Overview
African market now 'mature'
After a decade of
massive growth, the African mobile telecoms sector is entering a period of
consolidation and reorganisation. Although the citizens of half a dozen African
countries still have very limited access to telecoms, the era of rapidly
increasing penetration rates is coming to an end. Competition has driven down
tariffs in most markets, thereby reducing average revenue per user (ARPU), so
most operators are banking on the introduction of new services to generate more
income and sustain what has been the most dynamic part of the African economy
since the dawn of the new millennium.
There
are about 644m subscribers in Africa at present, resulting in a penetration
rate of about 60%. According to the 2012 African Mobile Factbook, global mobile
phone penetration now stands at 85%, so Africa still stands some way behind the
global average. Figures vary but most estimates agree that there will be 1bn
mobile phones in Africa sometime around 2016-17, which should ensure that most
Africans have mobile phones, even if a significant proportion of the population
have two or more handsets in order to differentiate their personal and work
lives.
Brahima Sanou,
the director of the International Telecommunication Union's (ITU)
Telecommunication Development Bureau, said: "The past year has seen
continued and almost universal growth in ICT [information and communications
technology] uptake. The surge in numbers of mobile broadband subscriptions in
developing countries has brought the internet to a multitude of new users. But
despite the downward trend, prices remain relatively high in many low income
countries. For mobile broadband to replicate the mobile cellular miracle and
bring more people from developing countries online, 3G network coverage has to
be extended and prices have to go down even further."
Slower growth in
penetration rates may encourage merger and acquisition (M&A) activity. Global
M&A action was frantic around the time that Vodafone became the global
market leader but has slowed down somewhat in recent years, as operators have
sought to concentrate on increasing their ARPU after laying out vast sums in
acquiring 3G licences.
India's
Bharti Airtel bought its African assets from Zain in 2010 but there still
appears to be considerable scope for takeovers in the near future and it would
be no surprise if the number of major players decreased over the next few
years. Airtel itself is considering merging its Africa and Indian operations,
partly because the former continues to make a loss. The company has conceded
that it will probably not meet its $5bn revenue target for its African business
for the 12-month period up to March 2013.
Some telecoms
industry commentators have suggested that Africa could become the first post-PC
continent. There is certainly merit in this argument as landline infrastructure
was very slow to develop in Africa by global standards and appears to have been
leapfrogged entirely by mobile telecoms in some countries. The promise of
higher capacity mobile internet access has persuaded many that some of Africa's
biggest markets are ready for the 4G revolution. In short, 4G technology
provides ultra broadband internet access, which enables high speed
communications at high mobility. For instance, it allows people to access
movies, gaming service and video conferencing via their mobile handsets and
while on the move. About 18% of all mobile phones in Africa are smartphones and
this figure is steadily increasing, although the continent has more basic
handsets than anywhere else in the world.
While BlackBerry
has suffered from increasing competition in its established markets, its
smartphones are becoming more popular in Africa. BlackBerry manufacturer
Research in Motion (RIM) has opened a retail store in Nigeria where it enjoys a
50% share of the local smartphone market. The outlet, which has been developed
in association with local retailer Slot Nigeria, has been opened at Computer
Village, Ikeja. Despite the company's focus on Nigeria, its African
headquarters remains in Johannesburg. Global marketing of other smartphones is
likely to drive down prices in Africa and Google has already set a target of
selling 200m of its Android phones on the continent.
Improved
services for Nigeria
There has been
some debate over whether Nigerian telecoms operators should make steady
improvement in mobile capacity or seek to leapfrog technological stages. ZTE
has announced that it will now work alongside Etisalat in Nigeria on improving
3G services. ZTE business consultant Ahtasham Rabbani told a workshop in Abuja:
"To survive in the big data era, operators need to size the business model
and build a strong, smart and cost efficient network. To develop the 3G
connections involves a terminal strategy and hi-tech services. The 3G package
needs to be explored a lot in Nigeria."
However,
Etisalat, based in the United Arab Emirates, must continue to compete with
bigger players in the Nigerian market, including Nigeria's own Globacom and MTN
of South Africa. Nigeria has overtaken South Africa as the continent's biggest
telecoms market and the number of subscribers is likely to break through the
100m barrier in the near future. Of course, many more prosperous Nigerians hold
multiple subscriptions and so there is still scope for further growth in a
population of about 150m.
MTN Group has
announced that it will spend R7bn ($114m) on improving its South African
operations in 2013. The 40% rise on last year's figure seems to be designed to
help fund the launch of 4G technology in the country's biggest cities, despite
the fact that 3G currently stands at just 65%. On 10th October, Vodacom,
majority owned by the UK's Vodafone, launched its first commercial 4G long-term
evolution (LTE) service in South Africa. LTE, which is one of the main 4G
standards, has been launched in Johannesburg, with other urban areas to follow.
The new chief
executive of Vodacom, Shameel Joosub, said: "Vodacom was the first network
in South Africa to test 4G LTE more than two years ago, and since then we have
been busy upgrading base stations and our fibre-optic transmission network in
preparation for today. It is great to claim another South African first and
even more pleasing that South Africa has joined an exclusive club with the
fastest mobile connectivity on offer."
Vodacom now has
more than 50m subscribers in Africa. It is the biggest operator in South Africa
but rival MTN Group is the bigger across the African continent as a whole.
However, Vodacom is looking to expand. Joosub commented: "We are more
confident about more expansion opportunities. We do have an appetite to go,
more than previously."
Cell C, South
Africa's third-biggest operator after MTN and Vodacom, is the latest to cut its
prices in a bid to increase market share. Its current initiative is attracting
700,000 new customers a month, most of them pre-paid subscribers, taking its
subscriber base up to 9m, or 13% of the market, by September.
The former chief
executive of Vodacom, Alan Knott-Craig, took the helm at Cell C in May and is
using $180m from shareholders to improve geographical coverage. He commented:
"We would have to raise some more, but it is not new money to be raised,
it is money that was already being arranged. One thing is sure, we would have
to spend some money to make more money. Job number one at Cell C is fixing the
company, and the company needs a lot of fixing."
Despite the
financial benefits of an active telecoms sector, conflict between operators and
governments occurs in many countries. For instance, the Rwanda Utilities
Regulatory Agency (RURA) announced in September that it would fine MTN Rwanda,
which dominates the domestic market, for poor quality "on call completion
rate, speech quality, signal strength and other measures". Rwanda has 4.9m
mobile telecoms subscribers, including 3.1m MTN Rwanda customers, as the market
continues to grow rapidly.
The
number of subscribers in Rwanda increased by 50% in 2010 alone, However, MTN
disputes the imposition of the RF3m ($4,767) a day fee for each day of alleged
poor service, arguing: "despite hitches that sometimes might be beyond our
control - like fibre cuts, our network is operating within all key performance
indicators in our licence obligations". Tigo Rwanda, which is owned by
Millicom International Cellular, has also been warned about its services but
not fined.
Whatever the
merits of the RURA argument, Kigali's strategy of turning Rwanda into an IT hub
is certainly yielding benefits in terms of infrastructure and education levels.
In its recent measuring the Information Society 2012 report, the ITU calculated
that Rwanda had the most improved information and communications technology
(ICT) in Africa over the previous 12 months.
The survey, which
considered levels of ICT access, skills and use, ranked the Seychelles as the
best-equipped ICT nation on the continent, followed by Mauritius, South Africa
and Cape Verde, in that order. Although not all African states were assessed,
the performance of Congo-Brazzaville had declined most and Niger had the worst
ICT sector overall of those countries that were analysed, followed by Chad,
Central African Republic, Eritrea and Burkina Faso.
By its very
nature, the telecoms sector enables companies from many different countries to
invest in different markets. This prevents any one region from dominating. The
mobile telecoms market is one sector where Chinese companies have not entered
Africa en masse. Nevertheless, the Ethiopian Communication and Information Technology
Company announced that it had awarded a $1.3bn contract to upgrade its telecoms
infrastructure to ZTE and Huawei Technologies. A spokesperson for the Ethiopian
firm said: "Both companies will be engaged... and will have a share in the
market. They will finance the project aimed at doubling the number of
mobile-phone users to 40m by mid-2015." n
'The past year
has seen continued and almost universal growth in ICT uptake. The surge in
numbers of mobile broadband subscriptions in developing countries has brought
the internet to a multitude of new users' Brahima Sanou, the director of the
nternational Telecommunication Union. 4.9m Rwanda has 4.9m mobile telecoms
subscribers, including 3.1m MTN Rwanda customers, as the market continues to
grow rapidly
Infrastructure
Telecoms
towers under attack
One of the main
advantages of mobile telecoms over landline technology is the reduced cost of
providing infrastructure. However, mobile phone towers are now being targeted
by militants in northern Nigeria, in a strategy that the industry fears could
be copied elsewhere on the continent by disgruntled groups. Radical Islamists
Boko Haram have attacked more than 30 towers across a wide swath of Nigeria,
from Borno in the east to Kano in the west.
A spokesperson
for the group said that it had "launched attacks on mobile phone company
establishments because of the help they are giving to security agents". It
claimed that mobile operators had passed information on to the security
services to help them track down Boko Haram members. The cost of each tower and
associated equipment is estimated at $1-1.5m.
This
is not the first time that telecoms services have been targeted. The government
of Hosni Mubarak shut down mobile communications in Egypt last year in an
effort to disrupt cooperation among protesting groups. In addition, it is
estimated that about 20% of Libya's mobile telecoms towers were severely
damaged or destroyed during that country's civil war.
In a more
positive development, tower sharing is becoming a popular option to reduce the
cost of mobile infrastructure. Charles Green, the chief executive of Helios
Towers Africa, supports the move. He says: "The timing is right because of
the infrastructure investment deficit in most sub-Saharan African markets.
Unless telecoms infrastructure investment in Africa increases, it will be
impossible to serve the burgeoning levels of consumer demand for 2G voice, let
alone the site densification required for 3G coverage, improved capacity and
the rapid growth in data traffic. It has been estimated that without an increase
in the sharing of infrastructure, the number of telecoms towers will have to
double over the next five years from 75,000 to 150,000, and that is just for 2G
traffic."
Al
Bawaba Ltd.
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