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Massive mobile growth on the African continent

Chris Andrews

Woefully poor broadband crying out for investment

If you want a picture of explosive growth in mobile communications, look to Africa. A report from The United Nations Conference on Trade and Development (UNCTAD) has found that between 2003 and 2008, mobile subscriptions surged from 54 million to almost 350 million; or a 550% increase in five years.

In 2008, the report found, Gabon, Seychelles, and South Africa had a mobile penetration rate of almost 100 subscriptions per 100 inhabitants. In North Africa, the average penetration stood at almost two thirds of the population, and for Africa as a whole, it was over one third.

For many SMEs in Africa, the mobile phone has overtaken the computer as the most important information and communication technology tool, said the report, with growth expected to remain robust. Only five African countries - Burundi, Djibouti, Eritrea, Ethiopia, and Somalia - still have a mobile penetration of less than ten per 100 inhabitants.

And the report found that there appears to be continued interest among investors in expanding and upgrading ICT networks in Africa. For example, France Telecom has forecast higher growth for Africa and the Middle East than for other developing regions, partly due to their phone sectors’ better resistance to the economic downturn.

So called South-South investment in Africa is also expected to continue despite the economic situation. In early 2009, Sudan’s incumbent telecommunication operator, Sudatel, said the impact of the financial crisis would be minimal in the countries in which it operated and Zain, MTN Group, and Orascom, which are among the top foreign investors in African telecommunications, may be in a position to further strengthen their positions in the regional wireless market.

But that’s the mobile market. On the downside, the UN has warned that most African nations are failing to keep up with global trends in the use of broadband Internet, which may partly explain why mobile growth has been so explosive.

This is partly due to the lack of fixed telecommunications infrastructure, with most other developing regions having broadband penetration ten times higher than Africa´s, the UN said. Also, broadband use in Africa is highly concentrated, with five countries accounting for 90% of all broadband subscriptions (Algeria, Egypt, Morocco, South Africa, and Tunisia).

There are, however, a number of fibre-optic initiatives coming to fruition, which should go some way towards improving the situation. For example, SEACOM, a cable linking the east coast of Africa with Europe and India, became operational in July 2009, and the East African Marine System (TEAMS) cable, which will link Kenya with the United Arab Emirates, is expected to be completed later this year.

The report says that making significant progress in Africa will require contributions from national governments, the donor community, and the private sector.

For the private sector, of course, improving infrastructure and hence technology take-up could have obvious long-term business benefits in terms of increasing customer base. This is something that Chinese industry has not failed to grasp.

The Nigerian news outlet Next has reported that ZTE, the Chinese telecom equipment and network solutions provider, is to invest $1-billion in telecoms support services in Nigeria.

ZTE reported third-quarter net profits jumping 58.2% from RMB 258.3 million ($37.8 million) a year earlier to RMB 408.65 million ($59.8 million), thanks to continuing investment in 3G networks by Chinese domestic carriers. No doubt it is hoping that similarly expanding networks in developing regions with further boost its profit margin.

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