Mobile telecoms growth in Africa expected to slow in the next 5 years – report

Growth in Africa’s mobile phone users is set to slow in the next 5 years, a study showed on Thursday.

According to a report by global industry body GSMA, subscriber growth is expected to slow to 6 percent between 2015-2020 compared with 13 percent growth in the first half of the decade, citing lack of commercial logic in setting up network coverage in some rural areas, where more than half of the population lives.

One reason for the slowing growth is that some areas especially in remote, rural communities are not economically viable for mobile phone companies to deploy their network because of the low spending power of people living there.

By 2020, a little over 500 million people, or just under half the continent’s population, will have subscribed to a mobile service compared with the global average of almost 60 percent, GSMA said in the report.

Mobile phones have been one of the factors behind Africa’s recent growth spurt, mobile technology has allowed Africans to communicate and transact at a relatively low cost.

The simple text message (SMS) – and more recently mobile social media – have also become powerful political tools, used by grassroots political movements to mobilize support against oppressive states, such as happened in the north African ‘Arab Spring’.

While relatively low penetration rates suggested significant growth potential in most markets, the negative impact of increasing competition on profit margins is raising the prospect of more consolidation in the region. Smaller players do not have the economies of scale to drive their prices down and compete for long periods – which may result in some consolidation in the market.

There has already been deal activity in the sector in recent years with South Africa’s Vodacom buying fixed-line operator Neotel, which struggled to mount serious competition against larger rival Telkom.

United Arab Emirates-based Etisalat sold its struggling Tanzanian mobile phone business, Zantel, to Millicom in June.