Africa: Africa - Fixed and Wireless Broadband and Internet Markets and Forecasts

Mobile broadband increase doubling each year, with three-quarters of all connections to be 3G/4G by 2020

The African region is witnessing one of the strongest increases in mobile data use in the world. Forecasts suggest that mobile internet traffic across Africa will double between 2014 and 2015, and will see a 20-fold increase by the end of the decade. Services based on 3G networks will be dominant within three years, replacing older and additional limited 2G technology. By 2020, about three-quarters of all mobile connections will be on 3G or 4G, and thereafter the focus for operators will be on making use of released spectrum to expand the reach of LTE networks beyond the major cities.

This increase in traffic is being spurned on by the maturing social media sector, data-rich applications and mobile video. The region is as well hosting a new wave and locally built cheap smartphones which is making such devices additional readily available to a larger proportion of the people.

An extra key facilitator is mobile banking and m-commerce. Mobile banking has taken root in a number of markets, particularly in Kenya, Nigeria, South Africa, Rwanda and Tanzania. This has supported a fast developing m-commerce sector which is enabling mobile-based transactions, remittances and payments between a growing number of participating banks. Such facilities across borders are making m-commerce a viable international service within the region.

Regulators and governments have encouraged improvements in national backbone networks, inclunding international connectivity, to enable operators to increasing traffic volumes inclunding customer expectations of a reliable service. These developments are providing the bandwidth needed to connect millions of additional citizens to the internet, while the cost of services has plummeted as networks are no longer constrained by expensive satellite links.

To encourage improved services, quality of service parameters in a number of nations in the region have been tightened during the last two years, which have obliged network operators to upgrade networks and improve services offered.

Broadband based on DSL technology remains limited in most markets, since it is offered by telcos on fixed-line networks which are generally underdeveloped. As such, the next of connectivity for a lot of markets in the region, particularly in rural and semi-urban areas, lies in mobile broadband. The cost of mobile broadband, traditional far additional expensive that limited fixed-line alternatives, is being driven down by the combination of network upgrades and the pressure of market competition.

Having introduced HSPA+ technology, in recent years a lot of operators, particularly the major players inclunding Bharti Airtel, Millicom, Etisalat, Orange and MTN, have launched or trialled a number of commercial LTE networks. Various regulators have worked to address the shortfall in available spectrum by enabling spectrum refarming and releasing digital dividend spectrum for mobile broadband.

Given these rapid developments, mobile broadband and data services are beginning to contribute a higher proportion of African cellcos’ in general revenue. SMS remains a leading contributor to data revenue, but in coming years operators will expect better returns from data-rich services carried on upgraded networks.

Mobile voice services are covered in a separate statement: Africa - Mobile Voice Market and Major Network Operators.

Market highlights:

3G networks remain dominant in most African markets; commercial LTE services gain wider footprint; CDMA2000 1x EV-DO deployed in around 30 African nations, offering up to 3Mb/s; mobile broadband accounting for up to 90% of all broadband connections in several markets; newly built international fibre optic cables and national backbone networks supporting broadband increase; m-banking services gaining -Pesa mobile banking service in Kenya carries about 20% of the country's entire GDP.

Mobile services capitalising on low fixed-line connectivity

Accurate figures for mobile penetration in Africa are complicated by the popular use of multiple SIM cards in some markets. This has led to penetration rates of 150% or higher in a few nations, though given the diversity of the region penetration rates vary considerably, with Eritrea and South Sudan sporting very low rates. In general terms, higher penetration can be seen in several southern nations, inclunding Botswana, South Africa, Zimbabwe and Namibia, as as well in the north from Morocco to Egypt and in a number of West African states inclunding Gambia, Ghana and Gabon. A large band of sub-Saharan and central African nations, often characterised by thinly populated areas or socio-political unrest, have relatively low penetration. Average penetration for the continent reached about 75% by mid-2014.

To some degree the sharp variable in penetration rates are evening out as nations at the lower end of the spectrum, such as Ethiopia, are typically recording far faster increase rates than those at the upper end.

Increase in the use of mobile voice services is largely stimulated by network coverage and quality of service. The latter is increasingly recognised as significant by regulators who are prepared to fine operators for poor QoS, or temporarily suspend their ability to attract new subscribers until remedies are made. An extra stimulus is poor fixed-line infrastructure which had rendered mobile connectivity as the only viable telecom service in a lot of areas. This applies both to voice inclunding internet services, though the latter are still largely geared to the 2G environment.

As a result of fixed-line limitations, mobile services still represent additional than 90% of all telephone lines in service. The popularity of cheaper prepaid services, which in some markets account for up to 98% of all mobile subscribers, inclunding a steady fall in tariffs has meant that an increasing proportion of the people can both access and afford a mobile phone.

Some market consolidation continues to occur in the region, with a small number of players, notably Bharti Airtel, MTN, Orange and Tigo, presently having a significant multinational presence. In early 2014 Etisalat sold to Maroc Telecom its Moov-branded mobile subsidiaries in Benin, Burkina Faso, Central African Republic, Ivory Coast, Niger and Togo. The transaction enabled Maroc Telecom to consolidate control of the West Africa operations and make use of its experience in this region. Newly introduced converged licensing regimes have as well increased competitive pressure part operators, and have enabled them to branch into new service segments.

African mobile internet traffic expected to increase 20-fold by the end of the decade

Africa’s diverse mobile market is characterised by having a small number of mobile players with footprints across multiple nations. These include Orange, Bharti Airtel, Millicom (Tigo) and MTN. There are as well a large number of national providers, a lot of of which have emerged from National-owned enterprises and in some of which the National retains a significant stake holding.

Given the poor condition of fixed-line telecom infrastructure in a lot of markets, mobile voice forms a major component of telecom services, and has a better share of in general voice traffic than in Europe or the Americas. This is particularly authentic in a lot of semi-urban and rural areas, where mobile network operators maintain the only service available for customers. Voice traffic is growing steadily in line with the growing people base, deeper penetration of mobile services, and declining prices for call minutes in the wake of competition and regulated tariffs.

In terms of mobile penetration, the region is as well diverse. Higher penetration (at above 100%) is seen in southern Africa (Namibia, Botswana, South Africa), inclunding a lot of northern nations (Morocco, Tunisia, Libya, Algeria, Egypt), and a select group of others in the central region, inclunding Senegal, Ghana and Gabon. Lower mobile penetration (at 50% or below) can be seen in a swathe of central African nations inclunding Niger, Chad, CAR, the DRC, South Sudan, Ethiopia, Eritrea and Madagascar.

Africa continues to see strong increase in mobile broadband use and data traffic, the result of several factors which are providing a beneficial environment for investment and customer take-up of services. This strong increase is supported by increased international connectivity and the use Smartphones in line with the availability of LTE networks being built out by network operators. A lot of of these operators have an extensive international presence, encompassing a significant number of markets which facilitates the development and spread of technical expertise, m-commerce and roaming.

By 2020, about three-quarters of all mobile connections will be on 3G or LTE, and thereafter the impetus will favour LTE as operators are able to make use of spectrum released from the switch to digital TV.

In general forecasts suggest that mobile internet traffic across the region will increase 20-fold by the end of the decade and mobile data revenue in Africa is expected to double by 2019.