Global Business Outcomes Mobile Phone Market in Africa Article Assignment Your task is to read the article “Africa Defeats World’s Biggest Mobile Carriers”

Global Business Outcomes Mobile Phone Market in Africa Article Assignment Your task is to read the article “Africa Defeats World’s Biggest Mobile Carriers” and identify the specific social, cultural, and economic factors that are present in this case of global business. (HINT: Use the examples as a guide to your answer & refer to your text and other sources as needed). Finally, comment on how any of the identified factors may affect the outcome of the Mobile phone market in Africa.Answer each aspect in a different paragraph! Africa Defeats World’s Biggest Mobile
Carriers
Many cell phone companies are rethinking their
headlong rush into the continent. Only Orange is
staying the course.
More stories by Loni Prinsloo July 9, 2017, 10:00 PM CDT
People use their mobile phones while waiting to board a ferry in Abidjan, Ivory Coast.
Photographer: Jose Cendon/Bloomberg
Back when African countries were auctioning off mobile licenses by the
boatload to serve the region’s young, tech-savvy population, investing in the
continent’s fast-growing economies seemed like a no-brainer. Some of the
world’s biggest wireless carriers rushed in.
Now they’re wondering if they made a mistake. Increasing government and
regulatory scrutiny, as well as a lack of expansion opportunities in subSaharan Africa, are making it harder for operators such as Vodafone Group
Plc, Orange SA and Bharti Airtel Ltd. to grow. Their choice: Pull back or
double down.
Two companies beating at least a partial retreat are Millicom International
Cellular SA, which disposed of its Senegal and Democratic Republic of Congo
units, and India’s Airtel, which sold businesses in Burkina Faso and Sierra
Leone to Orange earlier this year. Reducing its exposure to Kenya, Vodafone
transferred most of its $3.6 billion stake in Nairobi-based Safaricom Ltd. to
majority-owned South African unit Vodacom Group Ltd. in May, and may
pare further. That leaves Vodafone Ghana as the U.K. company’s sole ownbranded African operation.
“At this point it is becoming clear who has a chance of making it in Africa and
who does not, and it essentially boils down to scale, as well as government
sway,” said Baha Makarem, an analyst at Arqaam Capital. “It’s just a question
of who is ready to weather the storm.”
The shift in sentiment comes as governments across sub-Saharan Africa are
losing favor with investors. The fall in commodity prices has reduced tax
revenue in many countries, and average economic growth slumped to 1.4
percent last year from 3.4 percent in 2015, according to the International
Monetary Fund. That’s encouraged lawmakers in countries including
Tanzania and Ghana to look to international companies for revenue
opportunities—both have ordered foreign wireless carriers to cede shares to
local investors.
“The regulatory challenges are top of our mind at all times,” MTN Group Ltd.
Chairman Phuthuma Nhleko told shareholders at the annual meeting of
Africa’s biggest wireless carrier on May 25. “It’s just part of the environment
in which we operate.”
Nhleko has firsthand experience with that. A Nigerian watchdog fined the
carrier $5.2 billion in 2015 for missing a deadline to disconnect unregistered
subscribers, leading to a slump in the share price that’s yet to turn
around. The penalty was reduced to $1 billion after months of negotiations
and Nhleko has since overhauled management and corporate governance.
Even so, MTN was fined $8.5 million in Rwanda in May for non-compliance
with its license obligations. The company, Africa’s biggest carrier by
sales, hasn’t yet delivered on a promise to list its Nigerian unit in Lagos.
Vodacom, 70 percent owned by Vodafone, has complied with Tanzania’s
demand to sell shares on the Dar es Salaam stock exchange. It had to delay
the listing when a surge in demand from retail investors slowed the
processing of applications from outside the country.
IPOs are the only way to force the wireless carriers to share their profits with
local investors in the East African country, Tanzanian President John
Magufuli said last month, adding that licenses could be withdrawn if they
refuse the order.
“It is not enough to just subject the mobile-phone companies to fines and
allow them to continue minting billions of money in profits,” the local Daily
News quoted him as saying.
Not everyone is down on Africa, where GSMA Intelligence expects mobile
revenue will reach $43 billion in 2020. Orange, France’s market leader, in
February called Africa a priority region and has focused most of its
investment in French-speaking markets such as Cameroon and Ivory Coast.
That’s partly to offset stagnating growth in Europe and to take advantage of a
younger population demanding faster and cheaper data, according to Bruno
Mettling, the Paris-based company’s head of operations on the continent. A
lack of obsolete infrastructure that would need to be removed or upgraded is
also underlying the business case, he said.
Some operators “are withdrawing from Africa in the face of the enormous
investments to be made—3G, 4G, but also in the fiber to connect the antennas
to each other,” Mettling said. “At Orange, we invest an average of 1 billion
euros ($1.1 billion) in Africa each year.”
Areas of expansion for Orange include mobile banking, where Nairobi-based
Safaricom blazed a trail with its M-Pesa product in Kenya. Orange Money
reported a 74 percent increase in customers, to more than 30 million, in the
first quarter, and plans to extend the service into its home market this year.
Orange’s francophone markets have so far stopped short of ordering share
sales to local investors.
Vodacom, Africa’s biggest carrier by market capitalization, is another
considering further expansion following the Safaricom deal. The tougher
market and increasing willingness of some rivals to sell may have brought
down prices, Chief Executive Officer Shameel Joosub said at the company’s
results presentation in May.
“The days of you going in with a new greenfield license are gone,” Joosub
said. The price of potential acquisition targets is, however, “becoming more
reasonable,” and there “are not that many buyers.”
The first wave of second-generation digital mobile licenses in Africa started in
the late 1990s, with Nigeria being one of the last countries to issue its first
permit in 2001. While those markets have since been growing—more than
half the continent’s population is seen owning a smartphone by 2020—the
only country yet to auction licenses is Ethiopia.
“Africa is a market of growth, but also a very difficult environment to
operate,” said Dobek Pater, managing director of Pretoria-based Africa
Analysis. “Costs of operation are often high, disposable income levels of large
segments of the society low, and the regulatory environment not always
predictable. Only companies with “increasing economies of scale will
succeed.”
Global Discussion Question.
After studying the various aspects in your textbook, you should have gained a better
grasp of both the importance and complexity of the global business environment
including social, cultural, and economic factors at play. Here are but a few of the many
examples of these factors:
Cultural – Some cultures value modesty, team spirit, collectivity, and patience more than
US competitiveness and individualism
Business Practices: Japanese business focuses on group harmony and social cohesion (In
Japanese, “Wa”)
Geopolitical: Of the G-7 countries, Canada has the most business-friendly tax system
with federal corporate tax rate of 15%
Socioeconomic: 95% of the world’s population lives outside the US and is growing 70%
than the US; South Africa has a 17% Internet penetration rate
Differences (from the US) – Nordic countries have a high percentage of labor union
workforce (half to three-quarters), compared to about 10% in the US.
Trade – Singapore, New Zealand, and Hong Kong rank among the top nations in terms of
“ease of doing business”
Outsourcing – Foreign operations may be utilized low-cost production facilities with
cheap labor
Pricing – Dealing with multiple monetary systems in international business is complicated
Global case – Alcoa, Inc has closed high-cost smelting facilities in Tennessee but opened
manufacturing of facilities for automobile wheels in Hungary to meet European demand
Key Industries – BP has top revenues among UK companies, WalMart in the US, and
Toyota in Japan.
Global Business Outcomes – Firms may tap into new customer markets;
Your task is to read the article “Africa Defeats World’s Biggest Mobile Carriers” and
identify the specific social, cultural, and economic factors that are present in this case of
global business. (HINT: Use the examples as a guide to your answer & refer to your text
and other sources as needed). Finally, comment on how any of the identified factors may
affect the outcome of the Mobile phone market in Africa.

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