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Summary

In early June 2015, there were 42 live LTE networks across Africa, spread across 21 countries. The 3 million LTE subscriptions recorded in 1Q15 will soar to 318 million by 2019. However, coverage is limited and despite steady growth, LTE will only represent 1% of mobile usage in Africa at the end of 2015. The high cost of terminals and a fragmented, regional approach to spectrum allocation are the main factors impeding faster LTE growth.

African stakeholders need to work together on device taxation and spectrum harmonization

Overcoming the barriers around LTE uptake in Africa requires support from governments and partnerships among key private-sector players. This will need to be underpinned by a strategic and coordinated approach to harnessing the potential of LTE to stimulate economic growth through wider and higher-quality broadband connectivity.

Import duty on handsets varies across the continent. Exemption policies are more frequent in East and Southern Africa, but most West and Central African countries are yet to follow suit. In its 2015 budget, the government of Ghana announced a reduction to its 20% import duty on handsets from 2015 onwards. Until then, taxes could account for up to 35% of the cost of a smartphone. Import duty for handsets is at 20% in Senegal. In 2013, Nigeria – which has one of the lowest rates at 5% – set eliminating import duty on devices by the end of 2014 as a target in its national broadband policy.

Choice of spectrum will also drive LTE uptake. Aligning regional spectrum allocations would result in a wider and harmonized LTE handset market, creating economies of scale. The 1800MHz band is the most common because operators often re-farm spectrum initially allocated for GSM.

Another challenge to LTE uptake is a slow licensing process. This is prevalent in West Africa, where LTE is live in only four countries out of 15. There are seven networks operating in West Africa (of which four are based in Nigeria), but only one was rolled out by a traditional mobile network operator (MNO). The other six are run by ISPs.

Providing broadband is now vital for MNOs to increase revenues and lay the foundations for economic growth. It will enable them to connect the unconnected and provide the best available broadband access for existing 3G users. Set to remain the most widespread connectivity option for both MNOs and the price-sensitive African consumer, 3G is yet to be fully monetized. Respondents to Ovum’s Digital Africa Survey in 2014 felt that LTE was of low significance at the time, but will be much more important by 2019.

Operators need to assess how they can most profitably benefit from extending connectivity options to consumers in Africa with LTE technology. To achieve this, operators must work with regulators to discuss and formulate a coordinated approach to tackling the barriers that prevent 4G uptake. Lower handset taxes, harmonized spectrum allocation, and a framework for network-sharing are all areas that have been proven to stimulate 4G rollout and provide noticeable economic and lifestyle benefits.

Because 4G builds on existing patterns of mobile broadband usage and extends them into new areas, the possibilities for end users are numerous. This is particularly true as 4G embeds itself further into people’s lives. Operators in Africa should look to the world’s leading 4G markets to assess which strategies work. Put simply, pricing 4G at a premium to 3G has proved unacceptable to consumers, yet Ovum research shows how operators in diverse markets have managed to increase revenues by approaching 4G in the right way.

Appendix

Further reading

Africa Market Outlook, TE0015-000311 (April 2015)

4G Best Practice, TE0009-001393 (February 2015)

Author

Thecla Mbongue, Senior Research Analyst, Service Providers – MEA

thecla.mbongue@ovum.com

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