Kui Kinyanjui (Africa) -  Charting the Explosion of Africa's Mobile Phone Sector Credit: Mobilephone - by Flickr.com
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Kui Kinyanjui (Africa) - Charting the Explosion of Africa's Mobile Phone Sector

Ten years ago, when Africa was just beginning to embrace mobile technology, many players believed the technology would not take off as the continent was viewed as having little potential for growth of telecommunications.  A decade later and investors now view the continent as one of the most desirable telecoms sectors in the world, mostly due to the rapid uptake of mobile services and the vast untapped potential in various pockets of Africa.

There are currently over 500 million mobile phone subscribers across the continent compared to 246 million in 2008, with growth best characterized as being exponential. According to available data, Africa exceeded Western Europe in mobile connections in the final quarter of 2010 for the first time, proof that the continent may have finally come of age in investment terms.

African mobile connections reached about 547.5 million during the last three months of 2010 compared to about 523.6 million connections in Western Europe. Africa's solid growth can be attributed to a number of factors. At the beginning of the decade, several countries loosened their ties with the previously monopolistic regimes that characterized much of Africa's telecommunications landscape.

As regulators awarded more of the valuable licenses that would encourage more foreign participation in mobile network developments, unprecedented uptake of mobile services boosted subscriber numbers and has drawn the attentions of multi-nationals who are keen to participate in the growth market. Currently, there are 4.1 operators present in every African market, up from around 2.5 in 2005, with mobile network capital expenditure hovering above the $28 billion mark.

The sector has also boosted the economies of the countries that mobile companies started operations in, with mobile firms in some countries being the most profitable as well as employing the largest numbers. Telecoms revenue and expenditures now contribute an average 7% of GDP in many African economies, while investment in communications has reached around 5-6% of total investment spending on the continent. In other words, Africa's mobile sector has finally arrived. But even with such rosy - and largely profitable - outlooks, new challenges loom for operators on the continent.

To date, growth in most markets has been most noticeable in urban settings.  Saturation of these subscriber pools is forcing mobile operators to shifting their focus to rural areas as their new growth drivers, calling for increased investments in networks. In addition, the growing number of competitors has forced many companies to start grappling with how they can continue to enjoy stable profits as tariffs continue to free-fall and voice services become a secondary revenue earner.

For many, leveraging better economies of scale has emerged as primary option to achieve that balance, unfortunately, several find that there are few remaining markets on the continent that accommodate such maneuvering. Data is emerging as the new sweet spot for operators, who are keen to take advantage of the limited reach of physical infrastructure to expand their subscriber bases.

For many Africans, their first interaction with the internet will be via their mobile phone, and operators are keen to tap into the market ahead of the curve. Notably, Kenya's Safaricom, MTN, Vodacom, Orange and the pan-African operation Airtel have pointed to rising smart phone and mobile internet use as partly helping earnings last year, and project a larger share of their revenues in years to come will emerge from data provision.

Delta Partners, a telecoms research firm, anticipates that mobile data or non-voice revenue will achieve the $10 billion mark by 2014, up from about $5 billion now. In addition, innovations such as mobile money promise to provide new revenue streams for mobile firms, while Africa's heavy dependence on the mobile phone promises to transform it into a tool that can be used for social, economic and political gain.

Africa, it appears, has only just started on its mobile journey.

 

Kui Kinyanjui  is one of Africa's most experienced ICT analysts, and currently works with Business Daily, a leading East African business paper.  When she's not dissecting annual results, she likes to put on her evangelical hat to preach to anyone who will listen about growth opportunities in Africa's exciting technology space.

 

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