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African mobile market on the rise

September 30, 2004

With mobile uptake in Africa increasing by around 30 percent every year, there will be more than 150 million subscribers on the continent by 2007 - making it the world's fastest growing mobile communications market.
One of the most striking features of the African telecom market is that mobile penetration is now more than double that of fixed lines, with 70 percent of the continent's telephone subscribers using mobiles.

 

"This figure indicates that demand for telephony has existed for some time, but has remained untapped until fairly recently,” says Ericsson Market Unit sub-Saharan Africa Head, Jan Embro.

 

Speaking during a conference at Ericsson headquarters in Stockholm, where the company's African market unit heads had gathered to report on the positive outlook for the continent, Embro said it was still common in Africa for people to spend many years on a waiting list for a fixed line.

 

"So there has long been a demand for telecom services that the incumbent fixed line operators did not take up," says Embro. "Thus, when the African telecom market truly started moving around 1994, through deregulation and the appearance of major investors, mobile operators stepped in to take up the fixed line segment too."

During the next two years, Ericsson expects the subscriber bases in Nigeria, South Africa and Tanzania to grow by 6 million, 5 million and 2.5 million respectively. While growth rates north of the Sahara are not quite as rapid, the coastal countries of Morocco, Egypt, Libya, Algeria and Tunisia also offer huge potential.

 

Ericsson Market Unit Northern Africa Head, Johan Lallerstedt, says: "At the moment we are only at about eight percent penetration across the North African region, with close to 26 million subscribers. And while we cannot match European levels of penetration, we should see the figure go up to 17 or 18 percent by 2010."

 

Apart from being driven by pent up demand, the rapid uptake of mobile telephony across Africa is also attributed to telecom sector reform, the licensing of new competitors and the emergence of key investors. Yet despite these new opportunities, Africa remains a challenging business environment.

 

Operators are often hampered by inadequate financing, lack of expertise in certain areas, weak currencies, price-sensitive customers and underdeveloped infrastructure. In addition, the fragmented nature of the operator market means that each customer requires a specifically tailored package, rather than a one-size-fits-all solution.

 

In terms of applications, the African mobile market is still very much voice-driven and there is a preference for pre-paid solutions. The popularity of pre-paid stems from an absence of adequate credit checking facilities, as well as from the high cost of mobile starter packs. The concept of pre-paid also has a familiar resonance with the majority of Africans, who are used to paying in advance for utilities such as water and electricity.

 

When it comes to the technology used for wireless communications, African mobile telephony is still very much dominated by GSM, although mobile operators in certain areas have embraced CDMA technology too. Fixed line operators are also beginning to show interest in CMDA for use in Wireless Local Loops and similar limited mobility solutions. Overall, Ericsson's African market unit heads agree that the continent offers huge growth potential in terms of CDMA business.

 

EDGE technology also has a bright future in Africa. This is particularly so in countries where it is impossible to get a fixed line, and thus the only way that consumers can reach higher connectivity speeds is for them to use a wireless technology such as EDGE. Operators are therefore starting to use the technology as the bearer to tackle the DSL market, as well as to differentiate themselves in the face of increasing competition.

 

With African telephony developing at such a rapid rate, Ericsson is placing renewed emphasis on the market. By offering cost-effective, tailored solutions the company looks forward to maintaining its position as the continent's leading equipment vendor.