Africa’s Mobile Companies: Key Business Opportunities and Challenges

Although primarily based on material drawn from within Africa , this report also draws on case studies from other developing countries and where relevant developed countries.

1. Key trends

1.1 Consolidation in the market

1.2 Mobile operators assume role of “new incumbents”

1.3 Higher levels of business challenges

2. What is a business strategy for a mobile operator in a changing world?

Successful mobile businesses have been based on a "ring-fenced" technology (nearly always GSM): the trend of regulation is towards "technology-neutral" . However, fixed mobiles (with phones locked to a local cell) have shown the artificiality of these distinctions. Reliance in India started as a fixed mobile operator and exploited this position to offer subscribers numbers in different cities, before being granted a full mobile licence. What happens to the business model when the fixed/mobile distinction collapses?

Two of Africa ’s mobile operators (Econet and MTN) are already operating as something approaching “full-service” operators. For others, there are clear choices as to whether they take up the challenges of moving in this direction to protect their market position.

This section examines what ownership by a large international brand (Vodafone or Orange ) brings to the business in terms of buying, branding and expertise in terms of outsourcing business processes. It looks at how smaller chains of companies or individual operations might survive in a more consolidated market.

3. Facing increased competition - what will it mean?

The price differential between operators even in large African markets with 3 operators is less than 5%. In most markets there is almost no competition. There will be inevitable pressure to increase competition by increasing the number of operators. MVNOs are being introduced in Nigeria and South Africa . Virgin would like to get into Morocco and the Botswana regulator has discussed introducing an MVNO.

What is the impact of more operators on markets with two operators? Three operators? Four operators? It will discuss models that illustrate the impact of the entry of new market operators based on both experiences drawn from Africa and elsewhere. It will look at how MVNOs operate in Africa and elsewhere and whether they can fit with an existing operator’s business strategy.

4. Pricing - Do operators have a strategy?

Mobile prices in Africa are relatively high when put alongside the income levels of potential users. Competition between users is conducted through a wide range of tactical marketing offers. Few of these tactical marketing approaches are linked to wider strategic objectives. It will look at different pricing models, how they operate with different numbers of operators and the impact of price wars in this and other markets.

It will also look at how as growth slows in different markets, to what extent will lowering prices encourage further new growth? It will examine how mobile companies can wring out additional growth from niche markets for different groups of lower-income users without ARPU levels becoming unprofitable.

5. Data and Payment applications: Interesting side bets or core business?

Increasing numbers of mobile operators are putting in upgrades (CDMA, GPRS, EDGE, EVO, 3G and HSDPA) to enable them to offer data services. Operators in key markets have set themselves ambitious targets for income from this area. How realistic are these ambitions? What business models can be built out of these more advanced technologies? What are the challenges?

Mobile data services in Africa currently lack the “killer-app”. However there is much interest (and some informal take-up) of electronic voucher transfer. There are a number of analysts who believe that the mobile operator's ability to become a payment processor as THE opportunity. The report looks at how realistic these hopes are and the different types of value/cash transfer markets that already exist within which new services would compete.

6. Technology challenges

There are a bewildering number of network capacity upgrades available for African mobile operators. This report will summarise the different variants available (and the family of standards within which they have been developed) and look at what they can deliver for the business against the cost of their implementation.

It will also look at the new potential competitors capable of offering fixed and mobile VoIP using data standard equipment based on T-CDMA and Wi-MAX. It will examine the degree to which the cost-savings these new standards might offer will either undercut or assist a mobile operators’ business. It will draw on mobile operator experience in Africa with Wi-MAX for data operations.

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