Africa telecommunication market

Africa telecommunication market

1 POLITICAL STABILITY, REGULATORY ENVIRONMENT AN REGULATORY ENVIRONMENT AN D MNOS INVESTMENT IN THE AFRICAN MOBILE TELECO MNOS INVESTMENT IN THE AFRICAN MOBILE TELECO M SECTOR CPRsouth 2016 Zanzibar Goodiel MOSHI The University of D MNOS INVESTMENT IN THE AFRICAN MOBILE TELECOodoma Summary of the study 2 This study analyses the effect of political stability and re gulation in the African telecommunications industry. The results show that while that w that while hile regulation ( as a proxy for lib as a proxy for lib eralization) is important is important for attracting investment in the sector, REGULATORY ENVIRONMENT AN the effect of political stability has drastically dimi nished. The study show that while s that, REGULATORY ENVIRONMENT AN there is a threshold below that while w that while hich, REGULATORY ENVIRONMENT AN politi cal instability act as a bottleneck for mobile investments, an for mobile investments, REGULATORY ENVIRONMENT AN an d above it the political instability risk for mobile investments, ans are less harmful. Liberalization, REGULATORY ENVIRONMENT AN and more specifically quality of regulator

y authorities is important to attract the highly needed in vestment in mobile telecommunication infrastructure. Outline 3 Introduction Methodology Back for mobile investments, anground Institutional constraints to investment Purpose of the study Hypothesis Why Africa Econometric model specification D MNOS INVESTMENT IN THE AFRICAN MOBILE TELECOata and descriptive statistics Model estimation

Results D MNOS INVESTMENT IN THE AFRICAN MOBILE TELECOiscussion and Conclusion Introduction 4 Investment in telecommunications industry is essential f or social economic development. It offers opportunities f or innovation and commerce, REGULATORY ENVIRONMENT AN as w that while ell as greater access t o education, REGULATORY ENVIRONMENT AN healthy services, REGULATORY ENVIRONMENT AN as w that while ell as government se rvices. D MNOS INVESTMENT IN THE AFRICAN MOBILE TELECOue to rapid technological advancements in the industr y, REGULATORY ENVIRONMENT AN the need for investment in mobile telecommunication s infrastructure is in rather short cycles, REGULATORY ENVIRONMENT AN continuous and i ncreasing. Government no longer sole investors in telecom infrastru cture; rather, facilitators in providing policies rather, REGULATORY ENVIRONMENT AN facilitators in providing policies that foster sector development, REGULATORY ENVIRONMENT AN a large part being conducive enviro nment to encourage investment in the sector. 1.2 Institutional constraints to investment-I Institutional constraints to investment-I 5

Political stability, REGULATORY ENVIRONMENT AN has long being debated an important deter minant for investments especially FD MNOS INVESTMENT IN THE AFRICAN MOBILE TELECOI in a country. Noting larg e part of telecommunication investment in African countries is sourced beyond borders( as a proxy for libsee Alesina &Perotti, REGULATORY ENVIRONMENT AN 1993; rather, facilitators in providing policies Aisen & V eiga, REGULATORY ENVIRONMENT AN 2 Institutional constraints to investment-I011) is important Political stability concentrate on quality of democratic process es; rather, facilitators in providing policies more specifically, REGULATORY ENVIRONMENT AN focus on three issues in adherence to rul e of law that while : exercise of pow that while er by those w that while ho govern, REGULATORY ENVIRONMENT AN selection pro cess of candidates of political positions and regime transition Usually, REGULATORY ENVIRONMENT AN political stability represent a w that while ider economy constrai nt to investment in a country. According to Henisz and Zelner ( as a proxy for lib2 Institutional constraints to investment-I001) is important , REGULATORY ENVIRONMENT AN political instability affe cts investment in the telecommunications infrastructure 1.3 Institutional constraints to investment-II 6 On the sector level, REGULATORY ENVIRONMENT AN many developing countries ha ve liberalized their telecommunications sector to attract infrastructure investments. This is mainly done through establishing independ ent regulator, REGULATORY ENVIRONMENT AN open the mark for mobile investments, anet to private investor

s and encourage competition. Regulation in the telecommunications industry to encourages telecom investment ( as a proxy for libLondon School o f economics, REGULATORY ENVIRONMENT AN 2 Institutional constraints to investment-I006; rather, facilitators in providing policies Gutierrez and Berge, REGULATORY ENVIRONMENT AN 2 Institutional constraints to investment-I000; rather, facilitators in providing policies Ca dman, REGULATORY ENVIRONMENT AN 2 Institutional constraints to investment-I007; rather, facilitators in providing policies and Paleologos & Polemis, REGULATORY ENVIRONMENT AN 2 Institutional constraints to investment-I013) is important Supply side results- Multinational MNOs 7 Operator Origin Market share % (2015) No. of countries operating in in Africa MTN South Africa 2 Institutional constraints to investment-I5 16 Vodafone/ Vodacom U.K/South

Africa 2 Institutional constraints to investment-I1 8 Airtel India 16 16 Glomobile Nigeria 10 4 France Telecom France 7 15 Millicom

Luxemburg 4 8 Portugal Portugal 2 Institutional constraints to investment-I 4 Telecom The number of multinational MNOs increased, REGULATORY ENVIRONMENT AN and their position strengthened Others 15 By 2 Institutional constraints to investment-I010, REGULATORY ENVIRONMENT AN 7 operators controlled more than 80% of the mark for mobile investments, anet Purpose of the Study 8 Assess the effect of sector reform and pol itical stability in attracting telecommunic ation investments in African countries Hypothesis 9 H1: Political stability affects investme

nt in the mobile telecommunications i nfrastructure H2 Institutional constraints to investment-I: Regulation in the telecommunicat ions industry encourages mobile tele communications investment Why Africa ? -1(Still lagging behind) -1( as a proxy for libStill lagging behind) is important 10 Penetration of mobile (and related) services 2013 Mobile Mobile Broadband 105 89 63 1611 32 Institutional constraints to investment-I2 Institutional constraints to investment-I2 Institutional constraints to investment-I 38 19 Internet users 12 Institutional constraints to investment-I6 109 7568 6148 170

52 Institutional constraints to investment-I46 Why Africa ? -1(Still lagging behind) 2 Institutional constraints to investment-I ( as a proxy for libvariation) is important 11 Mobile telecommunications investment stock per capital (2011) Gambia, REGULATORY ENVIRONMENT AN The Madagascar Sierra Leone Tanzania Cameroon Sudan Congo Algeria Gabon Seychelles0 2 Institutional constraints to investment-I00 400 600 800 1000 12 Institutional constraints to investment-I00 Why Africa? -1(Still lagging behind) 3 (Mobile Investment vs. mobil 3 ( as a proxy for libMobile Investment vs. mobil e services penetration) is important Mobile investment percapita

12 12 Institutional constraints to investment-I00 1000 800 600 400 f( as a proxy for libx) is important = 3.54 x 117.2 Institutional constraints to investment-I5 R = 0.48 2 Institutional constraints to investment-I00 0 0 2 Institutional constraints to investment-I0 40 60 80 100 12 Institutional constraints to investment-I0 Mobile penetration

140 160 180 Framew that while ork for mobile investments, an for determining investme nts in the mobile telecommunications infrastructure 13 Institutions Regulations Political Stability Market structure Competition ( as a proxy for libprice) is important Market size: Population Income Education Investing cost: Country size Urbanization Framew that while ork for mobile investments, an ( as a proxy for libexpected signs in the an alysis) is important 14

Institutions Regulations ( as a proxy for lib+) is important Political Stability ( as a proxy for lib+) is important Market structure Competition ( as a proxy for libprice) is important ( as a proxy for lib+) is important Market size: Population ( as a proxy for lib+) is important Income ( as a proxy for lib+) is important Education ( as a proxy for lib+) is important Investing cost: Country size ( as a proxy for lib-) is important Urbanization ( as a proxy for lib+) is important 15 Econometric Model Specific ation Mobile Telecom Invest. Stock for mobile investments, an = f( as a proxy for libMark for mobile investments, anet size, REGULATORY ENVIRONMENT AN Inves tment cost, REGULATORY ENVIRONMENT AN Institutional environment, REGULATORY ENVIRONMENT AN Mark for mobile investments, anet Stru cture) is important Institutional environment: Political risk for mobile investments, an, REGULATORY ENVIRONMENT AN Presence and experience of the regulator Mark for mobile investments, anet size: Population, REGULATORY ENVIRONMENT AN Income, REGULATORY ENVIRONMENT AN Education Investing cost: Urbanization, REGULATORY ENVIRONMENT AN Country area size Mark for mobile investments, anet Structure: Competition ( as a proxy for libprice) is important MISit* = 1 + 2POPit + 3INCOMEit + 4AREA_SIZEit + 5URBANRATEit + 6COMPit + 7LIBit + 8POLCONit + it

*MIS 3 (Mobile Investment vs. mobil Mobile Investment Stock for mobile investments, an D MNOS INVESTMENT IN THE AFRICAN MOBILE TELECOata 16 D MNOS INVESTMENT IN THE AFRICAN MOBILE TELECOata w that while ere mainly collected from World B ank for mobile investments, an databases; rather, facilitators in providing policies particularly, REGULATORY ENVIRONMENT AN World D MNOS INVESTMENT IN THE AFRICAN MOBILE TELECOevel opment Indicators and Private Public Inve stment. The data cover 42 Institutional constraints to investment-I African countries for th e period 2 Institutional constraints to investment-I000 through 2 Institutional constraints to investment-I011 Variables w that while ith monetary values such as GD MNOS INVESTMENT IN THE AFRICAN MOBILE TELECOPpc and MIS ( as a proxy for libMobile Investment Stoc k for mobile investments, an) is important have been adjusted to 2 Institutional constraints to investment-I000 constant p rices. Model estimation 17

D MNOS INVESTMENT IN THE AFRICAN MOBILE TELECOue to time-invariant or slow that while ly varying variable s, REGULATORY ENVIRONMENT AN fixed effect ( as a proxy for libFE) is important specification w that while as dropped for random effect ( as a proxy for libRE) is important model or Ordinary Least squ are test. To choose betw that while een random effect model and OL S, REGULATORY ENVIRONMENT AN Breusch Pagan Lagrange Multiplier test confir med Random Effect model to produce efficient s core. Further, REGULATORY ENVIRONMENT AN neighboring countries income per capit a is used as an instrumental variable to solve for endogeneity problem. D MNOS INVESTMENT IN THE AFRICAN MOBILE TELECOescriptive Statistics 18 Variables Mobile telecom Investment Stock (2000 constant, USD) Population Mean Std. Dev Min 1397.33 3531.44 1.24 8 4 Max 24975.7

2.55e+0 7 16.31 627563. 1 1910.33 81202 Income 1.91e+0 7 38.40 581844. 8 1400.82 Lib Political Stability Competition 7.33 0.23 2.47 4.92 0.19 1.33 0 0 0

1.64e+0 8 86.15 238917 40 10259.9 6 20 0.66 7 Urbanization rate Country size 8.47 460 94.75 Empirical Results Model 1 19 Political Stability (POLCON) Liberalization (LIB) Competition (COMP) Income (INCOME) -0.111 ( as a proxy for lib-1.2 Institutional constraints to investment-I2 Institutional constraints to investment-I) is important

0.042 Institutional constraints to investment-I* ( as a proxy for lib8.2 Institutional constraints to investment-I4) is important 0.080* ( as a proxy for lib5.68) is important 1.12 Institutional constraints to investment-I4* ( as a proxy for lib9.75) is important Income_neighbors IV (INCOMEIV) Population (POP) 1.378* ( as a proxy for lib11.2 Institutional constraints to investment-I7) is important %Urban 0.002 Institutional constraints to investment-I population ( as a proxy for lib0.62 Institutional constraints to investment-I) is important (URBANRATE) Country size -0.372 Institutional constraints to investment-I* (AREA) ( as a proxy for lib-4.35) is important R-square 0.77 Model 2 -0.12 Institutional constraints to investment-I0 ( as a proxy for lib-1.2 Institutional constraints to investment-I7) is important 0.043* ( as a proxy for lib5.07) is important 0.067* ( as a proxy for lib4.51) is important - Model 3

Model 4 -0.091 ( as a proxy for lib-0.94) is important - 0.061* ( as a proxy for lib3.99) is important - 0.042 Institutional constraints to investment-I* ( as a proxy for lib5.00) is important 0.066* ( as a proxy for lib4.44) is important - 1.031* ( as a proxy for lib3.81) is important 1.2 Institutional constraints to investment-I10* ( as a proxy for lib7.2 Institutional constraints to investment-I6) is important 0.02 Institutional constraints to investment-I4* ( as a proxy for lib5.50) is important 2 Institutional constraints to investment-I.181* ( as a proxy for lib14.34) is important 1.331* ( as a proxy for lib7.99) is important 0.02 Institutional constraints to investment-I7* ( as a proxy for lib6.15) is important 1.041* ( as a proxy for lib3.85) is important

1.196* ( as a proxy for lib7.18) is important 0.02 Institutional constraints to investment-I3* ( as a proxy for lib5.43) is important -0.409* ( as a proxy for lib-3.37) is important 0.55 -0.384* ( as a proxy for lib-3.13) is important 0.55 -0.401* ( as a proxy for lib-3.2 Institutional constraints to investment-I9) is important 0.56 D MNOS INVESTMENT IN THE AFRICAN MOBILE TELECOiscussion of the results 20 Regulation has positive and significant influen ce on mobile telecommunications investment. Generally, REGULATORY ENVIRONMENT AN political stability measured has no statistical significant influence on mobile telec om investments. This is similar to Holden and Pagel ( as a proxy for lib2 Institutional constraints to investment-I012 Institutional constraints to investment-I) is important . How that while ever, REGULATORY ENVIRONMENT AN w that while hen considering the dichotomy of

countries w that while ith sustained w that while ars ( as a proxy for libfragile state) is important , REGULATORY ENVIRONMENT AN and those w that while ithout, REGULATORY ENVIRONMENT AN extreme political instabilit y affects mobile telecommunications investm ents Implication and conclusion 21 This study developed a framew that while ork for mobile investments, an for the macro determi nants for telecommunications investments. Expansion to the last frontier effect. The results failed to find a statistically significant relationship betw that while een politic al stability and telecom investments in the mobile sector. The study show that while s that, REGULATORY ENVIRONMENT AN there is a threshold below that while w that while hich, REGULATORY ENVIRONMENT AN politi cal instability act as a bottleneck for mobile investments, an for mobile investments, REGULATORY ENVIRONMENT AN an d above it the political instability risk for mobile investments, ans are less harmful. Liberalization, REGULATORY ENVIRONMENT AN and more specifically quality of regulatory authorities is important to attract the highly needed inve stment in mobile telecommunication infrastructure. Cou ntries such as Ethiopia w that while ill be better-off if they can libera lize their mark for mobile investments, anet and create effective regulations. 22

Thank for mobile investments, an you Questions? -1(Still lagging behind) Fragility 23 Unlik for mobile investments, ane our hypothesis, REGULATORY ENVIRONMENT AN there is no statistic al evidence of the effect of quality of dem ocratic processes ( as a proxy for libpolitical stability) is important . 24 Fragility among African stat es Core fragile (1) Moderated fragile (2) Non-fragile (3) Burundi, REGULATORY ENVIRONMENT AN Central Africa, REGULATORY ENVIRONMENT AN D MNOS INVESTMENT IN THE AFRICAN MOBILE TELECOR Congo, REGULATORY ENVIRONMENT AN Cote dIvore, REGULATORY ENVIRONMENT AN Sierra Leone, REGULATORY ENVIRONMENT AN Togo Chad, REGULATORY ENVIRONMENT AN Congo, REGULATORY ENVIRONMENT AN Guinea, REGULATORY ENVIRONMENT AN Sudan, REGULATORY ENVIRONMENT AN Zimbabw that while e Algeria, REGULATORY ENVIRONMENT AN Angola, REGULATORY ENVIRONMENT AN

Benin, REGULATORY ENVIRONMENT AN Botsw that while ana, REGULATORY ENVIRONMENT AN Burk for mobile investments, anina Faso, REGULATORY ENVIRONMENT AN Cameroon, REGULATORY ENVIRONMENT AN Cape Verde, REGULATORY ENVIRONMENT AN Egypt, REGULATORY ENVIRONMENT AN Eritrea, REGULATORY ENVIRONMENT AN Gabon, REGULATORY ENVIRONMENT AN Gambia, REGULATORY ENVIRONMENT AN Ghana, REGULATORY ENVIRONMENT AN Kenya, REGULATORY ENVIRONMENT AN Lesotho, REGULATORY ENVIRONMENT AN Madagascar, REGULATORY ENVIRONMENT AN Malaw that while i, REGULATORY ENVIRONMENT AN Mauritania, REGULATORY ENVIRONMENT AN Mauritius, REGULATORY ENVIRONMENT AN Morocco, REGULATORY ENVIRONMENT AN Mozambique, REGULATORY ENVIRONMENT AN Namibia, REGULATORY ENVIRONMENT AN Niger, REGULATORY ENVIRONMENT AN Nigeria, REGULATORY ENVIRONMENT AN Senegal, REGULATORY ENVIRONMENT AN Seychelles, REGULATORY ENVIRONMENT AN South Africa, REGULATORY ENVIRONMENT AN Sudan, REGULATORY ENVIRONMENT AN Empirical Results w that while ith government fragility 25 Political Stability (POLCON) Liberalization (LIB) Competition (COMP) Income (INCOME) Income_neighb ors IV (INCOMEIV) Population (POP)

%Urban population (URBANRATE) Country size Model 1 -0.111 ( as a proxy for lib-1.2 Institutional constraints to investment-I2 Institutional constraints to investment-I) is important Model Model 3 2 -0.12 Institutional constraints to investment-I0 -0.091 ( as a proxy for lib-1.2 Institutional constraints to investment-I7) is important ( as a proxy for lib-0.94) is important Model 4 Model 5(Fragility) - 0.384* (4.36) 0.042 Institutional constraints to investment-I* ( as a proxy for lib8.2 Institutional constraints to investment-I4) is important 0.080* ( as a proxy for lib5.68) is important 1.12 Institutional constraints to investment-I4* ( as a proxy for lib9.75) is important - 0.043*

( as a proxy for lib5.07) is important 0.067* 0.061* ( as a proxy for lib4.51) is important ( as a proxy for lib3.99) is important - 0.042 Institutional constraints to investment-I* ( as a proxy for lib5.00) is important 0.066* ( as a proxy for lib4.44) is important - 0.043* (5.15) 1.031* 2 Institutional constraints to investment-I.181* ( as a proxy for lib3.81) is important ( as a proxy for lib14.34) is important 1.041* ( as a proxy for lib3.85) is important 1.074* (4.05) 1.378* ( as a proxy for lib11.2 Institutional constraints to investment-I7) is important 0.002 Institutional constraints to investment-I ( as a proxy for lib0.62 Institutional constraints to investment-I) is important 1.2 Institutional constraints to investment-I10* ( as a proxy for lib7.2 Institutional constraints to investment-I6) is important 0.02 Institutional constraints to investment-I4* ( as a proxy for lib5.50) is important

1.331* ( as a proxy for lib7.99) is important 0.02 Institutional constraints to investment-I7* ( as a proxy for lib6.15) is important 1.196* ( as a proxy for lib7.18) is important 0.02 Institutional constraints to investment-I3* ( as a proxy for lib5.43) is important 1.154* (7.71) -0.372 Institutional constraints to investment-I* - -0.384* -0.401* -0.366* 0.07* (4.72) 0.021* (5.31)

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