Africa, which has 150 million mobile GSM subscribers, will need to open up marketplaces to increase mobile penetration into lower revenue income sectors.
Industry organisation Global Mobile Suppliers Association (GSA), in the country to foster dialogue on growing GSM on the continent, argues that economies of scale will underpin competition and innovation, lowering capital costs and allowing mobile operators to address lower revenue markets.
This is the first time the GSA has ventured onto the continent, which accounts for one in every seven new GSM connections, says president Alan Haddan. "Customers don`t buy the technology, they buy the user experience."
Locally, developmental agency ComMark, in its report, "Accelerating shared growth, making markets work for the poor in SA", says a lack of competition in the telecommunications sector has failed the poor. It says fixed-line penetration has dropped - going from 4.3 million in 1996 to 5.5 million in 2000 and then falling to 4.8 million in 2004.
"Telkom`s efforts to broaden access to telephones have been disappointing," states the report, published in March. Meanwhile, with Vodacom, MTN and Cell C competing for a slice of the same cake, cellphone ownership moved up 6.8 percentage points on the same basis.
In addition, mobile users have grown from a million in 1996 to 26 million last year. Thanks to competition, the report says, cellphone call rates have come down while Telkom`s prices have risen.
VP Dr Klaus Kohrt, representing Siemens at GSA level, contends that GSM is still expensive, but says it is more affordable than a fixed-line, thanks to economies of scale.
Rising to the challenge
In order to improve market penetration, there are challenges that have to be met. These include growing the subscriber base by opening lower revenue markets. Simultaneously, 3G will be grown at the top end, providing for revenue growth, the GSA says.
The regulatory environment should ensure there are no barriers to entry in order to allow for investment and growth. As such, to foster competition, there should be no additional costs and there must be an open marketplace. Haddan says one African country has a 30% import duty on mobile handsets.
Haddan called for low interconnect costs, clear and consistent decision-making to allow for planning, as well as a harmonised spectrum agreement.
An environment such as this would allow for the lowest cost of ownership, making entry into lower revenue markets possible as capital expenditure comes down due to economies of scale. However, Haddan urges mobile operators to pay attention to their operational costs. As new market segments are opened up, operators would have to create new business models to ensure sustainability and profitability, he says.
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