A new report by IT and telecommunications research house BMI-TechKnowledge says the growth of prepaid cellular in Africa is massive, increasing at a rate of up to 50% a year. The report says around 90% to 95% of subscribers in Sub-Saharan Africa are prepaid.
The report says that the South African ratio of prepaid to contract subscriptions for the financial year 2001 was: MTN and Vodacom: prepaid 66%, contract 44%; Cell C: prepaid 98%, contract 2%.
In the rest of Africa, the ratio is closer to 95% prepaid. In SA, the ratio of prepaid average revenue per user (ARPU) to contract ARPU is around 1:3, although the ARPUs for prepaid subscriptions in the rest of Africa tend to be higher.
"Prepaid billing is also fuelling a thriving black market for handsets, with redundant handsets being picked up for next to nothing in developed countries (exacerbated by the onset of 3G networks) and then sold in Africa, where handset prices remain quite high," explains Dobek Pater, BMI-TechKnowledge analyst.
BMI says there are approximately 23 million subscribers across the continent, and that this figure is increasing rapidly, because prepaid offers several advantages to both the consumer and the operator.
The consumer tends to opt for prepaid cellular because a contract, or post-paid billing, normally requires a steady and "guaranteed" income and a place of residence. In Africa, there is gross unemployment of up to 70% in a large number of countries and general economic depression, leading to the inability of subscribers to qualify for a contractual agreement.
Prepaid billing allows these subscribers the freedom to maintain mobile communications while paying only for what they can afford.
In addition, Africa has low teledensity, with installation of fixed-line service often taking months or years. Mobile communication is attractive to African consumers because it is instantly available on purchase of a SIM card and a handset.
Prepaid also offers African operators the advantage of guaranteed, upfront payment for services, and less administration. In some countries, such as the Democratic Republic of Congo, operators are considering offering prepaid exclusively.
According to Pater, prepaid is not necessarily confined to mobile services. Many fixed-line operators are also considering the prepaid option. Card pay phones already exist, but the option to have prepaid phones installed in homes is very attractive to fixed-line operators.
"Non-payment is often the biggest dent in most African telecom companies` financial results.
"Prepaid offers advantages for everyone in the African market. BMI-TechKnowledge expects to see prepaid billing become the de facto standard in Africa," says Pater.
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