonou in 2011. broadband data services to fixed locations within a
range of 1.5 to 2km from the base station. The network
In addition, the existing SAT-3 capacity will be significantly increased. Competition uses 802.11b outdoor access technology and is mainly
will probably lower the cost of bandwidth, ultimately to around EUR 300-400 per Wi-Fi based on the access part, with a few areas in
Megabit per month down from EUR 1,725 today. This massive reduction will likely town covered by Motorola Canopy base stations.
lead to a drop in consumer prices of approximately 30-40%. Wireless radios are used from the backhaul base station
back to the network operations centre.
According to France Telecom, as illustrated in Figure 5, half of the Internet bandwidth
costs are a result of the costs of international connectivity. The high price for ISOCEL operates in a 2.4GHz unlicensed band to
international bandwidth thus has a significant influence on the retail price. provide its access services. The 5.3GHz licensed band
is used for the transmission to the backbone loop
and for access to the Motorola Canopy base stations.
In order to access international bandwidth, ISOCEL
makes use of the infrastructure of Benin Telecoms
and France Telecom. The company works with the
hardware suppliers Latitude Broadband, Alvarion,
Radwin, Ceragon and Motorola for its base stations and
other network equipment. ISOCEL Telecom also has
a diverse group of partners, ranging from distributors
like International Gateway Distribution (IGD) to GSM
operators (MOOV).
Currently, ISOCEL has 27 base stations serving the city
of Cotonou, which co-locate at the MOOV cellular
towers. Each base station effectively covers 4 to 5
square kilometres. With 27 base stations, the total
effective coverage is around 130 square kilometres
– the whole of Cotonou – and an estimated population
coverage of 1.5 million people (of which 74% are
prepaid customers and 36% are postpaid customers).
Expansion
A Wireless ISP Model Due to the strong growth in customers over the last
ISOCEL is an Internet service provider, offering data speeds from 128kbps up to one and a half year, the current network is reaching its
2048kbps to residential and corporate customers. As part of its service portfolio, the maximum capacity. The company has formulated an
company offers customer premises equipment (CPE) and refurbished PCs. The sale ambitious expansion plan to facilitate the anticipated
of computers is mainly focused on the consumer segment, as the enterprises and increase in customers in the coming years. ISOCEL
institutions generally have their own computers. All PCs and CPEs are sold at cost wants to invest heavily in upgrading the capacity of
price, purely to reduce the entry hurdle and maximize the number of people that can the existing network, from 5,000 to 45,000 customers.
access the Internet. This may reduce the profit margins of the company, but this is It will also implement innovative services and solutions,
being offset by higher subscriber revenue, and in addition it provides the company and new cities will be covered.
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5. EMERGING MARKETS
The first tier of the expansion is the capacity upgrade.
ISOCEL will expand both the backhaul network and
access network to serve up to 45,000 customers.
The second tier of expansion is related to the reduction
of entry costs for customers. ISOCEL will deploy 300
micro base stations. These will allow customers within
reasonable reach to access the Internet with a dongle
rather than with a CPE, which means a significant
reduction in entry fees for subscribers.
In addition, a prepaid platform will be put in place,
which will allow customers to purchase small
denominations of air time and use them in several
sessions instead of one single session. Experience in the telecom industry in Africa
has shown that the introduction of lower air-time denominations increases the
subscriber base significantly and at the same time often increases the average
revenue per user (ARPU) per customer. People are able to buy Internet air time when
they like and for a period that fits their budget, and they do not need to wait until
they have saved sufficient funds to buy a high-denomination card.
The third tier of expansion is focused on the increase of the geographical coverage
area. To date, ISOCEL has limited its footprint to the city of Cotonou, where 90%
of all Internet subscribers in Benin is based. With the anticipated reductions of the
entry costs and subsequent strong market growth, ISOCEL has decided to expand its
coverage area beyond Benin’s capital. The coverage expansion will be targeted at
six secondary cities: Djougou, Porto-Novo, Parakou, Natitingou, Ouidah and Bohicon.
Incumbent Benin Telecoms provides limited DSL services in these cities, but other
than that, there is very little competition. Once ISOCEL has covered these areas, the
company will be able to serve half of the Benin population.
As part of the geographical expansion, ISOCEL will deploy over 50 fixed broadband
wireless base stations all linked to the fibre Benin Telecom backbone running 700
kilometres from the south to the north of Benin. All these base stations will then be
linked to the network operating centre in Cotonou, which will manage the traffic to
the overseas SAT-3 link of Benin Telecoms and thus connect the cities in the target
areas to the Internet. In addition, the company will create Community Centres in six
cities where the local population can learn how to use computers and the Internet.
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6. EMERGING MARKETS
The Community Centre Concept Innovation
ISOCEL will introduce a solution for the secondary cities to increase Internet ISOCEL will be the first to provide integrated ICT
penetration, namely Web-enabled Information and Communication Technology services in the smaller cities in Benin. Acting as an
(ICT) Community Centres. These will be equipped with broadband Internet access enabler to the local ICT industry, it is expected to foster
through the company’s network and provide services such as training as well as new entrepreneurship and businesses that rely on or
basic and technical ICT education, an Internet café and business centre facilities. relate to ICT, for example in the areas of e-commerce
Furthermore, the Community Centres will function as a sales outlet for Internet and financial and technical services.
subscriptions and related ICT products and services of ISOCEL and its partners.
The company has chosen for this solution, as many people in the targeted cities Despite the introduction of the Community Centres
may be literate and have sufficient income but do not have any general computer and their diverse activities, ISOCEL will remain very
experience. The centres will be able to train these people and introduce them to the focused, and all its undertakings will ultimately have
possibilities of the Internet. one goal: making Internet accessible to all. The more
people who will be able to use the Internet, the more
Internet connections ISOCEL can sell. Once there
are credible parties who can take over non-core
Community Centre activities, ISOCEL will hand these
activities over to local entrepreneurs.
The expansion of Benin ISP ISOCEL goes beyond a
mere expansion of its network coverage. By assuming
the concepts of ICT Community Centres, a win-win
situation for the communities in Benin and for ISOCEL
is created. These centres facilitate social and economic
development by enabling communities to develop
computer skills and knowledge and provide them with
access to the Internet. At the same time, increased ICT
knowledge and penetration will result in subscriber
and revenue growth for the company, which can gain
a good reputation on the local market.
The Community Centre model could become an
important blueprint for the roll-out and mass adoption
As part of the ICT Community Centre concept, the company will introduce an of the Internet in Africa.
international standard for educational certifications for ICT end-user skills in Benin.
The government supports the Community Centres by offering ISOCEL free use of
the buildings where the centres will be located and by contributing half of the ICT Robert Aouad
training costs. Chief Executive Officer, ISOCEL Telecom.
robert@isoceltelecom.com
The Dutch government, in the form of the EVD (the agency for international business
and cooperation of the Dutch Ministry of Economic Affairs), has also shown interest
in the project and is currently reviewing the project in more detail. Michiel Slootweg
Director, Emecas Finance.
michiel.slootweg@emecas.com
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