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AFRICA - Mobile Market growth starting to flatten
By Peter Lange
Mobile phones represent around 90% of all telephone lines in Africa. The continent's mobile market has been growing consistently at around 50 to 60% every year. Enormous further potential remains, with market penetration standing at only around 30%. However, in some of the leading markets the growth curve has started to flatten.
A steady decline in tariffs and the introduction of prepaid services has meant that almost 30% of Africa's close to one billion people can now afford a mobile phone. However, as lower and lower income groups are being targeted, the declining ARPU is putting pressure on the network operators' profit margins. Despite this, international investors are still paying record prices for new mobile licences or shares in existing mobile operations in Africa, which shows the huge potential that is still seen in this market.
There are now more than a quarter of a billion mobile subscribers in Africa, and revenues have passed the $20 billion barrier with profits estimated at around $2 billion. Governments have collected close to $10 billion in operator licence fees since 2000. Newly introduced converged licensing regimes have increased the competitive pressure in a number of key markets but also allow the mobile operators to branch out into new service segments.
On the other hand, high taxes on mobile phones are holding back growth in some developing countries, which has also resulted in a black market. Uganda is ranked second after Turkey among the 50 countries in the world with the highest taxation on mobile handsets and services, Tanzania is ranked sixth, and Kenya ninth, according to GSMA.
Although the greatest demand is in the capital cities, cellular solutions are also being employed to increase accessibility in rural and other disadvantaged areas.
The Ultra Low-Cost Handset program forms a major part of the GSMA Emerging Markets Initiative and is expected to help accelerate market growth even further by reaching lower-income customer groups with $30 handsets for which the Association reached an agreement with Motorola in September 2005.
Due to the continent's poor fixed-line infrastructure, the mobile networks are beginning to play an increasing role in Internet service provision as well, following the launch of 3G services in a number of markets - a welcome new revenue stream in an environment of low ARPU levels.
Africa's low population densities make wireless systems more economical than fixed-line networks. In addition to mobile networks, WLL systems have been introduced in a number of countries for the provision of fixed-wireless services. Some of these networks offer limited-mobility services within a certain radius of a subscriber's residence.
In Africa, mobile data technologies are increasingly being used as a substitute for poor or non-existing fixed-line infrastructures. Rollouts of ADSL or other terrestrial broadband services are slow in most countries and it can take many months to gain access. In vast parts of the continent, the mobile network operators are the only providers of any kind of telecommunication service apart from satellite services.
The development and introduction of mobile data services and content is expected to speed up in the coming years as subscriber growth peaks and operators seek alternative ways to grow their revenues. As the market becomes more educated, new value-added products are being more widely adopted.
As elsewhere in the world, SMS still accounts for the bulk of Africa's mobile data traffic, but since 2003 there has been an emerging interest in third party services such as the downloading of ring tones and logos, as well as MMS.
Many mobile operators in Africa are now establishing themselves as ISPs, following the introduction of mobile data services such as GPRS, EDGE and 3G. An ISP business can be very lucrative for African mobile operators with their large customer bases, especially those who operate their own international gateways so that no interconnect charges eat into profits. It offers an opportunity to significantly increase ARPU, and competition is limited due to the poor or often virtually unavailable fixed-line infrastructures.
In South Africa, mobile data revenue (including SMS) now accounts for close to 10% of total mobile revenues.
For more information see BuddeComm's -
African Annual Publications
Click here for a full analysis of the Africa and Middle East Mobile Telecoms Market 4Q 2008 with subscriber numbers and mobile penetration for all operators and States.
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