Mobile Telecoms in Africa - the good news story
By MTN Group
A media report in May 2008 said it all: “Growth in Africa’s mobile sector has defied all predictions.” The declaration, by US-based Africa Focus Bulletin, captures a widely held sentiment regarding the growth and future prospects of telecommunications in Africa.
Growth in Africa's mobile section has defied all predictions.
The critical message underlying Africa’s great mobile telecoms story is the fact that never before has a communication technology influenced human societies so pertinently, so rapidly. In Africa and the Middle East mobile markets, dominated by the MTN Group, new research shows that mobile communications are driving GDP growth rates, with some of the highest impact experienced in the small-scale business sectors. Indeed, it is now accepted that the mobile sector’s economic impact in developing countries is double that of industrialised countries. Among the major economic contributions of the mobile sector is tax revenue, capital investment, job creation, and a battery of forward- and backward- linkages.
The rapid growth in African mobile telecoms was not altogether unexpected, given the failure of fixed-line telephony on the continent. For many decades, Africa’s dated and highly inefficient fixed-line failed to take off, registered a meagre 2.48 telephone lines per 100 inhabitants in the late 1990s, compared to 35.18 lines per 100 in North Africa, 39.43 lines in Europe and 9.55 in Asia. The main factors for this failure were low investments replete with inefficiencies, poor access to capital, and excessive state interference.
Growth of cellular telephony
Against this background, Africa was a warm reception ground for cellular telephony. Between 2000 and 2005, the number of mobile phones subscribers grew sixfold from 30 million to 137.2 million subscribers, outnumbering fixed lines by a ratio of nearly five to one. Today, nine out of every 10 telephone subscribers in tropical Africa use mobile phones. There were over 264 million subscribers users in 2007, and the number is expected to grow 420 million by 2012.
In tandem, many African governments have divested themselves from the telecommunications regulatory and policy regimes, and created independent authorities to manage all aspects of the emerging sunrise industry. ITU estimates that telecom operations in three out of every five African countries are managed by separate regulatory entities, and that almost all African countries have licensed private mobile operators.
Expectedly, mobile communications as a major source of direct investment. For example, sub-Saharan Africa received over US$35 billion worth of capital investment in the mobile sector between 1994 and 2006. An additional US$50 billion is earmarked for capital spending in the sector by 2012. The MTN Group’s own capex budget exceeds US$6 billion in its 14-year history, with annual investment budgets exceeding 20% of revenue during much of this period.
The fixed-line networks have also attracted interest, especially because of their strong prospects for Internet connectivity and e-commerce solutions. Analysts estimate that capital expenditure on fixed telecommunications in Africa was about $195 million in 2006. The principal elements of the capex are numerous undersea optic fibre cables projects on the underserved eastern and western coasts of the continent. The $280 million East African Submarine Cable System (EASSy), provides a10,500 kilometre cable under the Indian Ocean from Durban, South Africa, to Port Sudan in Sudan and then to Europe. The cable will provide cheap broadband connectivity to 20 African countries, including landlocked countries such as Zambia, Botswana, Democratic Republic of Congo (DRC), Lesotho, Malawi and Rwanda. The project is financed by a consortium of companies including MTN, with additional funding from the Development Bank of France (DBF), the European Investment Bank (EIB), the World Bank’s International Finance Corporation and the Development Bank of Germany (KfW).