Smile Telecoms Holdings, which owns and operates LTE broadband networks in Nigeria, Tanzania and Uganda, caught the attention of the entire MEA telecoms community when it raised $365 million funding in September 2015.
The scale of the funding, and the fact that the operator already has operations on the ground, were clear indicators that Smile – which is backed by the Sharbatly family in Saudi Arabia – means business.
The company said that it intended to use the funds to expand its existing LTE networks in the 800MHz band in its three current markets and also to deploy a broadband network in Democratic Republic of Congo early in 2016.
Smile’s CEO, Irene Charnley, has no doubts about the potential of these four markets combined. “The total population of those four countries is about 300 million people, so those are all potential customers for us. There are about 60 million people who are using the internet already and that is mainly narrow band – that is 3G – and that is growing fast,” she says.
To tap this potential, the company has been investing in expanding its network beyond the metropolitan areas of its three markets. “Smile has made a significant investment in expanding its network to make its mobile 4G LTE broadband services available to people living in and around most cities, not just the major metropolitan areas, in its countries of operation, including Nigeria, Uganda and Tanzania. It is true that our network coverage does not currently extend to rural areas as yet, but our coverage today covers the larger towns as well as cities,” she says.
While Charnley is not able to reveal how many subscribers the company has, she says that the operators is “experiencing double-digit growth” each month, driven largely by pent-up demand for quality broadband services.
“The demand for high-speed, reliable broadband internet is growing within all market segments,” Charnley says. “We note that our services address a range of needs in our markets – some customers spend as little as $5 every month, whilst other customers spend hundreds of dollars per month.”
To cater to this diverse customer base, Smile has created a range of data bundles to make its services accessible to all potential customers, from the low-ARPU customer whose primary need is to stay in touch with their friends and family, to serious internet users who need tens of Gigabytes per month.
Most of Smile’s customers access its LTE broadband services primarily via a MiFi device with Wi-Fi capability. “USB dongles are now almost dead as it supports access to only a single device, whereas a MiFi device opens up access to connect eight or more devices simultaneously via Wi-Fi,” Charnley says. “We also sell a 4G LTE router with Wi-Fi capability, that enables 30 devices to be connected simultaneously, which is ideal for businesses and at home where the business or the whole family can seamlessly stay connected all the time.
While Smile may be somewhat ahead of the curve in terms of technology in Africa, the company looks set to benefit from the increasing availability of VoLTE-capable handsets. “As we introduce our new voice service and with the increased availability of VoLTE-capable handsets we may see a higher demand for VoLTE-capable devices that provides access to voice and 4G LTE broadband services, as well as access for up to five devices via a personal hotspot,” Charnley says. “Most of the new smartphones have the current Smile 4G LTE frequencies capabilities and are fast becoming available in our markets at aggressive prices.”
The CEO adds that there are several Samsung handsets compatible with Smile’s network and the telco continues to do interoperability testing on ZTE, Huawei, Microsoft and Apple devices. “From working with the various handset manufacturers, we are confident we will have sub-$100 handsets on our network by mid-2016. We are already testing such handsets for compatibility and they are working very well,” she says.
The availability of LTE compatible smartphones will stimulate an increase in potential customers who are able to access Smile's networks. This will no doubt be a welcome trend for Smile as it embarks on expanding its networks nationwide in its three markets. But while Smile may have access to a sizeable investment to expand its networks, it does not detract from the fact that deploying LTE in scarcely populated rural areas is a tough task with – on the face of it – a seemingly meagre return on investment.
But Smile appears to have thought everything through carefully and has a strategy in place to expand into rural areas in a commercially viable way. “Smile’s advanced technology strategy and the way in which we have designed and built our networks offers various options to expand the network sustainably in rural areas,” Charnley says. “A key technology we are currently integrating within networks is mesh Wi-Fi. Wi-Fi technology is a lower-cost option to delivering data services to less populated areas that need less capacity, whilst still offering a reliable, high-quality service to customers,” she says.
Furthermore, Smile will also consider network-sharing – as long as it can find partners with technology that complements its own.
Smile is also working very closely with the regulators in each country to explore ways of extending broadband coverage to rural areas using the Universal Service funds set up by regulators specifically for this purposes. Unfortunately, the existing 2G technology which most operators have deployed in rural areas is poor for data.
On the subject of network sharing, Charnley confirms that Smile also has plans to offer spare capacity on its network on a wholesale basis to other ISPs. “We are currently working with ISPs and other mobile network operators on ways to partner. These discussions are progressing well and are at a very advanced stage and we expect to finalise details in 2016,” Charnley says.
She adds that Smile’s technology has been designed to offer partners anything from a “white label” solution where Smile performs all network and operational functions, to a full MVNO, allowing the client to control all of the key aspects of their operation.
Another major benefit of the growing availability of LTE compatible smartphones is that Smile will be able to offer regular mobile voice services. While customers can already use voice services using OTT apps such as Skype, Charnley says that the addition of mainstream mobile voice services will effectively be a “value added” service. “We are fully licenced to offer the same set of service as any other Mobile Network Operators (MNOs) in the countries where we operate. Voice services is a commodity for us and is just a new value added service that will offer great value and quality to our customers, enabling customers to do broadband and clear voice using one smartphone,” she says.
An advantage of voice services on LTE networks using LTE-compatible devices is that the sound quality is high definition between two LTE users – hence the term Clear Voice – and Charnley says this will be another differentiator for Smile.
On the subject of preparations for voice services, Charnley says: “In terms of availability; we are in the final stages of completing the physical interconnects with local operators and international providers to ensure we can provide a full end-to-end service to our customers. Once this is complete we will be introducing SuperClear voice services in all our markets,” she says.
Smile raised $365 million of debt and equity financing September 2015. The funding is comprised of $50 million of equity, raised from the Public Investment Corporation on behalf of Government Employees Pension Fund (PIC), and a $315 million multi-tranche, multi-jurisdictional debt facility led by African Export-Import Bank with participation from the Development Bank of Southern Africa, Diamond Bank PLC, Ecobank Nigeria, the PIC, the Industrial Development Corporation of South Africa Limited and Standard Chartered Bank.
Smile’s shareholders now comprise Al Nahla Group, a Saudi Arabia-based company, which is the majority shareholder; Renven Investment Holdings, a pan-African investment vehicle, in which Nigerian investors, including the Obijackson Group, are the majority; Verene, representing Smile senior management and social entrepreneurs from South Africa; Telecom Investments, a Saudi Arabian-based investment company; Capitalworks, an active alternative management company, specialising in investment in the African mid-market”; the PIC; and Smile employees.
CommsMEA: Who started Smile?
Charnley: Smile was created from a vision to transform economies in Africa by empowering people with access to information. I believed (and still do today) that access to true broadband services can accelerate the development and wealth creation for all our people in Africa. The Smile launch from the beginning was fully enabled by the support and investments by the Saudi Arabia Sharbatly family who owns the AlNahla group.
CommsMEA: What is your aim for Smile? Where do you see the company in, say, five years’ time?
Charnley: Smile’s objective is to transform the economies in which it operates by providing universal access to high-quality, reliable, easy-to-use and affordable communication services. We aim, in the coming five years to be a profitable challenger brand that has succeeded in becoming the broadband provider of choice by enabling our customers to fully benefit from the internet world for both broadband and SuperClear voice services.