Dear colleagues and friends,

As international events such as the Africa CEO Forum, the Basketball Africa League kick off, MIP TV or SXSW get cancelled, companies ban all non-essential travel, and stores run out of toilet paper, it seems like the long-dreaded zombie apocalypse may be upon us. (One shouldn’t let a good disaster go to waste though - time to play the market). 

In Africa, if fake news is spreading much faster than the virus, stumbling oil prices resulting from lower Chinese and global demand are beginning to spell doom for oil-producers Nigeria and Angola. In any case, the show must go on, so welcome to the 3rd edition of HUSTLE & FLOW.

This week we are going to get a bit technical as we take a closer look at opportunities in data centers, telecommunications and mobile video. 

I've enjoyed chatting about African Entertainment in person with several of you last week in Los Angeles. Interest for African talents and stories is rising in Hollywood, and hopefully some of the exciting collaborations I’m hearing about will come to fruition soon. In the meantime, please keep your great comments, questions and referrals coming by emailing me at marie@restless.global.

Happy reading to all,

Marie

INVESTMENT NEWS

Emerging markets PE firm Actis has acquired a majority stake in Rack Centre, Nigeria’s leading provider of data center colocation and cloud services. Rack Centre hosts the Internet Exchange Point of Nigeria and has the largest installed capacity in West Africa servicing over 35 carriers, Internet Service Providers, and Mobile Network Operators. This news follows the recent announcements of Berkshire Partners’ acquisition of South Africa’s Teraco, the Africa launches of cloud data centers by Microsoft Azure and Amazon Web Services, and European data center giant Interxion's move into East Africa.

The development of local hosting capacity is a key ingredient of the growth of digital entertainment in Africa. At the moment most content consumed by African internet users is still hosted abroad, leading to long lag times and high costs. As the continent carries on its digital transition and demand for hosting capacity rises, data center trading is shaping up to be one of the largest investment trends in the coming years. If you have a few million (or dozen million) lying around, you might want to get in on this.

ARCHITECTURE

Nigerien architect Mariam Kamara, founder of Atelier Masomi, is set to begin construction on her sustainably-designed arts center in Niamey this summer. Like her previous projects in the city, the building will be built using compressed earth bricks.

And while we’re on the topic, here are more great examples of African architecture to feast your eyes on.

VISUAL ARTS

The new Yemisi Shyllon Museum, which opened last October in Lekki, Nigeria, would be a worthy addition to the above list. The museum is named after Prince Yemisi Shyllon, one of Nigeria’s biggest art collectors, who financed the construction of the building and its future maintenance to the tune of $1.7 million. 

BROADCAST

Multichoice’s VOD service Showmax has announced that more than 50% of its catalogue is now local content. Although Showmax is available across Africa, its investments in original content have so far been limited to South Africa.

Chinese pay-TV broadcaster StarTimes has added ESPN to its linear offering, making the sports channel available across Africa for the first time since a carriage dispute ended its deal with MultiChoice in 2013. Since then, fans in sub-Saharan Africa had been watching ESPN content on the ESPN Player subscription OTT service. The deal between Disney (which owns ESPN) and StarTimes was no doubt motivated by ESPN’s acquisition of the Africa broadcast rights for the NBA, which include rights for the new Basketball Africa League (BAL). 

SPORTS

Five-time boxing world champion Floyd Mayweather has announced its intention to expand its Money Team franchise in Africa, starting with South Africa, Nigeria, Kenya and Egypt. The Money Team offers specialized boxing programming based on Mayweather’s own training regimens, as well as virtual reality and personal training. The TMT franchise currently operates 44 outlets across the United States. 

The health and fitness sector has been growing alongside the westernization of urban lifestyles across Africa, with gyms, spas and healthy food options popping up everywhere. I believe there is an opportunity here for entrepreneurs who will manage to create strong, fun, scalable regional brands.

TELECOMMUNICATIONS

Telcos are Africa’s overlords. They run the continent and own the customers. Any business with a digital component will sooner or later have to deal with them. That is why it is crucial to understand the main forces at play in the African telco space.

A flurry of recent activity is giving us some interesting insights. Ethiopia is set to open the bidding process for the awarding of two telecoms licenses which have attracted the interest of Orange SA, MTN Group, Safaricom, Econet Global and Etisalat. In Angola, US-backed group Africell Holdings found itself the only bidder for the country’s fourth licence to run infrastructure-based mobile, internet, fixed telephony and pay-TV services. Meanwhile, South Africa’s Telkom is preparing to auction off some real estate assets to finance the modernization of its network while loss-making Cell C is considering acquisition offers; and Zimbabwe’s struggling state-owned telco NetOne has failed to attract an investor to take over its majority shareholding.

Although a couple “fresh” markets (such as Ethiopia) may remain, what we are witnessing overall is the maturation of the $60 billion Sub-Saharan African mobile market, which is now facing the same headwinds that have hit operators around the globe: saturated markets, evolving consumer preferences, slower subscriber growth and falling ARPUs (average revenue per user). Bain & Company sees two strategies for African telcos to survive this next phase: either focus on becoming a world-class network operator (as quality of service is still an issue on the continent), or choose to own the customer rather than the network by developing innovative lifestyle platforms that include content streaming, financial services, gaming, but also e-commerce or logistics. Kenya’s Safaricom is a proponent of this second strategy. Both approaches mean lots of opportunities for companies that can work with the telcos to achieve their goals.

MOBILE VIDEO

That takes us in a roundabout way to an interesting question I received last week from a HUSTLE & FLOW reader about Quibi, Jeffrey Katzenberg’s highly anticipated short form content start-up, and whether its model could be relevant for Africa. First of all, let’s stop a minute to acknowledge Katzenberg’s and CEO Meg Whitman’s tremendous fundraising abilities, as Quibi just added $750 million to its war chest ahead of its April 6 launch, after an initial round of $1 BILLION. Other than that, I must admit that I am a Quibi skeptic. Do we (or even Millennials) really need “one more thing to do with our phones instead of ever being bored”? In any case, it is not a solution built for the African market: too expensive, too premium, too heavy. Quibi’s most innovative feature is its proprietary Turnstyle technology, which allows users to switch seamlessly between landscape and portrait, actually bringing up different points of view on the same story. But Turnstyle videos use 20% more data than standard mobile videos - and that simple fact would make the service dead on arrival in Africa, where the price of data is already the biggest hurdle to the mass adoption of mobile video.

To expand on what I said last week, the opportunities I see in mobile video in Africa are for hyper-local, cheap content (such as local celebrities lifestyle, music videos, soaps or comedy in vernacular languages) distributed to the mass market through partnerships with telcos pursuing the “innovators” strategy described above. This is not actually anything new: in recent years all telcos have launched their own mobile music or video stores, with some turning out to be quite successful (MTN Music+/MusicTime!, MTN Comedy+) while others have bombed. Indeed, the transition from “dumb pipe” to content platform is anything but easy (just ask AT&T how its merger with Warner Media is going), that’s why none of the telco-owned services has managed to scale past a few countries and why none of them has expanded into original content yet. I believe that the bottom-of-the-pyramid mobile video market is still up for the taking and that a (well-funded) start-up with strong telco links has a better chance at this than any in-house service the telcos can come up with. 

Of course, the higher segments of the market will go to Netflix, which is already on track to adapt its offer to local specs. After implementing payments in local currency for South Africa, Nigeria and Kenya, it is now considering expanding the lower-priced, mobile-only option it piloted in India to Africa.

EVENTS

The events below may or may not happen. Who knows anymore!

FIHA, Abidjan, March 23-25

ARES Fighting Championship, Brussels, April 3rd

Cannes Film Festival, Cannes, May 12-23

Africa-France Summit on Sustainable Cities, Bordeaux, June 4th-6th