New developments in African telephony

By Jamie Allsopp | Published: 31 May, 2010

In OECD countries mobile telephony is seen as a business with utility-like characteristics. Saturated penetration levels and established competition are pervasive. Africa exhibits the polar opposite of this; there are thought to be 500m potential new subscribers and currently there is a scramble for mobile assets across the continent as multinational mobile operators seek growth away from their stagnated markets.

Across the continent penetration rates are estimated to be around 55 percent, but this is skewed higher by countries such as Algeria and South Africa, the latter of which has a penetration rate of nearly 100 percent. However, most African nations now have penetration rates of at least 25 percent.

The astounding growth rates that are catching the eye of international investors have recently been witnessed in Zimbabwe. Econet Zimbabwe has seen its subscriber base grow from 1.2m to 4m in 2009. Telecel Zimbabwe has seen its subscribers swell too, tipping over the 1m mark in April. Even during the hyperinflation crisis in Zimbabwe the mobile telephone market was still growing and now, soon after a resolution, 3G and GPRS services are being proposed. The importance of this new technology cannot be overestimated with agricultural prices, mobile banking and even medicinal applications being rolled out.

Safaricom, the incumbent in Kenya (40 percent of which is owned by Vodafone, the largest network provider in the UK) has shown enormous growth in its M-Pesa money transfer product. This product is a global leader allowing the user to transfer money using a mobile telephone not only domestically but internationally too. Others have entered the space such as Zain with “Zap”, a similar service, and have seen impressive rates of growth.

However, Safaricom’s M-Pesa is still dominant, having seen its user base of 363,000 registered users in 2007 rise ten-fold during the space of a year. The company now has 15m users and has a strong line up in value added services, having the sole 3G licence in Kenya and therefore a head start in multimedia services. The company also plans to start trialling 4G later this year, a move that will keep the company ahead of not only its competitors but the OECD peer group.

The opportunities in the most populous country in sub-Saharan Africa, Nigeria, are huge. From a base of 63m subscribers at the end of 2008, it is likely that this rose by 35 percent in 2009, and some market analysts are predicting that penetration could reach 100 percent within the next two years. That would equate to 180m subscribers.

Where penetration is lowest, Francophone Africa, there is very little competition for the incumbent, Sonatel. New and innovative products such as 3G or mobile internet are not the priorities they are in other parts of the region.

Exponential growth is also occurring in internet and mobile internet usage. As average revenue per user levels are generally falling across the continent due to increased competition, new ways of boosting revenue and increasing margin are sought. Mobile internet is a real and growing avenue to boost sales and is evidenced in Kenya. During 2009 the number of mobile internet users rose fourfold.

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