Telecoms Report: On the brink of a new telecoms revolution

The scramble for market share is over. Mobile operators are now focusing on how to use new technologies to create higher-value services.


The latest news on the African telecoms sector used to be about rocketing penetration rates and new licence tenders.

These days the focus is much more on new technology and boosting average revenue per user (ARPU) figures. Providers now have to decide what to do with the customers they have attracted. Voice revenues are falling, so the onus is on the sector to enable the download speeds required to greatly boost data consumption.

While the award of new licences attracts less attention than in the past, this is usually because governments are far more selective about offering new operating licences. They place a premium on the ability of new operators to ensure service standards and coverage, as well as allowing existing operators to remain profitable.

Most recently, in September, the government of Zambia announced plans for a tender for the country’s fourth mobile licence. The number of mobile operators in Zambia had previously been fixed at three in order to encourage those three to invest for the long term.

Those three are state-owned Zamtel, Bharti Airtel and MTN, as Vodafone Zambia currently only offers data services. Transport and communications minister Brian Mushimba revealed that the fourth mobile voice licence would be awarded within 12 months.

He said: “The market analysis that we have done supports the fact that we can have a fourth licensee and possibly a fifth and still the market will be profitable.” Some markets are not particularly competitive: Kenya provides perhaps the best example on the continent of one company dominating the rest within a deregulated sector.

We discuss Safaricom’s interesting challenges on pages 38–39. The company now accounts for a massive 6.5% of Kenyan GDP and recorded a 27% rise in pre-tax profits for the year to the end of March at KSh70.6bn ($671m).

Its high-profile mobile money service M-Pesa is still growing quickly, recording a 32% rise in revenue in the year to the end of March, at KSh55bn. Yet its overwhelming dominance has amplified calls for the regulator to intervene, just as the company is planning to expand into other markets.

VoIP cannibalises voice revenues

There are now more than 500m mobile phone subscriptions in Africa but many more wealthy people have two or more for different uses, so the proportion of the population with access to mobile phones or to mobile broadband is lower than many figures might suggest. The biggest players in the sector are the stalwarts Vodafone, MTN, Orange and Bharti Airtel, but the challenges facing them are changing radically.

While mobile operators for many years scrambled for market share, the sense of urgency has now abated. They now have to work out how to generate more income from each customer.

One of the biggest challenges facing mobile operators is the proliferation of over-the-top (OTT) voice services, such as WhatsApp. OTT refers to audio and video media that are distributed via the internet but without a subscription to a cable service or satellite TV.

By using data rather than call time, consumers can greatly reduce their costs, slashing operator revenues. According to research by analysts Ovum, telecoms companies will lose $386bn over the period 2012–18 because of the use of OTT voice over internet protocol (VoIP) services.

This phenomenon should push operators even further down the road of providing alternative services and encouraging data consumption. As we consider on pages 41–42, the most attractive method of doing this is by encouraging the use of video on demand (VOD) services.

The consumers and executives of the future may consider it amazing that mobile operators used to generate the lion’s share of their revenue through voice traffic, rather than by being digital service providers. At the same time, telcos will engage with customers across a wider range of platforms, generating much more data that can be utilised – either by themselves to target more services or sold in packages to third parties. This is particularly useful in targeting advertising and will put mobile operators centre stage in the era of big data.

Preparations for 5G

Although 4G capability is still only available to the minority, many in the industry are becoming increasingly interested in 5G. The new wireless standard will provide benefits that are as useful in Africa as elsewhere: much higher device-to-device speeds; higher densities of mobile broadband users; and lower power consumption, providing longer battery life.

In addition, wireless sensors will be able to access many more simultaneous connections, a prerequisite for the internet of things (IoT). The 5G standard has not yet been finalised: the International Telecommunications Union (ITU) is still determining its parameters and the spectrum needed to support it.

At the Fibre to the Home (FTTH) Council Africa Conference in Cape Town, FTTH president Andile Ngcaba said: “5G is no longer regarded as a spectrum-based network, but rather a platform that is scalable, segmentable and designed for the internet of things. The speeds it will achieve are unprecedented.”

However, the proposed data transfer rate of 100 megabits a second in urban areas is still a long way off for the vast majority of African users. By the same token, many may regard the IoT as a distant preoccupation for Africa but it offers the same opportunities for leapfrogging as other new technologies.

By connecting to the internet many other electrical devices, from traffic lights to fridges and from cars to heart pacemakers, the IoT will require a steep increase in the volume of data handled.

About 3.9bn of the global population of 7.6bn is still without access to the internet, so we are quickly approaching the point where more people will have access than are without it. The challenge for African companies, governments and other organisations is to ensure that the continent is not left behind.

Ngcaba commented: “We need to ensure policy, legislation and regulation move at the same speed as the technological developments themselves. As industry, we commit to work with the South African government, with Salga [South African Local Government Association] and with other African governments to ensure not only the infrastructure, but any enabling policies and legislation, is ready, so we can move quickly into the next generation of technology.”

Neil Ford

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