A series of multinational telecom groups are expanding in Africa as the continent emerges as a lucrative destination for growth in the sector.

Indian cellular service provider Bharti Airtel has acquired Kuwait-based mobile telecom group Zain, which has a physical presence in 25 countries across Africa and the Middle East, with an estimated 60% of its customers coming from Africa. This move prompted a rival South African telecom company, MTN, to enter into talks to purchase Egypt’s Orascom Telecom.

MTN has also opened a new headquarters in Ghana’s capital, Accra, which will act as its head office for west and central Africa. MTN has been the most active telecom investor in Africa in the past year with five projects, according to greenfield investment monitor fDi Markets. Since 2003, Nokia has made the most investments in the region, with 13 projects totalling $58.74bn.

There is talk, however, that MTN and Bharti are in discussions over a potential merger. Between them, the two firms have unrivalled access to the Indian, African and Gulf markets.

Talks between the companies failed last year due to disagreements over who would ultimately control the merged enterprise, but in a statement to its shareholders MTN said it had initiated the reopening of negotiations. The two groups said they would discuss the potential transaction until July 31.

Other companies eyeing a move into Africa are believed to include Vodacom, Millicom International Cellular, Portugal Telecom and Orange, all of which are understood to be researching possibilities for investments, mergers or takeovers. Vodacom made several moves in May, opening a string of communications centres in Tanzania.

Telecom FDI projects in Africa grew substantially in 2009, despite one of the toughest economic years in decades. There were 36 investment projects in 2009, the same number as in 2008, but in capital expenditure the growth was more than fivefold. Capital expenditure in 2009 was almost $10bn compared with $1.86bn in 2008.

The African sector receiving the most investment in recent years has been information communications technology and internet infrastructure, with 59 projects since 2003 totalling a capital expenditure of $26.3bn. Sales, marketing and support actually received more investments (65) over the same period, but far less total capital expenditure ($715m).

Spencer Anderson