Digital Digest – DigAfrica´s Technology Alert
March 29, 2001

INTERNET
1. Africa Industry: E-business updates
2. Global Industry: Risky e-business
3. Global Industry: E-strategies--after the dotcom fall

TELECOMMUNICATIONS:
1. Africa: Telecommunications updates

Africa Industry: E-business updates

MOZAMBIQUE: The country's oldest financial institution, Banco Standard Totta
de Mocambique (BSTM), has stared offering online banking services. Following
the launch of an internet site in conjunction with financial software
solutions provider Global Technology, customers can now complete account
transfers, access and download statements, order cheque books and make
third-party payments online.

SOURCE: Economist Intelligence Unit via DigAfrica
--------------------------------------------

Global Industry: Risky e-business

Many companies don't insure against ebusiness perils. Some have even found
that the insurance industry is not mature enough to handle their complex
needs.

Joe Chan was a happy man. In the three months after the finance manager's
retailing company started an online shopping mall in Hong Kong, his staff
had enrolled 27,000 members, or 30 a day--no small feat in a city that has
as many shops as there are shoppers. But before Chan could uncork the
champagne, the bad news hit.

Someone had broken into the company's Web site and copied customers' credit
card information, including expiration dates, cardholder names, and
addresses. Aside from the potential loss of business, Chan was worried that
the shoppers might sue for invasion of privacy due to the loss of
confidential information. "The hacker apparently got in the Web site by
using a password and passed himself off as a company executive," says Chan.

Chan's experience underlines how vulnerable today's companies are to crimes
in cyberspace. Although dotcoms, Internet service providers, software
developers, and Web designers are most vulnerable, any company with an
ebusiness can be in peril. "If you are connected, you are at risk," says
Gerard Tan, a partner with PricewaterhouseCoopers (www.pwcglobal.com) in
Singapore.

Even computer industry behemoths like Microsoft and Yahoo have been the
victims of cyber-crimes or been attacked by hackers. And with the use of the
Internet increasing and cyber-criminals becoming more sophisticated, the
number of cyber-crimes is expected to grow. Sales of ebusiness liability
policies are expected to exceed $2.5 billion worldwide this year, industry
analysts estimate.

Seemingly undaunted, many companies have not sought to insure themselves
against ebusiness risks. Managers either aren't familiar with the issue,
can't afford the additional expense, or have been too busy to turn their
attention to an issue that is easily put off. For some larger companies, the
industry is not mature enough to handle their complex needs or even to
calculate the cost of potential losses.

US freight forwarding giant UPS Asia Pacific (www.ups.com) is one such
company. UPS, which has started letting customers place orders online,
doesn't have coverage for ebusiness risks but has coverage for its business
operations. Says Perry Chao, ecommerce head at UPS Asia Pacific, "We have
found that the claims are not specific enough."

Chao explains that if a mishap occurs in cyberspace, it's hard to calculate
the cost of the potential loss of business, data or information, or the
damage to systems, and have both the insured and the insurer agree on the
amount of the claim. Chao also says that most e-policies cover key cities or
countries in Asia but not the entire region, which poses a problem for
companies like UPS that operate throughout the Asia Pacific.

Like UPS, many companies are trusting their own IT departments to protect
their systems from fraud. "We've heard about [ebusiness insurance], but we
don't know very much about it," says Tan Sek Wah, CEO and CFO of Web-based
logistics market provider eFreightStation (www.efreightstation.com) in
Singapore. "We rely on our technical people to protect our systems. In time,
we'll look at the issue in depth."

Risk Averse

Revenue--or lack thereof--is holding back the investment into e-risk
insurance of B2C portal Go-events.com (www.go-events.com). Says CFO Jim
James in Singapore: "We are aware of ebusiness risks and the need for
protection. But we aren't getting ebusiness insurance at the moment. We need
to prioritize our expenditures." James says his company has indemnity
against bad debt--a general business insurance.

Many companies are too busy building an ecommerce presence to worry about
insurance. "We have started talking to consultants about getting ebusiness
insurance," says Lisa Ko, accounting manager at Hong Kong-based Pacific
NetMarkets (www.pacificnetmarkets.com), a B2B portal that was launched in
December 1999. "Before, we just haven't had time."

The bursting of the Internet bubble in the second half of 2000 sent many
Internet companies scrambling for funding, and caused many traditional
companies to rethink or scale down their Internet strategies. Regina Chen,
associate director for AON Risk Services (www.aon.com) in Hong Kong, says
that in late 1999 she received many inquiries about ebusiness insurance
products. "We saw a lot of business opportunities," Chen recalls. "But with
tech stocks falling, many of these opportunities have since disappeared."

E-risk insurance products are also so new that many finance managers either
aren't aware of them or don't know how to use them. Many products on offer
by the few global providers that dominate the cyber-risk market in
Asia--including Lloyd's of London (www.lloyds.com), US-based American
International Group, or AIG (www.aig.com), and US-based Marsh & McLennan
(www.marshmac.com)--are barely a year old. The US's Chubb Group
(www.chubb.com), for example, says it has yet to offer comprehensive
coverage for its dotcom clients in Asia; many local providers say the same.

Ante Up

High premiums are also scaring away some companies. Insurance providers say
ebusiness policy premiums are at least 25 percent higher than traditional
insurance, partly due to the lack of a large pool of claims money to pay
claimants if the need arises. Premiums also reflect the high security risks
inherent in ebusiness systems and the lack of precedence for claims
reimbursement.

Just how unwilling are some companies to chip in for policies? Some
insurance brokers recall meeting senior management who reject ebusiness
insurance because of the high cost. "Even though the shareholder agreement
stipulates that the company have Internet liability, the management would go
back to their shareholders and ask them to delete that clause so that they
don't have to buy it," says one insurance broker in Hong Kong.

Despite the high premiums, Hong Kong property consultant Midland Realty
bought an ebusiness policy last year. CFO Kelvin Lo says he sees e-risk
insurance as a necessity as the group continues to grow its property-
related services online. Midland, which has expanded from property
brokering, now offers property-related services such as news, price
comparisons, legal services, and market trends on the Web.

Lo wouldn't disclose how much Midland is paying for its one-year e-risk
policy--on top of the company's general business insurance--but he says the
group shopped around and compared prices. Midland ended up spreading the
risk categories between several providers, including AIG. "That way, it
helps us to reduce our insurance bill," he says.

More companies are likely to purchase ebusiness insurance as the Internet
sector matures, insurance professionals say. "Companies are getting more
serious about purchasing [ebusiness insurance] because of the increased
incidences of virus, hacker attacks, and denial of service claims being
reported in the news," says Chin Feng, deputy general manager of AIG
Financial Services in Hong Kong. "More corporations are realizing that it is
not covered under traditional policies."

Adds Feng: "In Asia, the implementation of ecommerce is fairly recent. When
it comes to liability, cyber-risks are every bit as real as traditional
commercial ones. So, if ecommerce is here to stay, ebusiness risks and
insurance will stay with it."

Hacking Back

Companies will seek insurance for practical reasons, too. Security breaches
such as vandalized Web sites, computer viruses, information theft, and
denial of service on the Net are the most common problems companies face,
according to security experts, and the lack of criminal laws in cyberspace
means prosecution is difficult, if not impossible.

This leaves little protection for companies that have been hacked.
"Ebusiness is one of the top priorities for CEOs nowadays, so it only makes
sense companies have adequate protection for it," says
PricewaterhouseCoopers Hong Kong principal consultant Raphael Young. "If
companies have invested so much human and financial capital into their Web
sites, they should do everything they can to protect them. Conducting an
independent security assessment would be a start," says Young. Adds William
Bartlett, Financial Services chairman at Ernst & Young (www.ey.com) in
Sydney: "Of all business risks, IT risks may be the most challenging to
understand and manage. Technology changes continually, and each change
cascades through your company and creates new risks."

Stella Tse, an ebusiness risk specialist at insurance broker Marsh &
McLennan Hong Kong, agrees. "Some ebusiness risks are so new and understated
that many people don't know they exist," says Tse. "They go beyond people's
traditional thinking of risks; they touch on the intangibles such as
intellectual property, privacy, and defamation." She adds: "The damage can
be significant. Imagine there were a virus getting into your systems, the
impact it would have on your company income, reputation and morale, and
customer confidence."

To fend off possible attacks, companies have two lines of defense, IT
professionals say. The first is to have strong network security such as
firewalls, intrusion detection systems, and anti-virus software. "But
fast-changing technology, powerful hacking programs, and security loopholes
mean companies and systems with only internal defense remain vulnerable,"
says Tan of PricewaterhouseCoopers. He suggests a second line of defense--in
the form of insurance coverage.

Some companies in Asia have ebusiness coverage, either because their
shareholders have demanded it or they realize the value of having
protection. Singapore-based ebusiness investment company Assetline Holdings
has had ebusiness insurance since last May. "Our purpose is to have a
secured Web site so that we can do our job effectively and efficiently,"
says CEO Marc J Edelstein. He says that Assetline's experience with hacking
in its early days of operation taught the company the importance of being
insured.

Not every company seeking ebusiness insurance will get coverage. All
applicants need to undertake a business operations review and security
assessment to determine their eligibility. The review looks at the company's
business operation, security systems, and risk exposure to determine whether
it meets certain security standards. This helps the provider set the price,
terms, and conditions of the policy. The due diligence process can take days
to weeks.

An independent consultant, appointed either by the applicant or the insurer,
will also assess the IT operations of the company to give an unbiased
opinion. With the company's consent, the consultancy will submit its report
to the underwriter if the company decides to take out the insurance. "Given
the high-risk nature of ebusiness systems, the company must demonstrate that
it has in place sound security controls to reduce its risk profile to an
accepted level," says PricewaterhouseCoopers' Tan.

Hong Kong-based Asia Online went through this process not long ago. The ISP
bought its ebusiness coverage from Lloyd's of London, and is protected
against a range of risks such as hacking, loss of data, and professional
indemnity. Asia Online CFO Gareth Stephens says getting the appropriate
coverage was a lengthy process, from shopping for a provider, undertaking
the risk assessment test, and negotiating terms, conditions, and price of
the policy. But the work and expense were worth it, Stephens says. "We've
seen how some companies in the US have litigation in court" due to problems
with their Web operations, he says. "If there's one case, the cost of
defense can be substantial. We don't want that to happen to us."

SOURCE: eCFO via DigAfrica -- DigAfrica analyzes, informs and updates on
Internet & Telecommunications activities and progress in Africa
as-they-unfold.
© Copyright DigAfrica 2001 -- http://groups.yahoo.com/group/DigAfrica
-------------------------------

Global Industry: E-strategies--after the dotcom fall

Hard business lessons and bad debts are not the only things being left
behind by crashing dot-coms. Also to be found in the wreckage are some
expensive fulfillment engines that are well worth salvaging.

A prime example is available for viewing courtesy of online retailer eToys.
The enterprise could be forgiven for thinking that there is no justice in
this e-world. A year or so ago it was being lauded as an example of an
e-tailer that had paid attention to its back-end operations and as a result
was not suffering the order-delivery nightmares that were putting
competitors such as Toys R Us under a cloud.

Moreover, eToys still was spending money on its fulfillment operations to
ensure that it could cope with future growth. Last August it inaugurated a
1.2 million-square-foot, highly automated East Coast distribution center in
Blairs, Va. The Blairs facility was expected to pick, pack and ship more
than 100,000 items during peak seasons, ranging from toys and videos to
books and baby products. The company had recently completed a 763,000-
square-foot distribution facility in Ontario, Calif., and had plans to
expand the Virginia center.

At the Council of Logistics Management's annual meeting in September, David
Edwards, eToys senior director of customer service and fulfillment systems,
explained how he and his team had worked seven-day weeks to build the Blairs
complex in less than 10 months. "We want to provide complete control of the
customer experience. It is expensive but it's worth it," he said.

Apparently the market had a different view. In February the e-tailer
announced that it had issued pink slips to 293 employees in its Ontario and
Blairs facilities. The company filed for bankruptcy this month. In a
statement eToys said that it required an additional, substantial capital
infusion to keep trading, an infusion it did not believe was available.
Health care goods company Johnson & Johnson is buying eToys' BabyCenter Inc.
for $10 million. The fate of those expensive DCs, not to mention the
fulfillment systems the facilities are connected to, is undecided.

Online grocer Webvan Group is not falling from the sky yet but its engines
are spluttering. Again, a year or so ago the picture was very different.
Online grocery services were in vogue and Webvan was rolling out a national
expansion program. But its resources were being consumed by an excessive
cash burn rate. In January it shelved plans to push into the East Coast
markets of northern New Jersey, Baltimore and Washington, D.C. A month later
it announced the closure of its operations in Dallas "in order to conserve
capital." The company's goal of establishing a distribution network covering
36 cities has been derailed by cash flow problems, and Webvan now is
hunkering down in nine regional core markets. To get to this stage has
required more than $1 billion in financing.

In Dallas, Webvan's single distribution center was leased and the company is
now looking to sublease it, said spokesman Bud Grebey. Two DCs in northern
New Jersey and Baltimore have been mothballed but the company has no plans
to sell the facilities, he said. What remains are distribution centers in
the Seattle area, Oakland, Calif., San Diego, Chicago, Atlanta and two in
Orange County, Calif. The company also has a customer fulfillment center in
northern Las Vegas. Webvan said it has "sufficient capital to fund
operations through 2001." Even so, a further contraction of services may be
required to stem the online grocer's cash losses, particularly since
competition is getting stiffer as bricks-and-mortar rivals beef up their
online offshoots.

While Webvan's long-term future remains unclear, online enterprises have
been falling in record numbers. According to Webmergers.com, 270 Internet
companies have ceased trading since January 2000, 70 percent of them in the
last four months. Forty-nine dot-coms closed in January alone.

For shoppers of defunct dot-com fulfillment and distribution systems it
seems that the pickings have never been better. But there may be another
ending to these stories. Amazon.com has not cashed in its chips but the
organization has set an example that could be followed by online enterprises
seeking another lease on life. Its alliance with Toys R Us, whereby Amazon
provides order fulfillment services and the toy retailer the merchandising
expertise and inventory, shows that there may yet be life in many failed
dot-com models as providers of online fulfillment and distribution services.
The partnership helped Toys R Us cope with a tripling of online sales in the
2000 holiday season compared with the previous year, and it plans to convert
its Babiesrus.com and Imaginarium.com sites to the Amazon platform. For its
part, Amazon.com has made it plain that it is looking for more partnerships
of this type.

The recent revival of fashion apparel retailer Boo.com, which went bankrupt
last year, is an example of life after death in the dot-com space. European
distribution giant Deutsche Post has formed a strategic alliance with the
British organization Bright Station plc to sell gateways into online
marketplaces. At the center of the alliance is Boo.com's fulfillment
platform. Bright acquired the platform, a savvy move, since it is considered
to be one of the slickest business-to-consumer Internet fulfillment engines
ever developed.

So there may be hope yet for struggling online companies. At last year's CLM
annual conference, Edwards estimated that an Internet year is equivalent to
about 39 days in the physical world. Maybe life will be a bit more
even-keeled for born-again dot-coms.

SOURCE: Traffic World via DigAfrica -- DigAfrica analyzes, informs and
updates on Internet & Telecommunications activities and progress in Africa
as-they-unfold.
© Copyright DigAfrica 2001 -- http://groups.yahoo.com/group/DigAfrica
--------------------------------------

Africa: Telecommunications updates

NIGERIA: The process of selling state-owned fixed-line telecoms group Nitel
and its mobile arm, M-Tel, has begun. Strategic investors have been invited
to bid for between 40% and 51% of the two companies, which are being sold as
a single package. The deadline for bids is June 11th, and a shortlist of
prequalified bidders will be announced within ten weeks of the closing date.
The Bureau for Public Enterprises expects to close the deal in September --
six months later than the original target date of March 2001.

SOUTH AFRICA: Germany's Deutsche Telekom and information technology company
Debis have set up a joint-venture company, T- Systems, to provide IT and
telecommunications convergence services. The new firm hopes to secure a 25%
share of the South African market within two years. Black empowerment group
African Renaissance Holdings will own 25.1% of the new company. Debis
recently won a US$19m outsourcing contract to install global positioning
systems in vehicles owned by telecommunications group Telkom -- the largest
fleet-management outsourcing project in South Africa.

TUNISIA: Portugal Telecom (PT) may bid for a mobile phone licence in
Tunisia. If it does decide to bid, PT will link up with Spain's Telefonica
and will aim to exploit scale economies and other linkages between Tunisia
and its Moroccan operation.

SOURCE: Business Africa via DigAfrica -- DigAfrica analyzes, informs and
updates on Internet & Telecommunications activities and progress in Africa
as-they-unfold.
© Copyright DigAfrica 2001 -- http://groups.yahoo.com/group/DigAfrica