1.1.

Research background

In recent years, the African continent has become a significant hub for international investment,
reflecting what some researchers see as a new frontier for global finance (Amendolagine et al.,
2017). Analysis of foreign direct investment (FDI) inflows to Africa in Amendolagine et al.
(2017)’s work unveils an expanding quantity and geographical variety of investments in the
region. The investor profile includes well-established multinational corporations (originating
from OECD countries) as well as relatively recent entrants (originating from emerging
economies).

In particular, the telecommunications sector presents a substantial opportunity for MNCs’

expansion, given the continued rapid growth of mobile penetration and internet utilisation.
AFR-IX telecom (2021), an African internet and data service provider, projects that the Sub-
Saharan Africa mobile phone market will expand at a 4.6% annual rate between 2019 and 2025,
compared to a global growth rate of only 3%. This corresponds to an approximate 167 million
increase in the number of distinct mobile users by 2025, from 456 million at the conclusion of
2018 to 623 million (AFR-IX telecom, 2021), and by 2030, this number is projected to reach 692
million (GSMA, 2023). The increase is propelled by advantageous demographics, since more
than 60% of Africa's population consists of individuals under the age of 25 (Weny, Snow and
Zhang, 2017).

The African telecom industry is ready for more growth as 4G networks become more
widespread and 5G technologies develop. GSMA’s report (2023) indicates that in 2022, there
were a mere 287 million mobile internet users, accounting for around 25% of the population.
However, by 2030, this figure is projected to rise to 438 million, which would represent over
32% of the population. This suggests that there is significant untapped potential as network
coverage continues to expand.

However, there are ongoing developmental obstacles that constrain the sector’s growth. Access
to reliable fixed-line broadband infrastructure remains limited across the continent compared to
global standards, with mobile networks often serving as the primary connection mechanism
(Foster and Steinbuks 2009). Telecom MNCs may find it difficult to foster innovation and attain
economies of scale in Africa due to the diversity of regulations governing infrastructure sharing,
roaming, licencing, and spectrum allocation (Neto, 2005). The impact of these regulatory
inconsistencies on competition, prices, access, and innovation in telecommunications services is
evident in South Africa, Tanzania, Zambia, and Zimbabwe (Paelo, 2020).

Furthermore, financial limitations impede infrastructure expansion, particularly when it comes

to extending networks to rural and underserved regions characterised by lower profitability, as
stated in the GSMA (2019)’s report. Coupled with the impacts of natural calamities such as
droughts, floods, and the turbulence caused by political and economic instability, these
elements contribute to lopsided development. Consequently, the quality and affordability of
services in less affluent countries suffer, thus limiting their potential (World Bank, 2018).

The presence of major Western MNCs in Africa, such as Vodafone, Orange, and MTN
International, has been significant, with these companies leveraging their global networks,
economies of scale, and strong brand awareness to gain early dominance (Jahanbakht, 2020).
However, these firms also faced challenges in adapting business models to unique African
circumstances such as low-income consumer segments (Coetzee, 2020). On the contrary, Lorenz
(2020) indicated that the entry of EMNCs into the African telecommunication sector in the late
1990s marked a shift in global competition, with these companies using 'reverse innovation' to
introduce low-resource business tactics such as prepaid choices and mobile money services.
South Africa's MTN Group, India's Bharti Airtel, and Mexico's America Movil were among the
first EMNCs to enter the African telecom market. As emphasised by numerous scholars (Cuervo-
Cazurra and Genç, 2008; Williamson, 2015; Yeganeh, 2016), EMNCs have localised strategic
advantages over their Western peers, due to their shared identities and experience in other
developing markets allowing a deeper understanding of African consumers' needs and
preferences.

More recently, new waves of EMNCs from Asia and other emerging regions have also entered
the fray, including Malaysia's Axiata, Vietnam's Viettel Global, and others. These firms, often
latecomers to the global stage, have leveraged their status to their advantage, using
international expansion as a means to acquire resources and overcome institutional and market
constraints (Luo, 2007). Through capabilities leveraged from dynamic home telecom sectors and
innovation ecosystems, these 'latecomer' EMNCs have accelerated internationalization at
speeds exceeding traditional models (Satta, 2014).