Africa's mobile markets have expanded rapidly in recent years, with mobile penetration levels now far outstripping those of fixed-lines across most of the continent. But can this growth be sustained? And what are the prospects for further fixed-line sector growth?
Mobile telephony is now firmly entrenched as the predominant mode of telephony in almost every African nation. By 2001 mobile subscriber numbers had increased at such a rate that they had overtaken those of fixed lines, making Africa the first region of the world to achieve this. By the end of 2003, mobile users are estimated to have reached 51 millions, according to ITU, and are forecast to grow to 67 millions by the end of 2005. In just the first few years of the new millennium, Africa has added more telecommunication users than in the whole of the previous century. Africa is currently the world region with the highest level of mobile communications growth. The vast majority of mobile users use GSM technologies.
Evolving A Uniquely African Approach
The business and operating climate in the African telecommunication sector has radically shifted. Firstly, market liberalization has helped shape an environment which fosters competition. Regulatory bodies are being established, to oversee the introduction of services, resolve disputes, and support competition. A glance across Africa's mobile landscape illustrates the benefits of competition. The only countries with less mobile than fixed telephone subscribers in Sub-Saharan Africa at the end of 2003 were either those without mobile networks or without mobile competition. Mobile competition has benefited even the poorest countries. The Democratic Republic of Congo and Ethiopia both have per capita incomes of around US$100, yet the Democratic Republic of Congo has a mobile penetration of around 2% - some 15 times greater than Ethiopia's, which stood at 0.13% at the end of 2003.The difference? Whilst Ethiopia has only 1 GSM operator, the Democratic Republic of Congo has 3 GSM networks, in addition to non GSM cellular networks.
Pan Regional Giants
Competition alone is not the key. The emergence over the last 3-4 years of African based, pan-regional mobile operators, is another significant reason behind mobile's growth. The spheres of mobile influence of these strategic investors now reach across the continent. It is these operators, such as Vodacom, Orascom Telecom and MTN who have been able to apply uniquely African approaches onto the markets on which they operate. They also provide competition - not just any competition, but their presence ensures that competition is of a suitable quality to help stimulate market growth. "Operators such as MTN or Vodacom have the knowledge of operating in different African markets which they can then duplicate onto other markets in the region," explains Michael Minges, Head of ITU's Market, Economics and Finance Unit and lead author of the 2004 African Telecommunications Indicators report. "But crucially they also possess a vital zeal to spread the benefits of mobile communications across the region, and with this enthusiasm they have helped created a mobile revolution in Africa."
As Africa's telecoms investment climate has shifted, in turn, potential investors in the region are becoming more willing to make concessions which they would not have done 10 years ago. Vendors, looking to grow in new markets as they face saturation elsewhere, are increasingly tailoring their approach to the region, developing special lower-cost solutions to suit the needs of the region.
Harnessing Approaches that Work
Mobile operators in Africa have been quick to see the benefits of prepaid services. In a region where per-capita incomes are low, and payment upfront in cash is generally the preferred means of payment, prepaid services are ideally suited. They reduce the risk of bad credit to operators while exposing a whole new consumer group to telecommunications services; those who would not normally have qualified for postpaid mobile services or fixed lines. A growing number of African networks operate only as prepaid, and four out of every five African subscribers - almost twice the global average - use prepaid services. Prepaid services have been further adapted to offer mobile 'payphone' services. It is tapping into these regional specific approaches, and accessing new sectors of the population who have not previously been exposed to telecommunications, which have helped to drive up mobile usage in recent years, and will continue to do so.
How Far do Mobile's Benefits Really Extend?
Despite its suitability for the African market, how far has mobile really gone in terms of extending the benefits of telecommunications? Levels of mobile penetration vary considerably across the region, ranging from under 1% in Ethiopia to 74.7% in Réunion at the end of 2003, indicating that, for much of the region there is still huge scope for growth. Mobile technology has, however, gone further than any other communications technology in Africa in terms of bridging the digital divide. Mobile's ease of payment means that services extend to segments of urban and rural populations who previously would not have been able to afford them, and where demand is high. Mobile infrastructure also extends way beyond that of fixed-line, into rural and 'universal access' markets, something to which wireless technology is innately more suited than the traditional fixed-line. Nevertheless, network coverage remains low with only an estimated 50% of Sub-Saharan Africa covered by a mobile signal, indicating that there is still a large untapped market, provided operators can be encouraged to extend network coverage.
Boosting Local Jobs
Mobile technology has also spawned a number of new employment possibilities. Prepaid card sellers or mobile resellers, such as Nigeria's 'umbrella people' so called as they use umbrellas to provide shade whilst plying their wares - are now commonplace. Mobile reselling is a boom business - umbrella people, for example, have reportedly been able to exhaust 2-3 MTN prepaid cards, each valued at roughly USD11.60, per day.
Affordability of service is still a key issue - if services are unaffordable for potential new users, then this sector of the market cannot offer prospects for expansion. After a period of rapid mobile uptake, the mobile growth curve is set to continue. ITU forecasts mobile subscriber growth of 17% during 2004. To maintain the momentum of growth however, operators - as elsewhere in the world - will need to look to new areas of growth to attract new users.
Tapping into New Growth Streams Data
Applications such as WAP are beginning to surface. One of the most publicized examples is of Senegal's Manoni, which launched a service to enable farmers to query databases on pricing information, utilizing WAP. The service is used by over 1 000 users.
Meanwhile, SMS (short message service) usage is showing signs of a fast uptake in Africa. While the majority of SMS traffic tends to be for mundane communications, SMS has also been harnessed for a number of innovative, region-specific applications. In Zambia, mobile operator Celtel has launched a mobile payment system whereby users can make payments using SMS, with a code identifying the payee.
Applications such as mobile banking have the potential to make a major impact in Africa, a region where cash payments are preferred and where people do not generally carry credit cards.
Migration to 3G?
A lack of fixed-line infrastructure as well as low PC penetration means that the potential for mobile Internet is considerable. Indeed 3G services have already been launched in a number of African countries, including Angola. Although there are no 3G networks in operation on the continent, network upgrades have enabled service launches. Recently Ericsson was awarded Africa's first EDGE (Enhanced Data Rate for Global Evolution) contract, to provide the technology to Ghana's Scancom. Deploying EDGE will provide a migration path toward 3G, and enable Scancom to assess demand for enhanced data services. High speed or not, mobiles can still allow users to access the Internet "We are seeing users using regular GSM networks to gain access to the Internet, " says Minges "It is certainly slow, but in areas where no alternative exists it is the only way to gain Internet access." Given this, a logical technology to deploy would be GPRS (General Packet Radio Services), which could provide a higher speed access solution. Yet operators have still to embark on a large-scale rollout of the technology - by the end of 2003 GPRS had only been launched in three African markets. "Operators should be exploiting the potential of GPRS " explains Minges "Given the obvious thirst for Internet access, GPRS could provide users with Internet access at speeds equivalent to dial up access as well as new revenue streams for operators."
Universal Service Market
The Universal service market offers some surprisingly vibrant growth opportunities. Cautious of extending the reach of mobile services into rural areas, where service uptake may not be as rapid as in urban areas, operators have been slow in seizing the prospects these markets offer. "Operators should see these markets as a growth opportunity" says Minges. "Providing a service such as a community payphone can generate over 3 times the monthly revenue of a conventional user." While services such as community payphones clearly do not provide a boost for handset sales, they do mean that levels of mobile traffic are kept high. Mobile initiatives in the universal services area include the Grameen Phone initiative. This initiative replicates the Grameen Telecom's village phone programme running in Bangladesh, which currently has over 40 000 village phone operators. The Grameen initiative in Uganda operates in partnership with MTN Uganda and provides low cost mobile services into poor rural areas.
The Death of the Fixed-line?
Providing that operators maintain a focus on service affordability, as well as looking to new growth areas, the future for mobile looks very positive. But what of fixed-line growth, which has been almost static beside the burgeoning mobile market? Total numbers of fixed lines are forecast to reach 30 millions by the end of 2005, according to ITU. Although by this point the number of fixed lines will be dwarfed by mobile, fixed-line growth will nevertheless have been steady, increasing by around 6-10% each year. The key to fixed-line's growth lies with wireless technologies, and it is only through these technologies that fixed-line can 'fight back'. Offering fixed-line services over fixed wireless access (FWA) networks offers all the advantages of mobile - they are cheaper to install than conventional copper wire networks - but are also attractive in their ability to provide high data speeds. It is this ability to provide broadband which needs to be exploited, to leverage the one advantage fixed-line services has over mobile.
Fitting the Market's Needs
Fixed-line services will also need to be adapted to meet the needs of the market, paying attention to areas which have helped mobile grow - in particular the ability to prepay for calls. The suitability of FWA networks means that they are already being deployed in certain countries in Africa. In Nigeria, for example, by mid 2003, new fixed wireless networks accounted for some 30% of all fixed lines. If the Nigerian experience can be duplicated across other countries, and fixed wireless technologies can be harnessed to revamp traditional fixed-line services, then there may still be hope for Africa's fixed-line market.
Wireless Way Forward …
Fixed, Mobile or Internet, Africa's ICT future is definitely a wireless one. In the absence of fixed-line networks, in addition to a lack of PCs, Mobile phones are likely to becoming increasingly used as means to access the internet, and in the immediate future it is mobile technologies such as GPRS combined with wireless technologies such as WiFi, which are likely to drive the mobile Internet market. With a number of the region's mobile networks ready for GPRS, it is only a matter of time until operators keen to address stagnant levels of ARPU (Average Revenue per User) - begin to push GPRS as a means of accessing the Internet.
Fixed-line operators must also look to wireless options to diversify and extend their service range. As well as voice services, fixed wireless technology will also allow operators to offer highspeed broadband Internet access, and this could well prove to be the one antidote to declining fixed revenues.
Vested Interests in Africa's Mobile Future
The stakeholders in Africa's mobile industry will each have their own roles to play in shaping the future mobile market. Regulators and policy makers can act decisively to ensure that competition friendly policies are encouraged, such as keeping license fees to a minimum, and that any lack of transparencies in the business climate are addressed. Regulators should step in to make the prospect of rural expansion a more attractive one to operators, such as by including - and enforcing - higher rollout obligations for new market entrants, or by providing incentives such as lowering of asymmetric interconnect rates to entice existing players further into areas which previously had no network coverage. Operators themselves should be encouraged to share infrastructure where possible to keep their costs down and encourage competition.
Manufacturers must continue finding methods to keep infrastructure costs as low as possible, as well as tailoring their approach to address the needs of the region - such as looking at tailoring solutions to low ARPU users. Vendor financing agreements, with the backing of governments and investment bodies will also encourage manufacturers to provide network enhancement and expansion.
With around 51m mobile subscribers in a market of 800m, Africa offers tremendous growth potential, and by continuing to deploy and adapt an approach which fits the needs of the market, then the mobile growth curve looks set to continue.