Major African Mobile Markets: Future Growth Prospects 2006-2011  

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Back Figure 1: Africa - Comparative Analysis of FDI Inflows (In USD Million, 2004) Table 1: Africa - Mobile Subscribers (2002-2011, In Million) Table 2: Africa - Mobile Market Development Table 3: Africa - MNOs Ranking in terms of Subscriber Base (June 2005) During 2004 and 2005 Africa saw overall mobile market growth surge forward faster than any other continent in the world, almost doubling the size of the entire African market in those 2 years, and that growth should continue for some time. As Africa relieves its debt burden, continues to liberalise its telecoms markets and open up to further competition and foreign investment, the mobile sector will be a vital component of future growth on the continent. Africa is a vast market of almost 900 million people, and just 14 percent of them currently have a mobile phone. 2005 was a significant year for the mobile industry in Africa, as the market passed the all important '100 million subscribers' milestone. By the end of 2005, the African continent is home to a little over 113 million mobile subscribers, but the region is set to see significant growth in mobile subscribers between 2006 and 2011, adding 265 million new subscribers over that period. Our forecasts project the total subscriber base in Africa to reach 378 million by the end of 2011, that's more than Central and Eastern Europe (367 million), more than North America (294 million), and only a little way short of the total size of the Western European (411 million) or Latin American (424 million) market. (Data are end-2011 forecasts.) Whilst Asia will see the greatest number of net additions over the next 6 years, Africa, with its current subscriber base of 113.55 million at end-2005, will emerge as the fastest growing mobile market in the world, with total mobile subscribers in the region expected to increase at a CAGR of approximately 22.2 percent during 2005-2011, resulting in a mobile subscriber base of 378.62 million in 2011. Table 1 shows forecast overall growth in Africa for the 10-year period from 2002 to 2011 Table 1: Africa - Mobile Subscribers (2002-2011, In Million) Source: Portio Research Ltd. Market Evolution As with any developing market, many of the country markets in Africa are rapidly maturing, and indeed transitioning through their natural growth stages very quickly. Market evolution tends to follow through stages of deregulation, liberalisation, entry of competition, rapid growth and then consolidation and maturity. Many of the mobile markets in Africa have gone through immense changes in recent years, evolving from state-run monopolies to competitive growth markets. Much of the rapid growth in the last 2 or 3 years has been spurred by this liberalisation, and now these markets are evolving from this explosive growth phase into a more controlled, more mature phase. Different countries in Africa are currently at different stages in their market evolution, with a few markets, such as Ethiopia and Rwanda, still operating as monopolies and some at the other end of the scale facing maturity and intense competition, such as South Africa. As the example of South Africa demonstrates, with Virgin Mobile soon to be launching the first MVNO on the African continent, the market conditions in Africa's more competitive markets offer ample MVNO and MVNE opportunities. As MVNOs proliferate worldwide, particularly in Europe and North America, Africa may be the next exciting target market for MVNO growth, where regulatory market conditions allow. Table 2 shows the state of market development in all African mobile markets. Table 2: Africa - Mobile Market Development Source: Portio Research Approximately 95 percent of all subscribers in Africa are pre-paid users, and the continent is rife with cultural diversity. In some markets there are many languages, religious groups, political beliefs and cultural differences. For example Nigeria, the most populous nation in Africa, with over 125 million inhabitants, is home to over 250 separate ethnic groups. Locally and ethnically-relevant content is the niche of the MVNO, and fast maturing, fast growing markets like Nigeria, where growing competition is decreasing ARPU and increasing churn, may prove to be highly competitive MVNO markets. Foreign Investment With recent political developments in the region leading to the liberalisation of many markets, there has been an increase in Foreign Direct Investment (FDI) inflows in Africa. Figure 53 depicts the comparative analysis of key African markets by FDI inflows. Nigeria recorded the highest FDI in Africa with investments worth USD 2,127 million in 2004. Figure 1: Africa - Comparative Analysis of FDI Inflows (In USD Million, 2004) Source: http://www.unctad.org/ Africa represents the last great untapped market for major international operators, such as Vodafone, T-Mobile, TIM, Telefonica and TeliaSonera. Europe has been and continues to see consolidation as the well known brands dominate most European markets; North America is currently witnessing consolidation as many small regional operators are acquired by the national giants; Asia is largely dominated by the big regional names such as NTT DoCoMo, SingTel, China Mobile and Hutchison and Latin America has been largely carved up among America Movil, TIM and Telefonica. But Africa remains open to these global giants. Currently France Telecom (Orange) is the only one of the major global players to have established a footprint of branded operations across the continent, though recent moves from Vodafone, acquiring VenFin in South Africa to gain a greater stake in Vodacom, suggest that the worlds biggest operator may be making plans for the future that include a greater presence in Africa. In the 'land grab' for Africa's millions of mobile subscribers, key regional players such as MTN Group, Orascom, Celtel and Vodacom are spreading their wings and building their portfolios across the continent through acquisitions and strategic investments. Currently the operators profiled in this report dominate the African market; at year end 2005 the players we have discussed in this report (including Investcom) hold approximately 80 million of Africa's 113 million mobile subscribers. Table 3 ranks the major MNOs in Africa, in terms of their subscriber base, as at end-June 2005. Table 3: Africa - MNOs Ranking in terms of Subscriber Base (June 2005) Source: Company Reports 2006 represents a key time in the development of the African mobile market. These pan-African regional operators are now growing fast and the biggest players among this group would now make very expensive acquisition targets. Meanwhile many African markets still offer a way in 'from the ground up', with penetration rates as low as 1, 2 or 3 percent there is ample scope for new market entrants. 2006 could be a good time to invest in the region and gain a foothold into selected markets while they are still small and where the government is seeking to liberalise the sector. The only major hurdles likely to stop new operators from entering the African market might be the high taxation policies present in some countries, such as Tanzania, Uganda, Kenya and Zambia, and the ever present problem of large, impoverished communities. Low income groups dominate many African nations, and these markets will clearly require a long, slow game plan to return a profit on any investment, as ARPU is likely to be among the lowest in the world. Further concerns about dangerous political situations, economic instability, civil unrest and communities ravaged by HIV/AIDS will also hamper substantial foreign investments. Saving ARPU SMS, always popular among a predominantly pre-paid subscriber based, may be the one saving grace of ARPU in Africa. As voice tariffs are likely to be among the lowest in the world, so high SMS use may bolster ARPU and return some good margins for operators. Also in the more developed markets of Africa, as subscriber numbers grow, so existing operators need to start focusing on ARPU, churn and the growth of non-voice value-added services and again SMS is likely to be the most popular non-voice service available. As mentioned previously, the great cultural diversity present in many African countries could offer a great opportunity for a thriving content business across the continent. Locally, culturally and ethnically relevant content, delivered cheaply and easily by SMS, has been well received elsewhere in the world, particularly in Asia and the Middle East, and there should be plenty of scope for growth in Africa. Operators such as Celtel may be well placed to leverage the experience of their new owners, MTC, to find out what has worked in the Middle East, and apply those lessons to the African market. The 95 percent pre-paid subscriber base should indicate a strong future for P2P SMS and SMS-based services, as SMS has consistently proved popular with pre-paid subscribers the world over. Examples such as Venezuela, where SMS has been immensely popular as a cheap alternative to voice, show that SMS could have a strong future in Africa. Additionally, with GPRS and EDGE rolling out all over Africa and 3G licences being issued in some countries, a thriving value-added services market could start to develop. By end-2005 3G licences had been issued in South Africa, Mauritius, Tunisia and various other auctions or licence awards are currently planned or in the process of happening. Whilst GPRS value-added services will grow, high-value 3G services, such as video-calling, will likely remain something of a niche market for the next few years, confined to wealthier markets such as South Africa and Mauritius, where commercial 3G network services have already been launched. Top of page Copyright © 1998-2009 Africa & Middle East Telecom Week