The World’s Fastest Growing Mobile Market

30th April , 2004

Africa : 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."

Rapid Growth
Mobile telephony has been critical in boosting access to telecommunications in Africa and has helped substantially lift numbers of telecommunications users. 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 expand.

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 Africa.

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 users being 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.

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