Telcos must expand broadband networks to seize data opportunity
For African service providers, data connectivity is the most significant growth opportunity in the near-term, so expanding broadband networks to seize that prospect should be core to their strategy.
This is according to Ovum's Africa Digital Outlook 2019 report.
"For most service providers on the continent, the network focus should increasingly be on improving LTE coverage and capacity. Advanced African operators should also be developing network and commercial strategies for 5G," the report reads.
Ovum says the most significant growth in revenues, users and usage is coming from data access, and service providers are expanding the coverage and capacity of their broadband networks to take advantage of that growth.
"Most of the broadband expansion is in mobile broadband, and increasingly based on LTE networks. But there is also growth in fixed broadband, through fibre and fixed-wireless broadband services."
In terms of expanding LTE networks, many operators are making moves in Africa. In March, Nokia said it would carry out one of Africa's largest LTE rollouts as part of a network upgrade deal with Orange, covering seven countries on the continent.
Vodacom said that in the past year, its operation in SA became the first on the continent to provide 80% population coverage with a 4G LTE network. Airtel said nine of its operations in Africa had launched LTE as of mid-2018. Several operators are also using LTE for fixed-wireless broadband. Telkom SA has more than 500 000 customers using its LTE fixed-wireless broadband services.
5G is also on the horizon and Ovum believes the first use case for 5G will be for fixed-wireless broadband, followed by enhanced mobile broadband after 5G-capable smartphones become available.
A number of players in SA are preparing to deploy 5G as early as next year. Despite these developments, Ovum believes 3G and, increasingly, LTE will power the growth of mobile broadband in Africa for the coming few years.
The number of mobile 3G subscriptions on the continent will rise from 456.6 million at the end of 2018 to 697.6 million in 2023, according to Ovum forecasts.
LTE subscriptions will increase at a faster rate than 3G subscriptions, with the number of LTE subscriptions in Africa rising from 50.5 million at the end of 2018, to 271.6 million by 2023. Ovum expects mobile 5G services to be launched in Africa by 2021, but the number of mobile 5G subscriptions on the continent will initially be small, rising to 5.9 million at the end of 2023.
Ovum forecasts total mobile revenue in Africa will rise from $54.9 billion in 2017 to $68 billion in 2022. Non-SMS mobile data revenue, from mobile broadband access and mobile digital services, is expected to more than double over the forecast period, growing from $13.1 billion in 2017 to $32.1 billion in 2022.
However, Ovum points out the cost of access to broadband remains a barrier to take-up for many in Africa.
"Even though the price of basic smartphones has fallen to around $50, that is still a lot of money for those on low incomes. Research by the Alliance for Affordable Internet, a non-profit organisation, shows mobile broadband is less affordable in Africa than in the comparable low- and middle-income regions of Asia and Latin America and the Caribbean."
The digital divide also continues to be a problem.
"Even as Africa sees progress with broadband and digital services, basic connectivity remains out of reach, or not reliably available for many people on the continent. The gaps in connectivity represent a missed commercial opportunity for service providers, as well as an obstacle to achieving the economic and social benefits that should arise as broadband penetration increases," the report says.
Ovum says the number of mobile subscriptions in Africa reached one billion toward the end of 2017, and 1.04 billion at the end of June 2018, which is a population penetration rate of about 82%.
Nigeria is Africa's biggest mobile market in terms of subscriptions, with 150.3 million mobile subscriptions at the end of June 2018, followed by SA with 99 million, Egypt with 98.8 million, Ethiopia with 64 million, and Algeria with 46.2 million.
At the end of June 2018, 43.5% of mobile subscriptions on the continent were based on mobile broadband connections (3G or more advanced devices and networks). This is considerably below the global average of 70.7%. Mobile broadband penetration as a percentage of subscriptions was 74.2% in SA, 52.2% in Nigeria and 50.1% in Kenya.
The highest mobile subscriptions penetration as a percentage of population was in SA at 177.9%, followed by Ghana at 135.4%, Morocco with 117.5%, Algeria with 111.7% and Egypt with 102.8%.
The report found Africa is substantially behind most of the rest of the world in terms of fixed broadband development.
"Fixed broadband household penetration on the continent was just 7.3% at end-June 2018, the lowest rate of all the major world regions. Only Central and Southern Asia has a similar rate, of 7.5%. In all other major regions, fixed broadband household penetration is substantially higher.
"On a simple demographic basis, Africa represents a huge growth opportunity. The United Nations expects the population on the continent to double in the coming 30 years or so, from 1.26 billion in 2017 to 2.53 billion in 2050. Africa will account for more than half of the world's population growth between 2017 and 2050," the report says.
The report also suggests the next phase of growth for most African service providers will be in digital service. Ovum says operators should develop their plans for service offerings, target markets and implementation. Service providers should also be using technologies such as analytics and virtualisation to improve their own organisational efficiency.
According to Ovum, mobile money remains the leading digital service, but others show promise. Most major African service providers are reporting good growth in mobile financial services and are looking to expand these offerings and businesses further. Other key digital service segments are digital media, the Internet of things and enterprise ICT services.