Swedish media- and mobile operator Kinnevik to increase attention to its fast growing Africa business

subscriber | 17 May, 2007

JOHANNESBURG. Cristina Stenbeck, the heiress and new Chairperson of the Swedish media-, finance- and industrial group Kinnevik, had Africa’s poor, but information hungry, consumers and entrepreneurs in mind when she last week pronounced that the company’s media business will piggyback on the mobile phone subsidiary Millicom’s success in Africa.

Ms. Stenbeck, who replaced international investment banker and former Volvo CEO Pehr G. Gyllenhammar at the post, implied to newspaper Dagens Industri that media in Africa promises riches that cannot be ignored.

It is not hard to see why Ms Stenbeck is excited over the prospects in Africa. Millicom grows faster in Africa than anywhere else. Strategically the company is getting out of Asia and puts more effort into its African expansion.

Millicom’s first quarter sale in Africa increased by 64.7 percent, to US$ 103 million, last year and ebitda profit was up by 29.7 percent to US$ 38.5 million.

It easily makes Millicom the fastest growing Swedish controlled company on the African continent. The company derives 18.3 percent of its sales in Africa, which e.g. can be compared with the about 8 percent of total sales that telecom giant Ericsson generates in Africa.

And the African share is growing. During the last quarter Millicom had 400 000 new customers – the total in Africa is 3.8 million or 23 percent of the company’s total client base.

Ms. Stenbeck’s plans to expand the group’s media interests in Africa go against her father Jan Stenbeck’s orders. After loosing somewhere between SEK 70 and 100 million on ill fated radio stations and a failed bid to win a terrestrial television license during the Nineties, Mr. Stenbeck pulled the plug on media activities in Africa as a whole.

What is astonishing when the daughter and her strategists are taking a fresh look at Africa is that they are looking at seriously marginal, poor economies in Africa. It would be unthinkable only a few years ago, but now makes perfect sense. The plan is to follow Millicom, which means to set up shop in countries such as Chad, DR Congo, Ghana, Mauritius, Senegal, Sierra Leone and Tanzania.

Africascan Comment

Just about every analyst expect Africa’s customers to bypass fixed Internet and instead use the Internet via their mobile phones. The reason is easy, there are already more than 100 million mobile phone users but only 20 million fixed phone lines on the continent. This is a feast that the Kinnevik group is counting on, encouraged by already reasonably good profits from mobile calls.

Last year the company understood the real value of Millicom, where Africa adds a lot of value, when its directors decided not to enter a flight to China and accept an offer from China Telecom. The value has since doubled.

The Africa business would be of interest to a whole range of larger mobile operators in Africa, including Vodacom, Orascom and MTC.

Even Africa is reaching a level of maturity in certain markets and market segments. That’s where mobile Internet and various services, such as mobile banking, come in.