African mobile firms should adapt before slowdown

CAPE TOWN – African mobile phone operators can expect up to three more years of rampant growth but after that must find new sources of revenue and ways of cutting costs to keep profits rising, executives and analysts say.

Africa is one of the world’s fastest growing mobile markets and operators are expected to enjoy a bumper 40 per cent jump in subscriber numbers this year. But that is expected to slow to just 4-5 per cent in 2011, said analysts at a mobile phone conference held in Cape Town this week.Firms keen to keep the momentum on profits going need to find new sources of revenue growth – like SMS and mobile Internet – and must cut costs, possibly by sharing infrastructure so they can make a profit even in poor rural areas.”Operators have got to look at other sources of revenues, and mobile data is definitely one,” said Devine Kofiloto, principal analyst at Informa Telecoms research group.”But the focus for most operators will be cost effective growth.”Monthly average revenue per user in Africa stands at about US$15 – much lower than in most regions – and operators say the costly logistics of rolling out networks in the vast and sparsely populated continent means areas where an average user spends less than US$5 a month are simply not viable.That rules out large swathes of Africa, where almost half of the population lives on below US$1 a day.”To reach these areas we will need to change the model,” said Marten Pieters, chief executive at Africa’s third-biggest operator Celtel, owned by Kuwait’s MTC.One way to bring costs down is sharing base station sites, or even the masts themselves.”What’s the point of having three sets of security, three maintenance teams and three people to mow the lawn when you can have one?” said Stefano Mattiello, sales director for Motorola’s networks division in sub-Saharan Africa.Motorola and other suppliers say operators can save money by outsourcing more services and eventually the running of entire networks, allowing them to focus on reselling services to customers.Ericsson is piloting shared infrastructure among operators in Tanzania, Celtel said.Celtel’s Pieters said sharing costs made sense for operators seeking to reach poor areas where return on investment are slim.”If there is a pay-as-you-go type model then it’s a no-brainer.Of course we would use it,” he told Reuters in an interview.Operators can also offset slower growth in the key voice sector by persuading customers to spend more on data services – from basic SMS or text messaging to third generation (3G) Internet technology.But executives are divided on whether 3G – which has been slow to catch on in Europe – makes sense for Africa.Proponents point out that patchy fixed-line infrastructure has created pent up demand for mobile Internet.”For most Africans, the first experience of the Internet will be on handsets not on PCs” said Kofiloto.But while some 15 operators have either launched or plan to launch 3G in Africa, from countries as diverse as rich South Africa to war-scarred Sudan, there are sceptics aplenty.”There are 500 000 3G users in the whole of Africa,” said Muhieddine Ghalayini, chief financial officer of South Africa’s Cell C.”You show me the business model in that.”Nampa-ReutersBut that is expected to slow to just 4-5 per cent in 2011, said analysts at a mobile phone conference held in Cape Town this week.Firms keen to keep the momentum on profits going need to find new sources of revenue growth – like SMS and mobile Internet – and must cut costs, possibly by sharing infrastructure so they can make a profit even in poor rural areas.”Operators have got to look at other sources of revenues, and mobile data is definitely one,” said Devine Kofiloto, principal analyst at Informa Telecoms research group.”But the focus for most operators will be cost effective growth.”Monthly average revenue per user in Africa stands at about US$15 – much lower than in most regions – and operators say the costly logistics of rolling out networks in the vast and sparsely populated continent means areas where an average user spends less than US$5 a month are simply not viable.That rules out large swathes of Africa, where almost half of the population lives on below US$1 a day.”To reach these areas we will need to change the model,” said Marten Pieters, chief executive at Africa’s third-biggest operator Celtel, owned by Kuwait’s MTC.One way to bring costs down is sharing base station sites, or even the masts themselves.”What’s the point of having three sets of security, three maintenance teams and three people to mow the lawn when you can have one?” said Stefano Mattiello, sales director for Motorola’s networks division in sub-Saharan Africa.Motorola and other suppliers say operators can save money by outsourcing more services and eventually the running of entire networks, allowing them to focus on reselling services to customers.Ericsson is piloting shared infrastructure among operators in Tanzania, Celtel said.Celtel’s Pieters said sharing costs made sense for operators seeking to reach poor areas where return on investment are slim.”If there is a pay-as-you-go type model then it’s a no-brainer.Of course we would use it,” he told Reuters in an interview.Operators can also offset slower growth in the key voice sector by persuading customers to spend more on data services – from basic SMS or text messaging to third generation (3G) Internet technology.But executives are divided on whether 3G – which has been slow to catch on in Europe – makes sense for Africa.Proponents point out that patchy fixed-line infrastructure has created pent up demand for mobile Internet.”For most Africans, the first experience of the Internet will be on handsets not on PCs” said Kofiloto.But while some 15 operators have either launched or plan to launch 3G in Africa, from countries as diverse as rich South Africa to war-scarred Sudan, there are sceptics aplenty.”There are 500 000 3G users in the whole of Africa,” said Muhieddine Ghalayini, chief financial officer of South Africa’s Cell C.”You show me the business model in that.”Nampa-Reuters