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Positive outlook for Africa 'forced'

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Africa's telecoms executives have reason to be confident about the continent's future, but operators need to have the right strategies.
Africa's telecoms executives have reason to be confident about the continent's future, but operators need to have the right strategies.

While Africa faces consumer demand restraints due to high retail prices, exorbitant smartphones and a lack of investment in connecting parts of rural Africa, local telecoms industry leaders are optimistic about the continent's future - but this is debatably forced.

This is according to Informa Telecoms & Media, deduced from a survey carried out ahead of AfricaCom, which kicked off in Cape Town today. According to the telecoms intelligence firm, over 40% of telecoms executives surveyed are confident about the prospects for the African telecoms industry over the next few years.

Informa says a rise in digital service usage will drive Africa's mobile data business to be worth $23 billion in 2018. Currently, says the firm, SA's smartphone users spend on average $31 (about R322) per month on mobile phone bills. "Of the 12 countries surveyed (a range of developed and developing markets), South Africans are the fourth biggest spenders, behind consumers in the US, Saudi Arabia and the UK."

Spending trend

This is illustrative of a trend across the African telecoms market, says Informa. While Africa's mobile data business is currently worth $8.5 billion a year, this is expected to exceed $23 billion in 2018.

Nick Jotischky, principal analyst at Informa, says it is consumer demand that is driving this growth - even though the said barriers are still in place.

Matthew Reed, author of Informa's recently published report "Africa Telecoms Outlook 2014: Maximizing digital service opportunities", says much of this confidence is due to the fact that data and digital services are moving to the centre of many mobile operator strategies as the continent's emerging middle class spends more of their disposable income on e-commerce, entertainment and utility services.

Informa says, however, that this confidence may be "a little forced" as approximately half the survey's respondents believe that if mobile operators do not seek to seize new digital opportunities now, they risk their very survival at the hands of more innovative and agile competitors.

"Much will depend on the state of the smartphone markets as to whether consumer demand for data services in Africa can be met. Smartphone penetration across the continent is 11%."

Still too steep

Despite the arrival of many low-cost smartphone brands, one in three respondents to the Informa survey believe the cheapest smartphones on the market are still too expensive for most Africans and 37% call for Africa's mobile operators to subsidise smartphones and other data devices if they really want to reach the mass market.

Jotischky comments that, until now, the challenge for operators has been one of ensuring connectivity for a growing number of consumers. "But now the challenge has changed: It is about addressing new competition, serving evolving consumer needs and ensuring an excellent level of service - and all this at a time when margins are coming under intense levels of scrutiny.

"There is every reason for Africa's telecoms executives to be confident as they embrace a new phase of growth, but operators need to ensure they have the right strategy to maximize new digital service opportunities."

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