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The uptake of mobile services in Africa over the last two years has been unprecedented with mobile penetration in most countries exceeding fixed line penetration. For example, in South Africa, while the penetration of fixed-line telephony at end-March 2005 was approximately 10.6 percent , mobile penetration had far exceeded this, reaching approximately 48 percent by the end of 2004.
The fast growth of mobile services in Africa has been enabled by the introduction of GSM-based services, which have provided a cost effective means of communication compared to fixed-line telephony. Though mobile analogue networks were present in some countries before the launch of GSM networks, they did not succeed in reaching the mass market for a number of reasons, such as the high cost of handsets and service charges. For example, ETACS was introduced in Kenya in 1993 but had only 20,000 subscribers by the end of 1999.
Some of the other factors that have contributed to the growth of mobile services following the launch of GSM-based networks in Africa include the availability of pre-paid billing and community phones, and the liberalisation of telecom policies in a number of African countries.
The availability of pre-paid subscriptions has been a major reason for the fast growth in the number of subscribers in the region because the majority of the population, which lie in a low per capita income group, have gained easy access to mobile services by paying at their convenience. Pre-paid subscriptions account for nearly 95 percent of total mobile subscriptions in the region. This pattern is seen around the world; populations with a higher per capita income, such as in Western Europe or North America, favour post-paid subscriptions, where populations in Africa and Latin America favour pre-paid subscriptions.
A system of 'community phones', which allows users to pay by the call, has also proved successful in increasing the take-up of mobile services in some areas. This system has particularly gained popularity in rural areas of Africa, where network operators find the cost of providing coverage to every rural settlement prohibitive, and each individual cannot bear the high cost of owning their own handset, therefore using the centrally located 'community mobile phone' offers an affordable solution.
Most African countries introduced liberal telecom policies in late 1990s and early 2000, thus facilitating the entry of new operators, some of these with foreign stakeholders. The entry of new operators besides the state-owned sole operator in most countries brought much needed competition to these mobile markets, thus positively influencing price competition and driving subscriber growth. There are some major operators in Africa, such as MTN, Orascom and Vodacom, which have operations across multiple African countries.
Given the scope for growth of mobile services in many countries of the region primarily due to low penetration levels, such as Tanzania, Ghana, etc., some of the operators are seeking to expand their networks to such countries. For example, MTN acquired operations in Cote d'lovire and Zambia during the second half of 2005. Moreover, positive regulatory developments have also encouraged operators to invest more heavily in the region. For instance, the Communications Commission of Kenya (CCK) has frequently intervened to reduce inter-connectivity charges levied by the two operators in the country and has also continually monitored operators on quality of service, using modern quality monitoring devices. ,
The mobile market in the region however faces a number of hurdles, such as low per capita income and lower living standards, in sustaining the rapid growth that has been achieved in recent years. Orascom is one operator that appears to be actively limiting its focus on key countries of operation, and then shifting further investment to some of the emerging markets in the Middle East and Asia, rather than pushing further expansion in Africa. For example, it has increased its stake in its subsidiary in Iraq where the per capita income and living standards are much higher, compared to Africa, and hence there is greater scope for expansion.
In terms of mobile value-added services, the region is currently at a nascent stage. In general, the demand for value-added services in the region is expected to be low due to low levels of penetration, low literacy levels and low per capita income, causing operators to limit their investments in the development of anything but the most basic value-added services. However, some of the developed markets, such as South Africa, Morocco, Mauritius and Nigeria, will continue to prove an exception to this rule. Across most of Africa, SMS is likely to be the only non-voice value-added service to gain mass market popularity in the immediate future. As subscriber numbers grow, it is likely that locally produced SMS content will proliferate (adapted to local language, markets and demands) and, as a low-cost service, SMS traffic should grow to significant volumes.
Market Size - Subscriber Growth and Penetration
Mobile penetration across most of the region is still quite low despite the fast growth in recent years. Overall, the region had 79.74 million subscribers and a corresponding mobile penetration rate of 10.3 percent at year-end 2004. In 2005 this figure grew to an estimated close at 113.55 million, a penetration rate of approximately 14 percent. Pre-paid subscriptions are highly dominant in the region and constitute approximately 95 percent of the total subscribers.
Total mobile subscribers in the region are expected to increase at a CAGR of approximately 22.2 percent during the 6 year period from end-2005 to end-2011, resulting in a mobile subscriber base of 378.62 million by the end of 2011. The corresponding mobile penetration for the region is also expected to increase from 14.3 percent in 2005 to 41.8 percent in 2011.
