Murray Steyn
Murray Steyn Executive Head: Wholesale

Africa’s future is glowing bright enough to make the “dark continent” label a thing of the past. The continent is now becoming more connected and open to business – and it’s happening fast.

woman working on tablet in meeting

Bright future beckons for the African telecoms landscape

The rapid growth of mobile connectivity is driving a new way of doing business and creating a vastly altered landscape for telcos to operate in. Uncertainty still abounds, but trends towards increased consolidation in the African telecoms sector are evident with greater investment predicted as economic returns improve.

Voice services a money-spinner

Voice remains the primary revenue-earner for telcos, but the average return per user (ARPU) is being diluted by lower pricing and penetration into low-income markets. A few countries such as Kenya, Nigeria and Ghana have seen especially rapid declines in ARPU due to aggressive pricing driven by competition, outpacing the growth of traffic volumes. Regulation has also made an impact, with Tanzania and Egypt as two examples of countries where special taxation on telecoms services has increased. In other markets, the heavier mandated reduction in mobile termination rates has proved to be a significant additional factor. While all this puts ARPU under pressure, voice traffic levels continue to increase due to lower prices and aggressive discount policies. This places added pressure on the networks, necessitating capacity investments.

Innovation and new operating models

In addition to containing costs wherever possible, telcos are finding that they need to diversify their services and pursue new avenues for revenue growth. This often takes the form of strategic partnerships or acquisitions to enter adjacent markets such as deploying mobile banking services and other over-the-top services. Network infrastructure requires heavy capital investment and costly ongoing maintenance, which is why sharing is becoming more popular among African telcos. Tower-sharing deals are increasingly common and a rapidly growing number of Africa’s towers are shared by market players. This is partly due to regulatory pressures, but also because releasing value through tower deals is an attractive option for operators. Reaching the most rural areas remains a costly challenge, but innovative, low-cost solutions are being put into practice, such as Indian-based Vihaan Network Limited’s solar-powered rural Global System for Mobile communication (GSM) and broadband solution in Ghana.

International connectivity to fuel growth

For consumers and businesses, most data connectivity is still used for accessing content outside Africa, which leads to international connectivity making up a major portion of the price of fixed broadband. However, the obstacles that stood in the way of international connectivity have largely been resolved with the introduction of international sub-sea cables and satellite connectivity. The introduction of the EASSy, TEAMS, Seacom, Glo-1, Main-1 and ACE cables between 2009 and 2012 triggered a reported 90% reduction in international data costs, and the addition of newer cables added since then have further reduced costs. As a result, the cost of satellite connectivity has dropped with new satellites launched in 2012 and 2014. As expected, this has rapidly increased accessibility and driven the progress towards closing the digital divide between Africa and the rest of the world.

Local exchanges which directly route traffic locally reduce the need for international data, but co-locating carriers is a challenge and there is a lack of local peering in some regions, especially West Africa. Local content production is still nascent compared with developed markets, but is set to bloom as price levels become low enough to allow for mass ICT adoption.

Competitive landscape in flux

Several opportunities arise for global and local carriers to expand their IT services as connectivity challenges are solved. Major impediments still lie in the path of IT maturation, namely inadequate electricity supplies, poor PC and broadband penetration and a consequent lack of computer literacy. However, these barriers are being steadily addressed. African governments are increasingly incorporating e-government services and rolling out e-education initiatives while service providers are developing data centre capabilities and adapting their offerings to meet specific market needs. Global and local carriers have been recognising the opportunities to expand, making the IT service provider landscape increasingly competitive.

However, with a geographic region as large as Africa and a market that is growing exponentially, there is an abundance of opportunities through wholesale solutions to expand your business by partnering with a telecommunication provider.

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