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Ovum expects Africa to reach the landmark of 1 billion mobile subscriptions by the end of 2016. Data usage and revenue are growing strongly and digital services are becoming significant. Yet many people on the continent still lack basic connectivity. And the growth in data could be held up by the slow pace of allocating additional spectrum for mobile broadband, particularly LTE.

The complexities of the African telecoms market were discussed at this year’s AfricaCom conference, held in Cape Town in November. As AfricaCom got underway, South Africa-based Vodacom – which also operates in DRC, Lesotho, Mozambique, and Tanzania – revealed that in the six months to September that data usage among its customers had grown rapidly and that group data revenue was up 18.7% year on year. According to Jannie Van Zyl, executive head of innovation at Vodacom, Vodacom’s ability – as a large player in its own right and as a subsidiary of UK giant Vodafone – to make low-cost smartphones and tablets available to customers had led to a big rise in the take-up of mobile data in markets such as DRC.

MTN said recently that it was now the biggest digital music provider in Africa. At AfricaCom, it claimed that it had become the first operator in Africa to enable NB-IoT. "We believe that the next explosion [in growth] will be in IoT," said Babak Fouladi, CTIO at MTN Group. He then listed the IoT services that MTN plans to offer which include smart metering, smart fridges, smart transport, and wildlife tracking.

Despite the remarkable progress in Africa’s telecoms market, mobile subscription penetration on the continent is about 80%, the lowest among major world regions, and below the global average of 101%. And the tendency for many African mobile users to have several prepaid SIMs active at the same time means that unique user mobile penetration on the continent is only about 50%.

Therefore many people on the continent still do not have access to mobile connectivity, often because they live in remote areas not covered by mobile networks. This is the kind of problem that new operator Vanu was created to solve, according to founder Vanu Bose. At AfricaCom, Bose said that Vanu’s system is designed to improve connectivity in rural areas through low-cost technology and a business model that will be commercially viable at a monthly ARPU of $1.

Vanu is building its first African network in Rwanda, where it will cover about 1 million people (out of a total population of about 13 million). Bose cited government support as a key reason why Vanu had chosen Rwanda: "The government and the president are very pro-ICT and they smoothed the path. Governments, if they have the will, can streamline the process."

Other speakers at AfricaCom said that many African governments and regulators need to do more to enable connectivity and broadband development. Vodacom’s desire to expand LTE coverage in South Africa is being held up by lack of access to the necessary spectrum, according to Van Zyl. Vodacom’s LTE network currently covers about 70% of South Africa, using spectrum in the 2.1GHz band, and the company is ready to increase LTE coverage by using spectrum in the 700–800MHz bands – but this spectrum has not been allocated, according to Van Zyl.

Telecoms operations in Africa are much less profitable than a few years ago, due to macroeconomic difficulties, high taxes, and a tendency for telcos to be treated as cash cows. According to Christian de Faria, executive chairman of Airtel Africa, this means that there is a threat to broadband development on the continent. "Digital and broadband penetration in Africa will only grow if we have a conducive environment," he explained.

Straight Talk is a weekly briefing from the desk of the Chief Research Officer. To receive this newsletter by email, please contact us.

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