Telecoms, Mobile and Broadband in Africa - 2005

Free newsfeeds and
newsletter trials!

Regional Markets:

Telecoms, Mobile and Broadband in Africa - 2005 - Market

Paul Budde Communication Pty Ltd.
Management Report February 2005

With over 500 pages of research, BuddeComm's 2005 Telecoms, Mobile & Broadband in Africa - Market series contains a comprehensive analysis of the telecoms industry from a vertical market perspective with some discussion about the companies working in these markets. This research is divided into the following volumes: · Volume 1 - African Broadband and Internet Market · Volume 2 - African Infrastructure, Fixed Voice and Data Market · Volume 3 - African Mobile Communications Market ·

Executive Summary Africa is the world’s second largest continent after Asia, with a total surface area of 30 million square kilometres. The continent consists of 54 countries and territories housing close to 900 million people at the beginning of 2005. It remains the least connected continent in the world both from the view of the total bandwidth feeding the entire continent and from an Internet penetration perspective. While Internet uptake increased from less than 500,000 in 1995 to over 12 million in early-2004, its use remains comparatively minuscule due to the lack of telecoms infrastructures in many regions and high prices. Growth is slower than world averages and is less than half the growth rate of mobile. By early-2004, overall Internet penetration in Africa was around 1.5%, with the highest penetration recorded in Réunion (over 20%) followed by the Seychelles (around 14%). South Africa and Tunisia were next in line with between 6 and 7%. This compares with over 50% penetration in developed countries. New operators with fresh capital are needed to provide broadband connectivity to and within the continent and to serve what is becoming a very attractive telecom market opportunity for both equipment and service providers. Several African countries have experienced triple-digit growth rates in Internet usage in 2003 and 2004, including Cote d’Ivoire, Morocco, Senegal, Sudan and Tanzania. While Africa is still struggling to ensure universal availability of basic voice services, the implementation of broadband networks is still very limited but has picked up momentum during 2003 and 2004. Most fixed networks in sub-Saharan Africa have been digitised and are now undergoing modernisation. Next-generation networks will provide more bandwidth and will be more efficient and cheaper to run. New network technology will allow incumbent operators to introduce inexpensive broadband delivery mechanisms such as Asymmetrical Digital Subscriber Line (ADSL), which will be a boon to smaller businesses, most of which are currently having to cope with a dial-up line for their data communication. The number of African countries offering commercial DSL services has tripled from 5 to 15 during 2004. For the year ending March 2004, Telkom South Africa has announced an increase of 661% in the number of ADSL subscribers, albeit from a small base of 2,669, to 20,313. However, ADSL rollout is typically confined to high density areas and the technical constraints of the technology mean a large proportion of African businesses may not be able to get the service. Similarly, cable modem service is only available where there is a modern cable TV network, usually only in urban areas. In Africa, there are very few cable TV networks. While the continent presents an enormous market that has seen excellent growth rates in recent years especially in the mobile sector, it is still a long way from matching the levels of the industrialised world in terms of telecommunications. Close to three million Africans are currently on waiting lists for a fixed telephone line, and the African Telecommunications Union (ATU) estimates that there is demand to support an additional 60 million lines. Basic telephony provision remains a major need in many parts of the continent. Many African governments have realised the importance of telecommunications and the fact that private investment is the way forward. Alternative technologies such as satellite, wireless and cellular are now making the task of connecting Africa far easier than it has been with the traditional cable-based services, and growth rates have been phenomenal. Second, an in some cases Third national operators (SNOs, TNOs) have been licensed or are going to in the near future, to compete with the incumbent telcos in all sectors of the telecommunications market. Mobile communications have been open to competition in most African countries for years with up to four operators in some markets, and the number of mobile phones quickly outnumbered fixed lines by far. Fixed-line teledensity in Africa stood at around 3% in early-2005 while mobile penetration has reached 8%. This suggests that fixed-line access may become an outdated measure of a maturing telecommunications infrastructure, and follow-on services like Internet access are likely to focus on mobile handsets instead. Africa’s data traffic is experiencing strong growth, particularly in South Africa. Very Small Aperture Terminal (VSAT) satellite technology has established itself as a viable option for networking as well as Internet connectivity. While Internet uptake is growing steadily, market penetration is still very low due to the lack of reliable phone lines. Nevertheless, several African countries have experienced triple-digit growth rates in Internet usage in 2003 and 2004 and this trend is expected to continue during 2005. Various broadband initiatives have been launched and the number of African countries offering commercial Asymmetrical Digital Subscriber Line (ADSL) services has tripled to 15 during 2004. Voice over Internet Protocol (VoIP) telephony is finally starting to take off in Africa following steady improvements in Internet bandwidth, deregulation in several countries and the growing number of VoIP service providers entering the market. International IP telephony wholesalers have seen a huge surge in voice traffic to and from Africa since 2001. Several countries have liberalised VoIP in 2004, opening up opportunities for many smaller service providers, including South Africa and Kenya, with Uganda and Tanzania set to follow in their footsteps with new competition frameworks in 2005. This development is expected to create a ripple effect across the continent and trigger the much needed reduction of the traditionally high telecommunication costs in Africa. Africa’s cellular market is the fastest-growing in the world, gaining more than 50% in 2002, almost 40% in 2003 and more than 40% in the first three quarters of 2004 alone. The fact that 20 African countries have achieved triple-digit compound annual growth rates (CAGR) for the period 1998-2003 shows that this phenomenal growth is not just short-lived. It is primarily due to the small number and high cost of fixed-line connections, which seldom extend beyond the major urban centres. In early-2004, the last two countries on the continent, Guinea-Bissau and Eritrea, launched mobile services. As early as 2001, Africa became the first continent as a whole where mobile phones outnumbered fixed telephone lines, which individually is the case in most African countries now. Despite this, owning a mobile phone remains a luxury afforded by less than 8% of Africa’s 840 million people. This compares to only 3% penetration of fixed-line telephony. The mobile market is open to competition in the majority of the countries, featuring between two and four operators, and it is largely private sector driven. However, developments are still hampered by regulatory environments. Mobile licences frequently require that operators rely on a fixed network operator for interconnection, and relatively few countries allow their mobile operators to operate their own international gateways. Tariffs are expected to come down once mobile and fixed have an even playing field, including international gateways. Competition has already dramatically reduced mobile tariffs, which are now close to fixed services in some countries. Africa is experiencing growth rates in Second generation (2G) mobile systems now that much of the rest of the world saw during the nineties, and this growth will continue for some time to come - most African markets are far from reaching saturation points. Unlike the rest of the world, Africa will not experience the painful dip between 2G and 3G deployments that the rest of the world saw in recent years - probably quite in the contrary: The first 3G systems were launched in Africa as early as March 2003 (Code Division Multiple Access - CDMA-2000) and November 2004 (Wideband Code Division Multiple Access - W-CDMA), not too far behind their European and American counterparts. And unlike the rest of the world, Africa has the killer application for 3G in store: Internet access. Fixed-line infrastructures are poor and owning a personal computer is out of reach for most Africans. But more and more Africans do own a mobile phone and will embrace the opportunity to access the Internet with 3G phones. Several mobile companies have already positioned themselves as ISPs.

Number of pages - 521

For full details, please email keithw@blycroft.com

Order Form

CMS, P&A House, Alma Road, Chesham, Bucks. HP5 3HB, UK
Tel: +44 (0)1494 771734
Fax: +44 (0)1494 778994
e-mail: keithw@blycroft.com
Please note: calls to and from CMS may be recorded for quality control and training purposes.

For more information about us, visit CMSinfo.

Free newsfeeds and newsletter trials!

Free newsfeeds and
newsletter trials!