Africa Mobile Market Outlook - Recession, What Recession?

"Liduduma lidlule", the Xhosa say. The thunder shall pass. This maxim would be apt to describe the medium term impact of a global economic downturn on African mobile markets. With global financial markets remaining jittery, we have reviewed the possible implications of an economic downturn on African mobile markets over the next 6-12 months. We make the following points:

# African economic growth prospects have deteriorated somewhat owing to the uncertainty of the global macro-economic outlook - as per the International Monetary Fund. The IMF expects sub-Saharan African economic growth to decline slightly to 6% in 2008 and 2009 - from 6.5% in 2007. Governments have to review their budget assumptions.

# African mobile demand has proved resilient; we are less concerned about demand today than we were early this year when foodstuff prices peaked.

# Our argument isn't that a global recession would have no impact. To be sure, the combination of an economic downturn with price-based competition doesn't make for a good dynamic.  We believe the probability of declining margins has increased.

# Our mobile revenue projections remain moderate at 15%-20%. Our Opex outlook is positive and we have revised our Capex projections downwards. We remain positive but cautious on mobile broadband and expect to see more downward pressure on current mobile valuations.

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Download 10_21_08_rn_market_outlook.pdf