Zain / Celtel - Start-up

Celtel (Zain) - Start-up

Celtel, a mobile-phone company serving 13 countries in east and central Africa, is showing that new ventures can thrive when operating in some of the world's poorest countries. In fact, Terry Rhodes, Celtel's chief strategy officer, argued that the obstacles to operating in Africa actually created his company's market opening. "We sat down in the mid-1990s and wanted to do a phone company where we could be in a leadership position," he explained. "We did a global assessment and concluded that the best place was Africa because it was the least developed area in telecom. That gave us an opportunity to compete against the big boys, who have avoided Africa."

Founded only six years ago, Celtel has raised and invested about $800 million, and has 5 million customers and 6,000 employees in a region where mobile phones remain uncommon. Although the company serves Africa and was founded by an African -- Mohamed Ibrahim, who is Sudanese -- Celtel is based in the Netherlands. "We are run out of Europe because that's where the bulk of the money, technology and skilled people in our business are," Rhodes said. "About a third of our money was raised in the U.S., 1% in Africa and the rest in Europe."

As Celtel has built out its network, its executives have learned that western ignorance causes unique problems for people trying to create multinational businesses in Africa. The company won its first mobile license in Uganda. At the time, it approached a big American phone company about being its partner. "A board member there told us, 'We can't go to Uganda. It's run by Idi Amin,'" Rhodes recalled. "This was 1995." Ugandans drove Amin, a notoriously brutal dictator, into exile in 1979. Celtel's executives pointed out his error -- diplomatically, of course. The American's response: "If I don't know that, how do you think I'm going to persuade the rest of the board?"

Like many African businesses, Celtel has had to wrangle with political corruption. "Of course, we get approached for what I'll call 'contributions,'" Rhodes said. "We say, 'Mr. President, I understand that you're running for re-election, but all contributions have to be taken to our board."

Shakedowns such as this happen even though Celtel has carefully sorted through the countries in which it operates -- and those in which it refuses to. "We had an opportunity in West Africa and couldn't get sufficient comfort from the government there that they would stick to the rule of law," Rhodes noted. "So we gave our license back and wrote off $750,000. The government thought we were joking. They come back to us every year and say, 'Are you sure that you don't want to invest here?' We don't want any special treatment. We just want to be able to carry on business the same way as we do in other countries. Our assets are cemented into the ground. If something goes wrong in a country, we can't pick them up and go somewhere else." Getting African regimes to operate legally and predictably is probably the biggest obstacle to the continent's development and to the continued growth of entrepreneurial businesses, Rhodes said. "African governments need to show the African community that they are living by the rule of law."

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