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Africa: The World’s Fastest Growing Mobile Market
Does mobile technology hold the key to widening access to ICTs in Africa?
Geneva, 26 April 2004 — Mobile
subscriber numbers in Africa have increased by over 1000% between 1998 and 2003
to reach 51.8 million. Mobile user numbers have long passed those of fixed line,
which stood at 25.1 million at the end of 2003. In its latest publication African
Telecommunication Indicators 2004, issued on the occasion of ITU TELECOM
AFRICA 2004 taking place in Cairo,
Egypt from 4-8 May, ITU examines the reasons behind the continent’s rapid
mobile sector expansion and explores the sector’s future avenues for growth.
"Mobile technology is the Information Society in Africa", explains
Michael Minges, Head of ITU’s Market, Economics and Finance Unit and lead
author of the African Telecommunications Indicators 2004 report. "It is a
technology that has permeated more widely than any other into new areas, and we
must examine how we can utilize this technology going forward, to help narrow
the digital divide."
Mobile telephony has been critical in boosting access to
telecommunications in Africa and has helped substantially lift numbers of
Mobile penetration had reached 6.2% at the end of 2003, in contrast to 3% for
fixed line. The rise of mobile usage has been driven by a combination of
factors: demand, sector reform, the licensing of new competition and the
emergence of major strategic investors, such as Vodacom, MTN, Orascom and Celtel.
Dawn of a Mobile Internet?
With the region’s limited fixed line penetration effectively
curtailing Internet access via more traditional access methods, mobile
technology now has the power to drive the uptake of Internet. So-called 2nd
generation services such as WAP (Wireless Application Protocol) or SMS (Short
messaging service) are gaining ground, with South Africa topping the monthly SMS
league table with 17 messages per month, putting it firmly ahead of the global
average of 4. Innovative regional specific applications have also helped drive
SMS and WAP usage — mobile banking in Nigeria for example, or providing
election results in Kenya. Interest in these applications indicates a broader
level of demand for data services. 2.5 generation — GPRS (General Packet Radio
Services) have now been launched in 3 of the region’s markets with a number of
other networks on the continent now GPRS ready. With the capacity to provide
higher speed Internet access, GPRS could provide a solution to problem of a lack
of Internet access.
Meanwhile, fixed wireless networks are being harnessed to
provide 3G services in a number of countries, and a mobile 3G network looks set
for launch in Angola. How are these types of services likely to be received in a
region such as Africa? Given the demand for Internet access, these wireless
technologies could provide the solution to Africa’s Internet future. The best
known such technology is WiFi, although longer range technologies such as WiMax,
which offers high speed connectivity over a range of up to 50km, could also have
a key role to play in helping deploy a ‘portable’ Internet solution for the
region. Whatever the particular technology, a clear gap in the market exists for
the provision of Internet access technologies to counter a lack of fixed lines
in the region, although GSM license holders are likely to want to ensure that
their share of any potential markets is not eroded by alternative technologies.
Sustaining Market Growth
For mobile markets to flourish and continue growing, a
competition friendly and transparent operating climate will need to be in place.
Mobile policy issues have gone beyond licensing market competition as the
majority of African markets now have more than one operator. Policy issues need
to proactively seek to make competition work and to intervene in any cases of
dispute. In addition to policies that will ensure that competition functions
effectively, operators are encouraged to move into new markets. A glimpse across
the region’s mobile markets reveals the benefits of competition; those with
competition have significantly higher rates of mobile penetration than monopoly
markets, even where per-capita incomes are the same. The issue of
interconnection has been a bone of contention in almost every African country,
with incumbents often dragging their feet over the signing of interconnection
agreements, making the launch of competing mobile services difficult. To resolve
these disputes, regulators are increasingly opting for clearer, more analytical
frameworks to calculate rates.
It is not just regulators who have a role to play in helping
to sustain mobile market growth. All of the parties with a stake in Africa’s
mobile future have a role to play. Manufacturers, for example need to devise
solutions appropriate to lower income regions. And operators need to strive to
find innovative solutions to keep end user costs down such as by leveraging
incoming roaming to generate higher revenues and thus keep national call costs
down. Donors also have a key role to play, for example through providing the
resources for capacity building, or implementing programmes such as recycling
used mobile handsets from developed nations to Africa.
Extending availability of telephony services in Africa is
vital. Although mobile has already gone a long way in boosting access to
telecommunications, mobile operators can further extend their services into
universal access markets, such as by installing community payphones, or
subsidizing low income services. More innovative ways of providing access to
mobile services need to be devised, however, to ensure that services continue to
How Will Fixed Line Fare?
How does such impressive growth in mobile services bode for
fixed line? Can fixed line continue to grow or are its future growth prospects
effectively capped by the dominance of mobile? The ability to prepay for calls,
in a continent where cash upfront is often the preferred means of payment, has
been one of the factors behind mobile’s success. Could the same approach be
used for fixed line?
Given that fixed line penetration is so low however, prepaid
fixed line is unlikely to take off on so wide a scale. Generally, fixed line is
constrained by traditional copper wire infrastructure which is inappropriate for
deployment in large areas of Africa. Opting for a wireless infrastructure is
likely to be the saving of the fixed line. Fixed wireless networks offer
numerous advantages over traditional infrastructure in terms of cost and
mobility. They also have the added attraction of being able to offer high-speed
broadband Internet access — something which is currently in scarce supply in
Price Will be Key Factor
In a region encompassing some of the world’s lowest
per-capita incomes, the cost of services is a pivotal issue for their successful
future uptake. Unless prices decline further, then would-be subscribers will be
unable to afford mobile. Yet operators still need to be able to extract revenue
in order to make operations viable.
Mobile faces the challenge of how to sustain its growth in the
face of constraints on affordability. Short-term growth will hinge on potential
able to afford the services which operators are offering. If new subscribers can
be reached quickly, then operators will see a faster return on investment.
Already, equipment manufacturers have announced platforms which can be
profitable at an ARPU (Average revenue per user) of USD 5, while operators are
issuing prepaid cards with a value of just over USD 1. Crucially, demand for the
services is there. The challenge is to successfully meet this demand. Based on
different growth scenarios for the mobile market in 2010, the African mobile
penetration is expected to reach between 10% to a possible 20%, from 6% in 2003.
How Large Could the Market Grow?
African Telecommunications Indicators 2004
is an invaluable information tool for operators, vendors, regulators and any
other observers of Africa’s telecommunications landscape. It contains an
extensive overview of the key mobile sector developments, and trends influencing
the sector’s future structure.
The report explores the kind of mobile applications which have
proved a success, analyzes the current platforms which offer mobile data
services and examines the technologies that could be used to offer enhanced,
faster access to the Internet in future. It also outlines key areas on which
policy needs to focus to ensure that competition functions effectively. The
report analyzes different scenarios for the growth of Africa’s mobile market,
looking at potential future demand for mobile services and examines ways in
which mobile operators can extend their services into universal access markets.
As well, the report looks at what will influence fixed line growth in future.
In addition it contains valuable statistical tables providing
further insight, including industry forecasts as well as a listing of all
infrastructure-based operators in Africa.
The report will be available
as from 3 May after its launch in Cairo. Advance press
copies are available here
for ITU TELECOM AFRICA
2004 accredited media only.