The AfricaCom 2015 conference and exhibition provided insights into the challenges and opportunities associated with Africa’s increasingly complex telecoms and media markets.
Broadband is on the rise, but difficulties remain
More than 10,000 people attended the AfricaCom conference and exhibition that was put on in Cape Town November 17–19, according to the organizers, Ovum’s sister company Informa Telecoms & Media.
The event – held in Cape Town’s huge, sleek convention center – was again testimony to the dynamism and potential of the African market. Now in its 19th year, AfricaCom has evolved into a wide-ranging festival of seminars and exhibitions, covering TV, OTT services, and technology start-ups as well as more conventional telecoms players and topics.
Cape Town hipsters sipped designer coffees and gazed at their Apple laptops in the A-HUB, a new Ericsson-sponsored lounge area where entrepreneurs hoped to meet indulgent investors. Nearby, Facebook had meeting rooms alongside the likes of Nokia and Huawei.
This year’s AfricaCom came as new forecasts by Ovum projected that the number of mobile broadband subscriptions (those based on 3G or 4G connections) in Africa is expected to reach 1 billion by 2020. And the recent launch of LTE by South African operator Cell C brings the number of LTE networks on the continent to 50.
That figure of 50 LTE networks on the continent is remarkable, said Tony Dolton, CEO of Angolan operator Unitel, in a keynote session at the conference. Often those LTE launches are designed to address the demand in Africa for fixed broadband – a demand that cannot be met by the sparse wireline infrastructure on much of the continent. That broadband base is necessary for the development of the wider ICT sector in Africa, said Dolton.
And mobile broadband generally is becoming more widely accessible in Africa as the prices of data devices such as smartphones fall. Not so long ago smartphones were prohibitively expensive for the mass market on the continent, but increasingly that is no longer the case.
Basic smartphones are now available for as little as US$40 (after some subsidy by the operators), and this has made 3G use realistic for many more people, said Miguel Geraldes, CEO of MTC Namibia. About 45% of MTC Namibia’s customers are currently on 3G, and the company is aiming to raise this figure to 60% by the end of 2016.
Vodacom has been well served by its decision to develop a range of affordable, own-brand smartphones and tablets, said Jannie Van Zyl, executive head for innovation at the operator. Vodacom has more than 2 million LTE subscriptions in South Africa, and it expects that number to increase as the price of LTE devices falls.
Unitel has also introduced an own-brand smartphone, priced in the US$60–70 range, said Dolton. Additionally, the Angolan operator recently launched a prepaid music download service, Kisom, as a means of encouraging customers to use data.
Coinciding with AfricaCom, Airtel Africa and Facebook announced a plan to extend Facebook’s Free Basics offering to all of Airtel’s 17 operations on the continent. Facebook’s Free Basics, until recently known as Internet.org, is a suite of content services and apps that are offered to customers at no charge. The commercial aim of Free Basics is to encourage customers to move up to paid-for data services. Free Basics is currently offered by 15 operators in Africa, including several Airtel units, according to research by Ovum. Africa is the leading region for Free Basics deployments, accounting for almost half of the global total (there are currently five Free Basics deployments in South America and 11 in Asia).
However, despite the progress in expanding access to and take-up of data services in Africa, many operators on the continent face difficulties when trying to deploy broadband networks, including a lack of available spectrum and costly or inadequate terrestrial connectivity, said Dolton.
Geraldes said that MTC Namibia plans to partner with a utility provider in order to deal with limited terrestrial connectivity, which remains a problem even though an earlier bottleneck – Africa’s lack of intercontinental connectivity – has largely been removed by the deployment of subsea cables linking Africa to the rest of the world.
Perhaps surprisingly, less than 20% of the capacity of Africa’s subsea cables is being utilized, according to Richard Bell, CEO of East Africa Capital Partners, which invests in the TMT sector. That’s because of continuing obstacles to data deployments and take-up on the continent, such as the shortage of available spectrum. But infrastructure gaps also represent opportunity, and with that in mind Bell plans to open a new data center, called Kooba, in Mombasa, Kenya, in early 2016.
Andile Ngcaba, chairman of investment group Convergence Partners, said that there are also investment opportunities in fiber networks in Africa, as well as in new technologies and applications such as Wi-Fi for the Internet of Things (IoT).
Google is among those playing a role in improving terrestrial connectivity in Africa. Google’s Project Link fiber backbone in Uganda has enabled the rollout of LTE in Kampala, according to Luke Mckend, Google’s country director for South Africa, and Google recently began to deploy Project Link in Ghana. However, there is no schedule yet for when Google’s Project Loon – the scheme to use high-altitude balloons to provide Internet access in remote areas – will be brought to Africa, said Mckend.
Facebook is planning to offer satellite-based Internet access in West and Central Africa, said Markku Mäkeläinen, director of global operator partnerships at Facebook. The service is expected to start in late 2016, through a partnership with Eutelsat.
African operators face other difficulties too. Their markets have typically become more competitive. They need to offer new and often more complex services than before. There is still a great deal of political and economic instability on the continent.
A particular problem for many African operators at present is the slowdown in commodity markets, on which many African economies depend. As a result, many local currencies have fallen substantially – creating difficulties for operators, which typically make revenues in local currency but pay many of their costs in US dollars.
Over a coffee, some of our operator clients reflected wistfully on the days, not so long ago, when a base station would generate a profit almost as soon as it was put up. The African market still offers opportunities, but for some it has also become a tougher place.
Africa Market Outlook, November 2015, TE0015-000349 (November 2015)
Connecting the Unconnected: Data monetization holds the key to Facebook’s Free Basics initiative, TE0009-001478 (November 2015)
Matthew Reed, Practice Leader, Middle East and Africa