Growth Drivers
Subsidisation of Handsets: The subsidisation of handsets, or bulk supply of very cheap handsets, would encourage the low-income group (constituting the major proportion of the population in Africa) to start using mobile services and this would consequently boost the mobile industry in future.
The various operators, such as Orascom, Vodacom, MTN, Millicom and Celtel, are expected to engage with manufacturers to bring handset prices down.
Moreover, operators, such as Orascom might also move into the handset business and start bundling cheap, basic handsets with their offerings, which would eventually help boost the take-up of mobile services.
Pre-paid offerings: Pre-paid billing will continue to be a major driving force for growth in mobile subscriptions right across Africa. This system of billing helps individuals with restricted budget gain access to mobile services by paying at their convenience. Pre-paid subscriptions have proved popular in all low per capita income regions around the world, and we expect pre-paid services to continue to form the mainstay of African mobile subscriber growth. Many operators have also started focussing on pre-paid offerings as it helps them to overcome problems, such as fraud and the shortage of personal bank accounts.
Liberalisation: The liberalisation of the telecom sector and hence the privatisation of government owned telecom operators in many African countries, such as Kenya, Morocco, etc. has already set an example for others to follow.
For instance, Tunisia has already launched the tender to privatise Tunisie Telecom in August 2005 and bids have been received from major names, notably from Europe, such as France Telecom, Telecom Italia, etc.
The Nigerian government has also laid the foundation for privatisation of NITEL (and its mobile-arm, M-Tel). Various operators, either in their own capacity or within consortia, have placed their bids for acquiring the government's stake in NITEL.
Low penetration: Currently a large proportion of the region's population does not have access to mobile services. This provides a great opportunity for operators to expand their network coverage and increase their subscriber base. As we have already noted, mobile penetration across many African countries remained well below the 15 percent mark in 2004, barring advanced markets such as South Africa, Tunisia and Morocco. The average mobile penetration in the region stood below 15 percent mark even in 2005. Particularly, Nigeria holds excellent potential owing to such a large population and low rate of penetration.
Expected uptake of 3G services: 3G services are still at a nascent stage in Africa, with 3G services being commercially available only in Mauritius and South Africa at the end of 2005. 3G services should help operators to stabilise their declining ARPU and thus a number of operators are expected to launch 3G services in the near future. For instance, Algeria and Tunisia expect to see the launch of 3G services in 2006 and 2007, respectively, while Nigeria and Egypt are also expected to bring in 3G within the next two years.
Growth Inhibitors
Taxation - Many African mobile markets, especially in East Africa, have a model of high tax charges which are being applied on both the usage and the sale of mobile phones. This could seriously hamper the growth of the mobile industry in the region, forcing the cost of handset ownership to a prohibitive level for many individuals. According to an ITU report, Tanzania, Uganda, Kenya and Zambia are among the top ten markets in the world with the highest taxes for the mobile industry. Moreover, it also highlights the fact that Tanzania and the Democratic Republic of Congo are the only countries in Africa that still impose customs duty on imported mobile handsets.
Low income group: In short, many countries in Africa are largely poor, and the low income per capita will seriously hamper the growth of any kind of advanced mobile industry. If there are not enough subscribers to make value-added services viable, operators will not invest in network upgrades, which in turn will hold back market development. SMS growth continues to be hampered as has been observed that SMS traffic falls dramatically when operators close free-trial periods and begin charging for these services. As such, there might not be adequate backbone infrastructure across Africa to support the growing subscriber base.
Widespread illiteracy: The high illiteracy rate in the region is also a deterrent to the growth of mobile services. The illiterate population find it difficult to use even basic data services, such as SMS.
Further obstacles, such as unreliable electricity supplies and corruption in local government, could suppress the momentum with which the mobile market is growing in Africa, at least in certain country markets.
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