Africa remains a lucrative market for mobile telecoms operators, with the region showing phenomenal growth in mobile subscriber numbers that now account for almost 60% of the continent’s population, compared with a mere 25% in 2000.
According to the International Telecommunications Union’s Information Society Statistical Profiles released at the end of last year, the continent has seen compound annual growth of 47% between 2003 and 2008. This far surpasses the global comparative rate of 23%.
“The increase in the number of mobile cellular subscriptions in the past five years has defied all predictions and Africa remains the region with the highest mobile growth rate,” wrote Sami al Basheer al Morshid, director of the ITU’s Telecommunication Development Bureau.
“By the end of 2008, Africa had 246-million mobile subscriptions and mobile penetration has risen from just 5% in 2003 to well over 30% today. The high ratio of mobile cellular subscriptions to fixed telephone lines and the high mobile cellular growth rate suggest that Africa has taken the lead in the shift from fixed to mobile telephony, a trend that can be observed worldwide.”
This rapid growth necessitates aggressive investment in infrastructure to meet demand, with research firm BMI-TechKnowledge (BMI-T) pegging this at $76,1-billion in both fixed and mobile networks between 2000 and 2008. It expects an additional $68-billion to be pumped into telecoms infrastructure from 2008 to 2012.
“The higher spending on mobile networks is also expected to continue, with mobile investments making up about 68% of this total,” says Fezekile Mashinini, Telecoms Analyst at BMI-T. “In general voice services will still be the ‘killer’ growth opportunity for operators in most African countries for some time to come.”
The picture across the continent is not a homogenous one, with mobile penetration in some markets significantly higher than in more underdeveloped regions. This does not mean that investment in services and infrastructure is slowing, it is merely being directed to higher value services — such as data.
The ring of fibre
This is being fed not only by subscriber demand, but especially by the arrival of the slew of submarine cables bringing access to high-speed broadband services that the continent has been severely starved of.
By the end of 2011 Africa will have access to broadband capacity estimated at 10 Terabits/second, compared with the 80 Gigabits/second that was available at the end of 2008. This will have been achieved through the landing of the Seacom (1,28Tb/s), GLO-1 (640 Gb/s) TEAMS 120Gb/s), EASSy (1Tb/s) MainOne (1,92Tb/s) and WACS (3,8Tb/s) cables.
Mobile operators will be keen to take advantage of this new age of high-speed internet, as can be seen by MTN’s involvement as the single biggest investor in the EASSy cable which is expected to be operational by August this year.
Sanjay Kaul, vice-president of Multimedia & System Integration at equipment vendor Ericsson Africa, says there is also a strong business case for operators to invest in data services as the cost is generally a third of the cost of investing in voice services.
“For operators to go back to shareholders with profits, they have to bring in data services that excite the user and for which they are willing to pay,” he says.
“So if they put the same amount of money into data as into voice, they will have three times the [revenue] throughput. What is complex with data is that it is unique for every consumer and they have to provide them that.”
BMI-T’s Mashinini concurs, saying that as operators’ voice services mature they will undertake the so-called “second wave” of investments directed at enhancing current services and broadband systems, while also building out and expanding their transmission backbones.
He says South Africa is an example of a market that is in this stage of investment, with multibillion-rand investments in higher-speed mobile data services announced this year by all three mobile networks.
A world of IP opportunities
The African market is so rich in potential and demand for mobile data that international equipment vendor Harris Stratex generates a third of its revenue on the continent, which is only slightly lower than the income derived from its North American home market.
The company is already active in Algeria, Côte d’Ivoire, Kenya, Nigeria, South Africa and Zambia, supplying operators in the region, such as MTN, Vodacom and Zain.
Company chief executive Harald Braun concedes that voice is by far the greatest proportion of traffic in Africa, but that this will change as connectivity via the submarine cables comes on line.
“Everything we do [in Africa] is IP-focused, so growth in IP usage is a fantastic situation for us because it will explode. And people will buy smartphones, which will result in an explosion of demand for data services,” he says.
Policies to pave the way
Looking at the way forward, the ITU suggests that the two main areas of ICT policy concern centre on the need to sustain mobile cellular and internet user growth, while extending access to lower-income segments, and to take the necessary steps to enable greater broadband access.
It recommends that greater steps be taken to enhance liberalisation and privatisation and to strengthen regulatory agencies to promote competition and level playing fields.
“Countries that have introduced the basic building blocks of regulatory reform need to pursue deeper liberalisation to sustain market growth and extend access, including steps such as the abolition of remaining exclusivities on market entry, introduction of number portability and the simplification of licensing procedures,” it says.
Lowering the cost to the consumer is another area that requires attention to drive this growth, it says, pointing to the advantages that can be had from infrastructure sharing.
“Regulators need to create a trusting environment among operators and develop policies that promote infrastructure sharing and allow operators to compete on the service, rather than on the infrastructure level.”
Mashinini is supportive of this view, saying that the broadband digital divide is so vast that this is one of the mechanisms that can be used to ensure that broadband infrastructure is built in all areas and not only in profitable areas.
“Globally, governments or independent regulators do tend to intervene wherever there is market failure, so there is a case to be made for managing these highly regulated industries, just as would be the case for water or electricity — at the very least on a ‘soft touch’ basis.”
Growth opportunities
He says the East and West African market will remain particularly active and show solid growth in the next five years. “Nigeria is sitting at a penetration rate of about 49%, with close to 78-million mobile subscribers. With the exception of Kenya, which has a mobile penetration of 51%, penetration rates of East African countries are relatively low,” he says. “Ethiopia is at about 5% penetration. You can see the opportunities in these regions.”