A look at the rise of mobile broadband in Africa and the opportunities for operators

By Thomas Demolliens, Head of Telecom Sales at Lumata

Global smartphone adoption will continue to be driven by emerging economies predominantly China, India and Africa

Globally, there are now around 1 billion smartphones. Smartphone adoption had rapidly grown reaching 700 million by 2011 before hitting one billion in 2013. This growth is expected to continue driven by the emerging economies of China, India and Africa.

Thomas Demolliens,
Head of Telecom Sales, Lumata

Current estimates put smartphone penetration in Africa at 7%; however, it is expected to hit 40 per cent by 2017. This rapid growth can be attributed to an increase in mobile infrastructure coupled with the growth in Africa’s middle class who now account for 34.3 per cent of the population.

This emerging middle class has benefited from increased competition in the region from new smartphone manufacturers such as ZTE and Huawei. Both of whom have introduced smartphones for less than $100 to rival those offerings from traditional players such as Nokia and Samsung. This has lowered the barrier to entry for many Africans and heavily contributed to rates of adoption. This is particularly evident in Nigeria and Egypt where smartphone penetration stands at 25 per cent and 22 per cent respectively.

This rapid adoption of smartphones has led to an explosion in mobile internet access and data use

Due to the lack of fixed broadband services, mobile is the primary channel most Africans access the internet with, the continent now possessing 84 million internet enabled devices.

Broadband access is fundamental to economic growth with current figures estimating that a 10 per cent increase in broadband access can lead to 1.3 per cent growth in terms of GDP. This is through its role in the enablement of key areas such as education, healthcare, banking and commerce.

Ghana has the highest levels of mobile broadband on the continent with 33 per cent penetration, while in urban Kenya, 95 per cent of mobile subscribers own an internet enabled device. According to the International Telecommunications Union (ITU), Zimbabwe ranks second in Africa after Ghana for its mobile data usage rates. Zimbabwe’s mobile data penetration rates stand at 29.7%, according to the ITU.

While these figures are currently comparatively low to other regions, the growth in internet enabled devices will continue at a faster pace than other continents due to there being a higher number of young consumers. These consumers display similar behaviours to their Western counterparts; for example, 57 per cent visit social networks and 38 per cent listen to music or watch videos on their device. This growth in demand for services, dependent on mobile broadband, represents the single biggest revenue growth opportunity for operators on the continent.  

In the short term, the demand for increased mobile data will be met by 3G services (with which many African operators already face a significant challenge in terms of development and adoption) and Wi-Fi. While the commercial roll out of LTE is on the horizon, to date, only a few countries, including Namibia, Angola and South Africa have launched LTE commercial services. This is as a result of the prohibitive cost of LTE devices, regulatory challenges, lack of spectrum, insufficient content and slow return on investment for existing 3G roll outs.

Key to increasing ARPU and offsetting the decline in traditional revenues will be finding ways to drive competitive differentiation of data services

Although mobile subscriptions are increasing, ARPU is declining. This is due to the increase in levels of competition for traditional services such as text and voice, with the latter currently making up 70 per cent of revenues for African operators. In order to offset this decline, operators need to diversify into other high revenue services. The most obvious of which is data to cater for the growing needs of increasingly mobile savvy African consumers. However, as was the way with traditional services, competition will be fierce, leading to a depression of prices and by extension revenues.

In order to succeed, it is vital that operators find a way to drive competitive differentiation as a way of increasing uptake of these services.  Key to achieving this will be through the offering of targeted data plans to different customer segments, coupled with personalised real-time offers, and underpinned by user data such as usage behaviour, device type, location and content consumption habits.

For example, producing a targeted campaign offering free data trial valid for one week could be very appealing to a subscriber as they get to enjoy the experience of mobile internet, accessing original content, social media and apps via their new smartphone. A timely follow-up campaign can then be automatically triggered to present the subscriber with a highly personalised data offer that they can redeem on the spot or later if more convenient.  

Operators need to not only be very selective in how they use the vast amounts of consumer data they have access to, but also be very flexible and agile in their approach to best meet their customers’ needs. Undeniably, this agility requires smart, cutting-edge technology and the good news is that a number of operators are already driving innovative campaigns, reaching their goals of increasing take-up of new services and generating new revenue streams; paving the way to the adoption of mobile data usage on a massive scale in Africa.

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