Major African Mobile Markets: Future Growth Prospects 2006-2011  

Market Evolution

As with any developing market, many of the country markets in Africa are rapidly maturing, and indeed transitioning through their natural growth stages very quickly. Market evolution tends to follow through stages of deregulation, liberalisation, entry of competition, rapid growth and then consolidation and maturity. Many of the mobile markets in Africa have gone through immense changes in recent years, evolving from state-run monopolies to competitive growth markets. Much of the rapid growth in the last 2 or 3 years has been spurred by this liberalisation, and now these markets are evolving from this explosive growth phase into a more controlled, more mature phase.

Different countries in Africa are currently at different stages in their market evolution, with a few markets, such as Ethiopia and Rwanda, still operating as monopolies and some at the other end of the scale facing maturity and intense competition, such as South Africa. As the example of South Africa demonstrates, with Virgin Mobile soon to be launching the first MVNO on the African continent, the market conditions in Africa's more competitive markets offer ample MVNO and MVNE opportunities. As MVNOs proliferate worldwide, particularly in Europe and North America, Africa may be the next exciting target market for MVNO growth, where regulatory market conditions allow.

Table 2 shows the state of market development in all African mobile markets.

2006 represents a key time in the development of the African mobile market. These pan-African regional operators are now growing fast and the biggest players among this group would now make very expensive acquisition targets. Meanwhile many African markets still offer a way in 'from the ground up', with penetration rates as low as 1, 2 or 3 percent there is ample scope for new market entrants. 2006 could be a good time to invest in the region and gain a foothold into selected markets while they are still small and where the government is seeking to liberalise the sector.

The only major hurdles likely to stop new operators from entering the African market might be the high taxation policies present in some countries, such as Tanzania, Uganda, Kenya and Zambia, and the ever present problem of large, impoverished communities. Low income groups dominate many African nations, and these markets will clearly require a long, slow game plan to return a profit on any investment, as ARPU is likely to be among the lowest in the world. Further concerns about dangerous political situations, economic instability, civil unrest and communities ravaged by HIV/AIDS will also hamper substantial foreign investments.

Saving ARPU

SMS, always popular among a predominantly pre-paid subscriber based, may be the one saving grace of ARPU in Africa. As voice tariffs are likely to be among the lowest in the world, so high SMS use may bolster ARPU and return some good margins for operators. Also in the more developed markets of Africa, as subscriber numbers grow, so existing operators need to start focusing on ARPU, churn and the growth of non-voice value-added services and again SMS is likely to be the most popular non-voice service available.

As mentioned previously, the great cultural diversity present in many African countries could offer a great opportunity for a thriving content business across the continent. Locally, culturally and ethnically relevant content, delivered cheaply and easily by SMS, has been well received elsewhere in the world, particularly in Asia and the Middle East, and there should be plenty of scope for growth in Africa. Operators such as Celtel may be well placed to leverage the experience of their new owners, MTC, to find out what has worked in the Middle East, and apply those lessons to the African market.

The 95 percent pre-paid subscriber base should indicate a strong future for P2P SMS and SMS-based services, as SMS has consistently proved popular with pre-paid subscribers the world over. Examples such as Venezuela, where SMS has been immensely popular as a cheap alternative to voice, show that SMS could have a strong future in Africa.

Additionally, with GPRS and EDGE rolling out all over Africa and 3G licences being issued in some countries, a thriving value-added services market could start to develop. By end-2005 3G licences had been issued in South Africa, Mauritius, Tunisia and various other auctions or licence awards are currently planned or in the process of happening. Whilst GPRS value-added services will grow, high-value 3G services, such as video-calling, will likely remain something of a niche market for the next few years, confined to wealthier markets such as South Africa and Mauritius, where commercial 3G network services have already been launched.