Business
Africa’s mobile telecommunications experiencing rapid growth
Despite the decade-long surge, Booz & Company has determined that today’s African mobile sector faces three obstacles that threaten to constrain future growth; pricing pressures, high investment costs and uncertain and uneven regulation. Failure to quickly and effectively address these challenges could seriously undermine the development of next-generation mobile systems’ potential on the continent.
Many of Africa’s operators have deployed GSM/GPRS/EDGE networks, relying on highly standardized network components to drive down capital costs and operating costs. Although there has been some competition based on innovation and value-added services, most operators have relied on pricing and promotions to differentiate themselves from competitors.
A new and value-destroying race to the bottom in pricing has taken hold in most markets, with operators using short-term promotions to entice rapidly churning customers.
“The likelihood of persistent pricing pressure makes investing in African telecommunications a high-risk undertaking. Although Africa’s operators have gained some scale advantages by operating across multiple territories, they have not lowered costs as dramatically as they have in other markets,” said Tusa. “Africa’s operating companies have not managed to gain the scale that Asian operators have achieved; cost factors, when coupled with the relatively steep costs of capital, are causing investors to become increasingly skeptical about ongoing capital commitments.”
Investors remain concerned about the structure of regulatory frameworks overall. License fee setting is frequently unpredictable. Regulations regarding pricing and service launch frequently prove cumbersome, and involve unnecessary and lengthy processes that hinder operators’ flexibility in bringing competitive and innovative propositions to the market. Restrictions on product bundling prevent value-led innovation, while in some cases gateway access restrictions or obligations create structurally higher costs for competitors than are borne by state-owned incumbents.
Lastly, infrastructure-sharing approaches vary considerably, at best creating additional barriers that operators must hurdle if they are to gain cost benefits that can be passed to consumers.
