Q&A with Envir Fraser
Envir Fraser, Chief Strategy Officer, Convergence Partners
Your company, Convergence Partners, is very much focussed on the telecommunications, media and technology sector in Africa. What do you think are the greatest drawbacks to the development of the TMT sector in Africa - and are the obstacles regional or national?
I need to start by saying that the African TMT sector continues to excite us and we are encouraged by its continued growth on the African continent. Over the last few years, the frothiness of the sector has settled down and we are seeing a gradual maturing of the sector in terms of growth and market dynamics.
In terms of drawbacks to the development of the TMT sector, our biggest concern remains the uncertainty and sometimes contradictory actions of policy makers and regulators on the Continent. These challenges are at a regional level, where coordination and harmonisation between national policy makers and regulators is not taking place as effectively as one would like. At national level, the challenges relate to the consolidation in the various markets, often resulting in vertical integration which squeezes out new entrants as well as creating uncertainty with regard to policy and regulation. Nationally, there are also challenges relating to the ability and speed with which regulators are licensing new spectrum bands, thereby hampering the level of potential growth and innovation in the markets concerned.
Earlier this year your company closed the Convergence Partners Communication Infrastructure Fund (CPCIF), with a capital of over $200 million. Your investors have come from a wide range of bodies, on both the private and public sector. How have you set goals to be met and how will the management of the Fund be organised to ensure fairness?
Our goals have been set in terms of the mandate we have negotiated with our funders which include: (i) investment focus; (ii) limiting our environmental impact; (iii) supporting economic and social development; and very importantly providing the required financial returns. We are fortunate in that the mix of investors in our fund share a number of common principles and goals. This assists in ensuring that no investor feels that their interests and rights are impinged upon, also these rights are protected via various agreements between the parties and the manager. It is critical that the correct trust and governance framework is in place to safeguard the fairness between the various parties concerned.
You took part in the IIC Telecommunications and Media Forum last month. There you spoke about the importance of infrastructure, and its (obvious) role in increasing the economies and social status of all. But you also spoke of the vertical and horizontal consolidation and integration taking place, regionally and globally. How does that affect the infrastructure development that is required and how must business models change to accommodate these evolutionary processes?
The positive impact of infrastructure development has been well documented. The maturing of the African TMT market coupled with the impact of delays in some regulatory decisions has led to operators actively looking to consolidate and vertically integrate within regional and national markets. We have seen the consolidation within various markets leading to increasingly dominant incumbents that is reducing the space for the entry of innovative new players into markets and/or the sector. This accelerating consolidation is changing the economies of scale and ability for operators to absorb pricing and cost pressures, but resulting in some of the later entrants and potential new entrants being locked out of the market. It has however, also created opportunities for independent wholesale providers to enter offering opportunities for shared infrastructure that can be provided to both existing incumbents and new entrants. Business models therefore have to shift from infrastructure only to services as a differentiator to retain or attract new customers.
The clear message that came across was that the complexity and dynamism of regulation of the TMT sector is increasing exponentially. This presents challenges to regulators in keeping pace and being effective. In my opinion, what is required is for regulators to play less of an interventionist role, rather look to enable the market and facilitate investment. The regulators need to ensure that they develop the capability to understand the changes taking place and so doing be able to use their levers more judiciously in ensuring fair competition and protection of the consumer.
Your panel at the IIC included community development groups and industry and was very 'lively' - if you saw value in that diversity of participants, what was it? How would you describe your experience at the IIC Telecommunications and Media Forum?
I enjoyed the panel discussion in terms of the quality of input from the panellists as well as the relevance of the topic discussed. The diversity of participants was of particular value in that the participants were able to provide very distinct and insightful perspectives (often very different) that enriched the debate and discussion. It also made for lively discussions and active audience participation.
I thoroughly enjoyed my experiences at the IIC TMT Forum. The networking provided with high-level industry leaders was of particular value over and above the quality insights and inputs made by the various speakers and audience questions and comments.
- Monday, 25 January 2016