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Table of Contents

Market Briefing
Published: July 2010
Pages: 17
Tables: 6
From: GBP 399.00  Buy Now!
Research from: Pyramid Research
Sector: Broadband & Fixed

With the arrival of the new undersea cables on both sides of the continent and the abundance of international bandwidth these cables can supply, many African telecom markets have the potential to improve their poor broadband penetration rates and limited revenues and transform their competitive structures. Still, although some major undersea cables are currently being implemented but have yet to become operational, service providers’ and end users’ reactions to the activations of TEAMS and Seacom in eastern Africa, as well as the first phase of Main One in western Africa, have been mixed. Although the new undersea cables will almost certainly contribute to increasing broadband adoption and revenue in the region by providing it with much-needed international bandwidth, there is still much work to be done by the players across the telecom value chain if they wish to take full advantage of this opportunity.

We believe that the impact of the new undersea cables on broadband adoption and revenue in different markets will be different in both degree and immediacy. We anticipate broadband penetration and revenue growth to be more favorable in markets where domestic terrestrial network infrastructures can exploit the new international bandwidth supply and where competition and competitive regulations reduce tariffs and allow for flexible pricing strategies that encourage geographic expansion toward the rural and poorer regions in Africa. Also, more data-centric end-user devices will be necessary to support the new high-speed connections.

In this report, we analyze factors related to the new undersea cables that will be instrumental in the growth of broadband adoption and revenue in Africa. In particular, we highlight how variations in the state of domestic terrestrial networks in the regions where these cables land can impact potential operator revenue and broadband penetration rates among end users. Then we discuss the effects of competition, regulations and pricing strategies across the undersea cable suppliers as they enable small or large operators/service providers and create different market dynamics. To that end, our report also includes a fresh analytical approach by providing four scenarios of how the AME markets can grow in terms of broadband adoption and revenue under different prices and different market reactions to price reductions. For instance, we show the specific price reductions necessary for a four- or eightfold growth in broadband adoption and revenue between 2010 and 2015.

Lastly, after explaining the role of end-user devices capable of exploiting the new bandwidth, we describe in detail two cases, Tanzania and South Africa, to demonstrate these factors in action.

Driven by improvements in the terrestrial backbones and last-mile networks, the new undersea cables surrounding Africa will boost the broadband penetration rate from 3.2 percent in 2010 to 6.8 percent in 2015, according to a new report.

New Undersea Cables Help Boost Africa's Broadband Prospectsanalyzes the factors related to the new undersea cables that will be instrumental in the growth of broadband adoption and revenue in Africa, specifically how variations in the state of domestic terrestrial networks in the regions where these cables land can impact potential operator revenue and broadband penetration rates among end users. It examines the effects of competition, regulations, and pricing strategies across the undersea cable suppliers as they enable small or large operators/service providers and create different market dynamics. The 17-page report provides scenarios of how the AME markets can grow in terms of broadband adoption and revenue under different prices and different market reactions to price reductions.

New undersea cables will drive the growth of total broadband users in Africa from 40 million in 2010 to 92 million in 2015 at a CAGR of 18 percent, while revenue will increase at a CAGR of 16 percent in the same period to US$20 billion, notes Kerem Arsal, Analyst at Pyramid Research, and author of this report. During the forecast period, WiMax will take center stage in the coverage for the last-mile access and its access lines. 'We predict that WiMax will grow at a CAGR of 30 percent between 2010 and 2015; we also foresee similar trends in mobile broadband, particularly in the data cards/modems,' says Arsal.

'Many African telecom markets have the potential to improve their poor broadband penetration rates and limited revenues and transform their competitive structures,' Arsal claims, 'however, there is still much work to be done by the players across the telecom value chain if they wish to take full advantage of this opportunity.' Tiered pricing strategies designed by undersea cable operators for smaller capacities and shorter durations, such as that announced by EASSy (Eastern Africa Submarine Cable System), will improve competitiveness in the AME region. Growing broadband access will also need end-user devices that can exploit the available bandwidth.

Companies Mentioned:

- Cats-Net
- Raha
- Sasatel
- Simbanet
- Telkom
- TTCL
- Zanlink
- Zantel

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