End of the African telecoms boom?

The upsurge in sub-Saharan Africa mobile telecommunications seems to be subsiding as companies continue to overcrowd the market while trying to gain more clients. Sizeable investments and how businesses aim to win over customers’ favour was investigated in a new report.

As one boom ends, another begins Bitange Ndemo, secretary of the Kenyan Ministry of Information and Communications, believes. (image: file)

The Morgan Stanley Research report, a global investing firm, says as firms backed by big money, like Bharti Airtel, continue improving their network coverage and decrease tariffs, Africa will become more competitive. Old timers, such as MTN and Safaricom, that have enjoyed market dominance are set to be affected the most. According to the report, the boom will be replaced by market driven innovation, new products and expanding data services.

“All companies are focusing on driving data usage, and new services to reduce churn. The most important are mobile money services like M-Pesa, where innovation take-up is high,” the report says.

“We expect mobile revenues to grow from 3,4% of gross domestic product (GDP) in 2011 to 3,7% by 2015, as we believe mobile revenue growth will outpace GDP in the next four years,” the report says.

Bitange Ndemo, secretary of the Kenyan Ministry of Information and Communications, says there is little room for new entrants in the local market.

“Unfortunately, there has been market erosion of about 20%, mostly because of competition that has seen cuts in tariffs in the sector. A new entrant would have a lot of problems as the four firms (Safaricom, Bharti Airtel, Yu Mobile, Orange) are struggling due to stiff competition,” Bitange told Daily Nation.

Industry analysts agree with his conclusion. ”What we are seeing is a correction of factors like the supernormal profits that some telecoms have been enjoying in the past,” Techie Makau, a Nairobi-based telecommunications consultant, said.
Makau added that providers now have to focus on provision, customer service and value addition. In the Kenyan market, the average price per minute fell by 80% due to competition largely from Bharti Airtel, between Sh2 and Sh4 ($0.03-0.05).

Despite the report, Bitange believes the data market is set to kick off next. Kenya’s internet penetration is only 30%, so once fibre optic cables expansion starts he believes we are set for another boom. “The data market is beginning to take shape as the fibre optic network continues to expand,” he said, adding: “this will see a lot of consumption of broadband… and that is what the companies should be looking at.”

Nico Gous

February 21, 2012/by actualize

Agriculture, Economic Growth & Trade, Mobile, Originally posted on the GBI Portal

Africa’s mobile economic revolution…half way there?

The UK Guardian’s Killian Fox recently described the rapid rate at which cellphones became ubiquitous (and are used) in Africa as a “mobile economic revolution”.

Some people easily dismissed this assertion as another hyperbolic pronouncement, but there’s truth to it. The expansion of mobile telephony services and access over the last decade did more than merely open up avenues for efficient social inter-action among Africans. It reinvigorated, structured and even cultivated a more efficient culture of enterprise, across banking, agriculture, healthcare, education and governance, in some countries.

But, if this “mobile economic revolution” is to be fully realized, much more ought to be done. Deeper integration of technology into commerce, and greater expansion of telephony access and service provision are two things to consider, among others like financing and marketing that I have looked at in other blogs. The fact is, a half of all Africans still do not have access to a cellphone, despite the rapid expansion observed. This means the enormous economic benefits mobile phones bring to less developed parts of the world is still untapped in much of Africa. According to the London Business School, “for every additional 10 mobile phones per 100 people in a developing country, GDP rises by 0.5%”. So, the expansion in GDP experienced on the continent in the last decade, due to telephony expansion, is, at the very least, half of what it could be.

Furthermore, the depth to which the instrument (cellphone) has been leveraged for commerce is still limited, which means the economic potential is much greater than what obtains. The success of Safaricom’s M-Pesa in bringing banking services to the previously unbanked, for instance, is still limited to a minority of Africans. Further to that, global mobile money transactions is slated to exceed a trillion dollars by 2015. African economies are likely to benefit from cheaper transfer of remittances, and reduced transaction costs across borders, but those benefits will be much greater if more people have access to mobiles. Therefore, boosting the number of people on the continent with access to mobile banking must be a priority for policymakers, to safeguard the “mobile economic revolution”.

The deepening of the “mobile economic revolution” should be contextual. The provision of mobile-enabled financial services such as micro-credit is great, but it doesn’t always function in the poor’s economic interest. The use of mobile phones to offer traditional options, such as layaways, to help the poor improve their entrepreneurial endeavors is negligible. KickStart, a nonprofit that sells human-powered irrigation systems to entrepreneurial farmers, seems to be an exceptional case. The organization introduced an SMS powered layaway program in Kenya that allows buyers to set aside tiny increments via M-Pesa.

KickStart‘s approach to aiding farmers to finance their entrepreneurial endeavors seems much more sustainable, compared to existing micro-finance options, although the time factor is a drawback. However, the main point here is that, the “mobile economic revolution” must never leave the poor behind. The ways in which the individual’s long term economic livelihood is affected is key, if the larger objective remains that of sustainable development.

July 28, 2011/by actualize