Business
Africa’s race for data – making sense of the transition through everyday services today
By Russell Southwood
In most of Africa’s big markets there is now an intense level of competition. The average revenue per user (ARPU) is down below the US$10 mark and amongst those operators who are really hurting, at between US$2-3 which makes the priority for mobile operators on the continent in making the transition to data urgent.
Thus far, majority of the data products offered – which have largely been versions of bandwidth packages – have been aimed at the “salary boys with laptops”. Although prices have in some markets fallen considerably, there’s still much of a premium spring in their step. If everything follows past patterns, this will be the same with LTE data packages. The salary boys will get soaked again for high prices (“They can afford it and they’re not paying themselves.”) and in 18 months to 2 years the prices will cascade down to something approaching reasonable.
But the data market the operators will need cannot be developed this way. The existing market is a high-value and niche but is crying out for something really transformational. If the cascade in data prices always ends up at the bottom, then why not turn the problem on its head? Start with low prices and create a genuine mass market for data.
In broad terms, all African mobile markets have two pieces: the niche, high-value customers (often post-paid but by no means always) and various stripes of mass market using greater or lesser amounts of voice and SMS.
In a country like Kenya, Nigeria or Cameroon, the middle ground between these two pieces of the market is capable of affording higher levels of ARPU, whether voice or data. In Liberia, the niche will remain largely a niche: education and income levels will make a transition to data extremely challenging.
The mobile operators are all sitting on absolutely humongous amounts of unsold data capacity in the new international pipes that have been built. Prices for this capacity will continue to decline to the sub US$100 level, however much operators try and control things by rationing its introduction. Every day that passes means that you can’t get money for yesterday’s unsold capacity. So the dash for data needs to produce significant growth in wholesale revenues.
So what follows is not a deeply worked out strategy for the dash to data but something more like a first draft. The overall objective must be to deliver as soon as possible a range of data bundles between US$5-10 per month and accompany this package with smartphones that are in the US$50-70 range.
