Africa's Cellphone Revolution

by Business In Africa
2005-08-02 00:00:00 | Viewed 1216 times

Few technologies have affected entire continents as broadly as mobile telephony - and few continents have embraced it as warmly as Africa.

As governments release their grips on telecommunications, mobile telephony is affecting every single aspect of life on the continent - and the potential market has scarcely been touched.

The GSM revolution which has swept across Africa is busy narrowing the digital divide at an unprecedented rate, dragging the continent into the economic mainstream in the process.

Mobile telephony is now firmly entrenched as the predominant mode of telephony in almost every African nation.

It is well documented that by 2001, mobile subscriber numbers had overtaken those of fixed lines, making Africa the first region of the world to achieve this.

By the end of 2003, the number of mobile users reached 51 million, according to the International Telecommunication Union (ITU).

Currently, there are more than 82 million mobile phone users in Africa.

Putting an exact figure on the phenomenon that is Africa's GSM market is a tough call. Suffice to say that in the first few years of the new millennium, Africa has added more telecommunications users than in the whole of the previous century.

Hundred of millions of dollars

Africa is currently the world region with the highest level of mobile communications growth, and the occasional legal squabble notwithstanding, mobile operators are pouring hundreds of millions of dollars into infrastructure and development.

This is good news for Africa.

According to a recent report, there is a clear link between the current exponential growth of telecommunications on the continent and the rates of economic growth in poor countries.

Mobile and land line networks - in addition to the openness of an economy, GDP growth and infrastructure - are positively linked with foreign inward investment, according to the report, which was backed by the UK mobile phone giant Vodafone and supported by the Centre for Economic Policy Research.

Stephen Yeo, chief executive of the Centre for Economic Policy Research, said mobile phones had enabled developing countries to "leapfrog' old technologies.

"The result is explosive growth - 5 000% in Africa between 1998 and 2003," he said.

Interestingly, the effects of GSM technology are twice as big in developing nations as in their developed neighbours.

A developing country which had an average of 10 more mobile phones per 100 population between 1996 and 2003 had 0.59% higher GDP growth than an otherwise identical country.

Default method of communication

What few people seem to realise is that African telecommunications differs from the global market in one important respect. In the First World, cellular phones, e-mail and the internet are additional methods of communication, without which businesses and individuals can still function well.

In Africa, a lack of functioning alternatives means the cellular phone and the internet has become the default method of communication.

Businesses ranging from multinationals to market traders cannot function effectively without them. According to the Vodafone-commissioned report:

• More than 85% of small businesses run by black people, surveyed in South Africa, rely solely on mobile phones for telecommunications.
• 62% of businesses in South Africa, and 59% in Egypt, said mobile use was linked to an increase in profits - despite higher call costs.
• 97% of people surveyed in Tanzania said they could access a mobile phone, while just 28% could access a land line phone.
• Income, gender, age, education - and even the absence of regular electricity supplies - do not create barriers to mobile access in rural areas. Handsets are often shared by smaller communities.

Mobile operators in Africa have been quick to see the benefits of prepaid services.

In a region where per-capita incomes are low, and payment upfront in cash is generally the preferred means of payment, prepaid services are ideally suited.

Reduced risk of bad credit

They reduce the risk of bad credit to operators while exposing a whole new consumer group to telecommunications services - those who would not normally have qualified for postpaid mobile services or fixed lines.

A growing number of African networks operate only as prepaid, and four out of every five African subscribers almost twice the global average - use prepaid services.

Prepaid services have been further adapted to offer mobile "payphone" services.

It is tapping into these regional specific approaches, and accessing new sectors of the population who have not previously been exposed to telecommunications, which have helped to drive up mobile usage in recent years, and will continue to do so.

According to the ITU, mobile competition has benefited even the poorest countries.

The Democratic Republic of Congo and Ethiopia both have per capita incomes of around US$100, yet the DRC has a mobile penetration of around 2% - some 15 times greater than Ethiopia's, which stood at 0.13% at the end of 2003.

The difference? Whilst Ethiopia has only 1 GSM operator, the DRC has 3 GSM networks, in addition to non GSM cellular networks.

Uniquely African approach

But competition alone is not the key. The emergence over the last 3 to 4 years of African based, pan-regional mobile operators, is another significant reason behind mobile's growth.

The spheres of mobile influence of these strategic investors now reach across the continent. It is these operators, such as Vodacom, Orascom Telecom and MTN who have been able to apply uniquely African approaches onto the markets on which they operate.

Mobile technology has, however, gone further than any other communications technology in Africa in terms of bridging the digital divide, says the ITU.

Mobile's ease of payment means that services extend to segments of urban and rural populations who previously would not have been able to afford them, and where demand is high.

Mobile infrastructure also extends way beyond that of fixed-line, into rural and "universal access" markets, something to which wireless technology is innately more suited than the traditional fixed-line.

Nevertheless, network coverage remains low, with only an estimated 50% of Sub-Saharan Africa covered by a mobile signal, indicating that there is still a large untapped market, provided operators can be encouraged to extend coverage.

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