African Telecoms Market Drivers and Inhibitors
In growth rate terms, Africa has been one of the fastest growing mobile markets in the world over the last 2 or 3 years. The African mobile industry has also shown a dramatic transition from the dominance of state-owned monopoly operators to more competitive market and has put pressure on operators to develop methods to retain their present customers as well as expand their market share. This section discusses the various opportunities present in the African mobile market and some of the threats that could be detrimental to the region's rapid growth.
- Subsidisation of Handsets: The subsidisation of handsets, or bulk supply of very cheap handsets, would encourage the low-income group (constituting the major proportion of the population in Africa) to start using mobile services and this would consequently boost the mobile industry in future.
- The various operators, such as Vodacom/Vodafone, MTN, Millicom, France Telecom and Airtel, are expected to engage with manufacturers to bring handset prices down.
- Moreover, operators, such as Airtel might also move into the handset business and start bundling cheap, basic handsets with their offerings, which would eventually help boost the take-up of mobile services.
- Pre-paid offerings: Pre-paid billing will continue to be a major driving force for growth in mobile subscriptions right across Africa. This system of billing helps individuals with restricted budget gain access to mobile services by paying at their convenience. Pre-paid subscriptions have proved popular in all low per capita income regions around the world, and we expect pre-paid services to continue to form the mainstay of African mobile subscriber growth. Many operators have also started focussing on pre-paid offerings as it helps them to overcome problems, such as fraud and the shortage of personal bank accounts.
- Allied with this is Mobile Banking, which has seen dramatic uptake, particularly in Kenya where Safaricom's M-PESA has revolutionised the whole payments process.
- Liberalisation: The liberalisation of the telecom sector and hence the privatisation of government owned telecom operators in many African countries, such as Kenya, Morocco, etc. has already set an example for others to follow.
- For instance, Tunisia launched the tender to privatise Tunisie Telecom in August 2005.
- The Nigerian government also laid the foundation for privatisation of NITEL (and its mobile-arm, M-Tel). However, this has proved to be a particularly fraught process, and despite an initial sale, the semi-moribund operator has been put back on the market, although the second effort to sell it failed at the end of 2010.
- Across the continent, within individual country markets, liberalisation should bring more competition to the market and boost growth of the mobile industry, and attract investment in the sector.
- Low penetration: At the end of 2010 48% of the region's population does not have access to mobile services - based on a simple division of the number of people by the number of active SIM cards. However a notable feature of the market is the multiple ownsership of SIM cards, and Bharti Airtel at the time of its entry into the market in early 2010 estimated that as a result the mobile penetration rate was inflated by a third. Whatever, this would appear to be an opportunity for the multi-SIM Smartphones evident at 3GSM World Congress in February 2010. This provides a great opportunity for operators to expand their network coverage and increase their subscriber base.
- Expected uptake of 3G services: 3G services are still at a nascent stage in Africa. 3G services first made there appearance in Mauritius and South Africa at the end of 2005, and in 2011 Namibia was confidently demonstrating 4G.... At the start of 2011 there were some 23 operators offering 3G services in 13 nations. 3G services will help operators to stabilise their declining ARPU and thus a number of operators have launched 3G services in the near future. Growth Inhibitors
- Taxation - Many African mobile markets, especially in East Africa, have a model of high tax charges which are being applied on both the usage and the sale of mobile phones. This could seriously hamper the growth of the mobile industry in the region, forcing the cost of handset ownership to a prohibitive level for many individuals. According to an ITU report, Tanzania, Uganda, Kenya and Zambia are among the top ten markets in the world with the highest taxes for the mobile industry. Moreover, it also highlights the fact that Tanzania and the Democratic Republic of Congo are the only countries in Africa that still impose customs duty on imported mobile handsets.
- Low income group: In short, many countries in Africa are largely poor, and the low income per capita will seriously hamper the growth of any kind of advanced mobile industry. If there are not enough subscribers to make value-added services viable, operators will not invest in network upgrades, which in turn will hold back market development. SMS growth continues to be hampered as has been observed that SMS traffic falls dramatically when operators close free-trial periods and begin charging for these services. As such, there might not be adequate backbone infrastructure across Africa to support the growing subscriber base.
- Widespread illiteracy: The high illiteracy rate in the region is also a deterrent to the growth of mobile services. The illiterate population find it difficult to use even basic data services, such as SMS.
Further obstacles, such as unreliable electricity supplies and corruption in local government, could suppress the momentum with which the mobile market is growing in Africa, at least in certain country markets.