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ICT IN AFRICA THE FUTURE IS BRIGHTER [African Business](African Business Via Acquire Media NewsEdge) Arecent report by telecoms specialists Analysys Mason predicted Africa's telecoms market would grow faster than anywhere else in the world over the next five years, with a compound annual growth rate (CAGR) of 6%. Revenues from mobile data will match those from voice revenue - growing at a 6.7% CAGR compared to just 1% for fixed - as a result of increased 3G coverage and the increasing prevalence of low-cost smartphones. Cisco says the Middle East and Africa (MEA) region's mobile data traffic growth rate will be the largest in the world until 2017, with 77% growth. Its 2014 Sub-Saharan Africa: Ericsson Mobility Report said the growth was underpinned by the number of mobile subscriptions in the region, which the company predicts will increase by 50% (300m subscribers) between 2014 and 2019, to reach 930m. Usage is also growing impressively - Ericsson believes data traffic will increase by 20 times in the next five years, while even voice traffic is set to double. The size of the opportunity is evident in the number of international operators turning to Africa in the last few years. As Johan Van Huyssteen, partner in PwC's telecoms practice in South Africa, notes, around 60% of operators present in Africa are affiliated with major international telecoms groups such as France Telecom, Vodafone, MTN, Bharti Airtel and Millicom. "This strong involvement by global players is a function of the consolidation process of recent years," Van Huyssteen says. "The world's biggest operators - facing market maturity, cut-throat competition and slower growth in their more established markets - have turned their attention to the opportunity in Africa." Mobile payments central to opportunity At the centre of the excitement surrounding the African telecoms industry are mobile payments. As PwC global communications leader Pierre-Alain Sur says in his company's most recent Communications Review on telecoms in Africa, Africa's relative lack of legacy infrastructure has enabled it to almost completely bypass fixed-line services and move straight to mobile. This dynamic communications market has proved itself one of the most innovative with its use of mobile payments. Africa has been at the forefront of the mobile payments industry since the launch of M-Pesa in 2007. MEF's Global Consumer Insights Series on Mobile Money estimates that 82% of consumers in Africa are engaged in mobile banking, compared to a global average of 66%. More than 17m Kenyans today use M-Pesa, with 25% of the country's gross domestic product (GDP) passing through the service last year. The Kenya Bankers Association (KBA) says 60% of Kenyans use their mobiles to pay bills and transfer money, with KES2bn ($23.3m) transacted each day. Mobile money transactions total more than double that of commercial banks. The opportunity has again not been missed by global players. New international entrants to African markets include Western Union and MoneyGram, while banks are also catching up, with Kenya's Equity Bank notably obtaining a mobile virtual network operator (MVNO - see box) licence this year. Moves are under way to make mobile money even more accessible. In May of this year, nine African telecoms firms announced they would cooperate to implement interoperable mobile money services across Africa and the Middle East Interoperability allows individuals and businesses to move money to any mobile money account regardless of what company that account is held with. The move is aimed at boosting competition within the mobile market and allowing customers to move money unhindered. The first moves towards interoperability have already been made in Tanzania, where operators Airtel, Tigo and Zantel have become partners for a cross-network transfer service. LTE is coming Just as Africa skipped fixed-line services to go straight to mobile, the continent's operators are increasingly bypassing 3G networks and focusing on 4G/LTE (see box) infrastructure. As recently as the middle of last year, only six African countries had live 4G/LTE networks, but now they are coming thick and fast. Smile Telecommunications has launched commercial LTE services in Tanzania and Uganda, Surfline has launched its own in Ghana, and Nigeria's Spectranet has launched in Lagos and Abuja and is in the process of rolling out in other cities, including Kano, Ibadan and Kaduna. The Rwandan government is working with South Korea's KT Corporation to roll one out, Glocall Telecom is working on plans in Somalia, while Huawei is building a network in Ethiopia. South African operators Telkom and Vodacom are testing LTE-A services, while even troubled Somalia is set to launch a 4G network. Currently, most African operators recycle their existing spectrum for LTE services, though there is a continent-wide push for new spectrum to be made available through 700MHz and 800MHz bands. This would encourage new entrants to challenge the incumbents in the continent's journey towards LTE. The benefits offered by LTE networks to Africans include its low fixed-line infrastructure build out and its high population densities, which allow operators to reach more people more affordably, perhaps a crucial benefit as Africa looks to tackle its last-mile connectivity issues. Challenges remain Van Huyssteen notes, however, that operators need to overcome a number of hurdles in order to turn the potential of the sector into revenues. One hurdle is the low level of disposable income compared to many other markets. Only 16% of Africans are online compared to 77% in the developed world. "The biggest challenge is how to make services available and sell them profitably to a population of users who generate relatively low revenues per user, and many of whom are geographically dispersed across massive rural areas," Van Huyssteen says. "These factors mean that both operators entering and those currently doing business in Africa need to develop lean operating and business models that can be profitable at relatively low average revenue per user." Tower sharing in order to reduce costs is becoming increasingly common, but issues such as poor regulation or low levels of competition are still hindrances. Regulatory regimes need to be adapted to the current climates in many nations. Across the continent, most of the national regulatory regimes were established in the 1990s. Though some countries have to an extent overhauled these regimes to catch up with new developments, many have not. While there are efforts in some countries to encourage new entrants into the market - as with the granting of MVNO licences in Kenya - these efforts have not been seen across the board. These shortcoming has ensured that quality of service (QoS) issues remain in many countries. A number of international initiatives have sprung up in the last year to bring more affordable communications to Africans, notably the Alliance for Affordable Internet (A4AI), which has already begun working with several African governments, notably Nigeria, Ghana and Mozambique. Others include Facebook's internet.org, which aims to provide internet access to 5bn people, and Google's Project Loon - which looks to provide connectivity to underserved regions through balloons. Yet the growth in the local telecoms market suggests Africa may yet become better connected through the efforts of its own operators. As mobile networks increasingly fill the role of banks in facilitating the movement of money, and the swift rollout of LTE/4G networks looks to tackle last-mile connectivity, the future appears bright for the sector. n LTE/4G and MVNO 4G LTE NETWORKS - 4G Long Term Evolution (LTE) networks are the fourth generation of mobile telecommunications technology, succeeding 3G. 4G networks provide voice and SMS services as well as mobile wireless broadband internet access. 4G LTE networks are designed to provide up to 10 times the speeds of 3G networks for mobile devices such as smartphones and tablets, providing voice, data and multimedia streaming at speeds of at least 100 Mbit per second and up to 1 Gbit per second. MVNOS - A wireless communications service provider that does not own the infrastructure over which it provides services to customers. Usually an MVNO enters into an agreement with a mobile network operator, such as MTN or Vodacom, to obtain bulk access to network services at wholesale rates, before then setting independent retail prices. MVNOs typically offer value added services the operator is unable to unwilling to. Virgin Mobile is an MVNO. (c) 2014 IC Publications Provided by SyndiGate Media Inc. (Syndigate.info). |