Sonatel SA

Direct: Our capital is providing growth capex to improve and deploy new digital infrastructure including 4G, 5G, and FTTH (Fibre To The Home), enabling densification to improve quality of service in urban areas and expanding the network in underserved areas.

Economic enabler: Increased coverage and better service quality creates indirect jobs and enhances firm productivity, supporting economic growth.

Senegal

Access/market penetration: 60% of the population are using the internet; high data utilisation rates at c.6GB/person vs SSA (Sub-Saharan Africa)average of c.2G/person but lower than low-middle income countries; >100% active mobile subscriptions. Affordability: ICT prices across all five baskets are above the UN affordability target of 2% of GNI (Gross National Income). Coverage/Quality: 99% coverage for mobile cellular and 3G and 91% coverage for 4G. High data utilisation rates in urban areas necessitates the need to increase network density and set up the network for 5G adoption.

Senegal

Market: Total population of 18.2m with large youth base; 77% smartphone penetration; 13.2m mobile money users (2019 transactions represented 35% of Senegal’s GDP)

Senegal

SMEs and MSMEs (Micro, Small & Medium Enterprises) will likely experience productivity from becoming digitally enabled. Employees of businesses that utilise the internet can increase productivity through faster speeds, which is likely to include mostly urban and large-scale businesses.

Projected increase in mobile subscriber base from 12.6m to 14m by 2031 and projected increase in fibre subscriber base from 0.9m homes and businesses to 2.6m in 2031. Prices are predicted to reduce from a blended ARPU (Average Revenue per User) of €4.5 to €2.7 by 2031.

An increase of 10% mobile broadband penetration yields an increase in 2% in GDP per capita in African geographies. African firms using the internet have 3.7 times higher labour productivity than non-users.

Capital is not offered in sufficient quantity.

Evidence Risk

It will be difficult to distinguish and confidently attribute the market impact and GDP uplift to this specific transaction. This risk needs to be tolerated.

Execution Risk

Sonatel only focuses on deploying digital infrastructure in urban areas given that rural areas constitute a less profitable customer segment and high taxes imposed on the telecoms industry despite the location of operations. Mitigant: Sonatel has capex budget allocations for both urban and rural areas but was forthright in highlighting the limited incentives to expand to rural areas beyond licence obligations unless the Government provides a tax break.

Unexpected Impact Risk

Higher availability of capital gives Sonatel an undue advantage over the competition, resulting in a distorted market/perception that Sonatel is monopolising the market. Mitigant: Sonatel is faced with credible and experienced competitors in the market especially Free/Axian (mobile and fixed services) and Wave (mobile money). Moreover, the business plan projects a reduction in Sonatel’s market share from 57% to 50% by 2031 so this risk is minimal.