Connecting-Africa_1

Connecting Africa

The story of Africa’s telecoms market continues to be about growth. There were 778 million mobile subscriptions in Africa at endJune 2013 and the continent’s mobile-subscription count will reach one billion during 2015 and 1.2 billion by end-2018, according to forecasts by Informa Telecoms & Media. Mobile voice revenues in Africa are forecast to continue growing over the next few years, whereas voice revenues in many other major regions are either already declining or expected to decline before long. Mobile data usage and revenues are growing strongly in Africa, and at a significantly faster rate than voice revenues, albeit from a fairly low base.

Annual mobile data revenues on the continent are expected to rise from US$8.53 billion in 2012 to US$23.16 billion in 2018, according to Informa forecasts (see fig. 1). Data accounted for 14.3% of mobile service revenues in Africa in 2012 but will account for 26.8% in 2018. The growth in data revenues in Africa is being driven by factors including: the continent’s new submarine and terrestrial cables; the rollout of mobile broadband networks; the increasing affordability of data devices; and economic growth. As well as facilitating a rise in data connectivity in Africa, these factors are creating a platform for a range of new digital services on the continent, such as mobile financial services, e-commerce and digital content and services for the business market. Connecting Africa A major driver behind the rise in the use of Internet and data services in Africa is the strong growth in international connectivity to the continent over the past few years.

The activation of submarine cables, including EASSy, TEAMs and Seacom on Africa’s East coast and Main One, GLO-1 and WACS on the West coast, has hugely increased the international data capacity available to the continent. Just a few years ago, there were no submarine cables at all on Africa’s East coast and only the SAT3/SAFE cable on the West. As a result, most of the continent’s international data capacity was via satellite and was expensive. The activation of the new cables has brought down prices for international capacity substantially, though the benefits are typically greatest in countries that are on the coast and directly served by the new cables. For many African countries and regions that are landlocked or otherwise have limited access to the new submarine cables, international capacity remains relatively scarce and expensive.

Some say that the bottleneck has moved: A few years ago it was connectivity to and from Africa that was scarce – now that problem has largely been solved, but terrestrial cabling within and between many African countries needs to be extended. But there are initiatives to address that bottleneck too – and to target the growing demand for capacity. For example, Liquid Telecom, a subsidiary of Zimbabwe’s Econet Wireless, is building a fiber network across southern Africa, with a presence in Botswana, the Democratic Republic of Congo, Lesotho, South Africa, Zambia and Zimbabwe.

In January 2013, Liquid extended its footprint to East Africa with its acquisition of ISPs in Kenya, Rwanda and Uganda. In June 2013, Liquid also acquired the fixed-line assets of Rwandatel. In September, Liquid unveiled a new data center in Nairobi, which it described as the largest such facility in East Africa. The carrier-neutral data center offers a range of hosting, interconnect and other services and applications to operators and businesses. Liquid said the decision to develop the data center was driven by the growing demand for these types of service in Africa. Also in East Africa, Dimension Data, a South Africa-based IT-services company and a subsidiary of Japan’s NTT, recently acquired AccessKenya, a Kenyan ISP that focuses primarily on the corporate market Again in Kenya, mobile operator Safaricom recently began building its own fiber network, saying that having its own backhaul network to handle the growing volume of data traffic would ultimately be less costly than leasing capacity from thirdparty providers.

The Central African Backbone project, which is backed by the World Bank, is also designed to remedy the lack of international connectivity in a number of Central African countries, particularly Cameroon, the Central African Republic and Chad. Additionally, big changes are underway in Africa’s economy, and those changes are having a knock-on effect on the continent’s telecoms market. The economy of sub-Saharan Africa grew by 4.7% in 2012 and is expected to grow by more than 5% a year between 2013 and 2015, according to the World Bank. The expanding middle class and corporate sector on the continent both have a growing appetite for more sophisticated data services.

Of course, despite Africa’s generally good macroeconomic outlook, there are still substantial problems on the continent, including some political instability, often-poor infrastructure and the fact that many people have very low incomes. Regulatory matters, such as logjams around spectrum for mobile broadband, also need to be addressed in a number of markets. Building broadband Fixed broadband is sparse in much of Africa. The average fixed-broadband penetration was just 4.3% of households at end-2012, the lowest among major world regions. The highest rates of fixed-broadband penetration on the continent are found in North Africa, South Africa and the islands, such as Mauritius, that have more advanced economies. Many countries in sub-Saharan Africa have fixed-broadband penetration rates that are well below the average for the continent; rates of around 1% or even less than 1% are common. However, there is a growing amount of activity in the fixed-line sector in Africa, both in terms of fixed-access networks and in the building of new backhaul networks to support the rising demand for and use of data services. For example, East Africa’s Wananchi Group has ambitious plans for the triple-play (fixed broadband, pay TV and VoIP) services that it launched in Nairobi, Kenya, in 2009 and which it plans to extend to other major cities in the region. Wananchi’s pay-TV service, Zuku TV, has also been launched in Uganda. Wananchi’s products are aimed squarely at the expanding middle class in African cities such as Nairobi, resulting largely from the strong economic growth on the continent in recent years.

The number of mobile broadband subscriptions on the continent is growing strongly, reflecting the growing number of mobile broadband network deployments and the increasing availability of affordable data devices. As a result, there were 62.05 million mobile broadband subscriptions in Africa at end-2012, up from 41.92 million a year earlier, representing year-on-growth of 48%. (Mobile broadband is considered here to comprise WCDMA, HSPA, LTE and 1xEV-DO.) Mobile broadband is set for further strong growth on the continent: the total number of mobile broadband subscriptions in Africa will increase from 105.16 million at end-2013 to 805.85 million at end-2018, according to forecasts by Informa (see fig 2). Mobile broadband will account for a relatively modest 12.5% of Africa’s mobile subscriptions at end-2013 – but by end- 2018, mobile broadband will account for about 66.8% of the continent’s mobile subscriptions. Notably, a number of “4G” LTE networks have been launched in Africa over the past year or so, and commercial LTE services are now available in Angola, Mauritius, Namibia, Nigeria, South Africa, Tanzania and Uganda. As in many other markets, LTE services in Africa tend to be aimed at the business and high-end consumer markets. Africa’s low rate of fixed-broadband penetration presents a particular opportunity to use LTE to provide fixed-broadband services on the continent. Smile Communications, a new operator that is offering LTE services in Nigeria, Tanzania and Uganda, says its target markets include SMEs, households and hot-spot providers.

In both Kenya and Rwanda, there are plans to implement national LTE networks that will offer capacity to operators on  wholesale basis. South Korea’s KT has reached an agreement with the government of Rwanda to create a joint-venture company that will deploy a national broadband network based on LTE technology. The technology giants Google and Microsoft have also recognized Africa’s growth potential. Some of their activities seek to encourage that growth by plugging infrastructure gaps on the continent. Google’s African projects include the Wazi Wi-Fi service in Kenya, and a TV-white-spaces wirelessbroadband project for schools in Cape Town. Additionally, Google has ambitious plans to use TV white spaces to provide wireless-broadband services across Africa and Asia. Microsoft’s 4Afrika initiative, which was unveiled in early 2013, includes the launch of a low-cost smartphone that Microsoft developed with Huawei, and a wireless-broadband project in Kenya’s Rift Valley that is based on TV-white-spaces technology and is being run with local ISP Indigo.

A broader initiative to promote broadband recently got underway. In October 2013, a group of major technology companies, governments and public sector bodies launched the Alliance for Affordable Internet, an initiative to reduce Internet-access prices in emerging markets, including Africa, to less than 5% of monthly income, a target set by the UN Broadband Commission

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