African mobile ARPUs set to fall up to 2013 in most countries except in those with mobile data potential, says new report

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Good news for consumers is bad news for Africa’s mobile operators. As coverage areas widen and competition increases, ARPUs in many of their country markets will go into long-term decline up to 2013. However, this cloud comes with a silver lining for many African countries. Where there is mobile data potential, ARPUs will begin to rise again.

Operators across the region are shifting their sole focus from subscriber growth to improving ARPU or at least stopping its decline, by streamlining their operations (not Zain’s round of redundancies earlier in the year) and by offering advanced services.

The emergence of 3G mobile technologies, coupled with the often poor or virtually non-existing fixed-line telecommunications infrastructure in Africa offers an opportunity to do this by offering broadband Internet access and other multimedia and entertainment services.

Published this week, a new report from Balancing Act called African Mobile ARPU, Subscriber and Market Size Forecasts (2009-2013) looks at how revenues will and decline in different markets as well as projecting subscriber levels and market size.

The 24 countries chosen for this report reflect the full range of mobile country markets on the continent. Some are small in terms of subscribers numbers, others are large. They also reflect a full range of literacy levels, GDP growth and language groups. The report opens with a detailed section entitled Mobile ARPU: the key to stemming ARPU decline. This looks at use levels and revenues in different markets as well as identifying browser and content use.

Of the 24 country markets examined in the report, 17 are set to experience declining ARPUs in the short to medium term. The remaining 7 countries will experience continued ARPU growth. ARPU is not always a reliable guide to net profitability but there is enough available data to allow it to be a useful proxy for overall business performance.

Over the last 3-5 years, ARPUs in Africa have gone from the US$10-20 range to the US$5-8 or less range. In broad terms, there are two main reasons for this overall decline. Firstly, there have been far higher levels of competition in mobile markets and with competition has come price wars: good news for the consumer but far less good news for operators. For example, with the entry of two new operators into the Kenya market, bringing the total number of operators to four, Orange Kenya’s ARPU’s fell to just US$2.67 a month at the end of 2008 although they have risen subsequently. After its recent launch in Ghana, Zain announced similar ARPU levels.

The second main reason for ARPU decline is that even as operators continue to expand their population coverage, they are reaching out to more and more less wealthy customers. Put simply, they are reaching the very edges of their addressable markets and as they increase the number of lower spending customers, the Average Revenue Per User falls.

Of these 17 country markets showing declining ARPUs, 13 will by the end of the forecast period in 2013 have begun a steady haul upwards to increased ARPUs again. The key to these countries finding a way to increase ARPUs is that they have the potential to increase mobile data revenues: in definitional terms, these revenues include all SMS and mobile Internet revenues.

The prize for mobile operators is not just mobile ARPUs but also taking market leadership in the broadband Internet market in Africa. For example, the challenger WANA in Morocco launched its mobile Internet offer in March 2007 and by mid 2008 it had seized 74% of this market from under the nose of its much better established competitor. In overall Internet market terms, it now has a 19% market share.

Intelligent Networx, in association with Balancing Act has developed a model to forecast ARPU specifically for African mobile markets, taking into account consumer buying power, market maturity in terms of penetration, and the level of competition that exists or may exist in the future. Taking an ‘comparative empirical’ approach African Mobile ARPU, Subscriber and Market Size Forecasts 2009-2013 uses a model that has been “road-tested” for a couple years before being used. This shows that over the this period it performed with considerable accuracy. Coupled with GDP and subscriber growth forecasts for each market, it also delivers a prediction of the total mobile services market size in terms of revenue.

This report contains forecasts of mobile subscriber base, ARPU and total market size for 24 African markets for the period 2009-2013, along with a market overview as well as subscriber and ARPU statistics for 2003-2008 for each country. In view of the uncertainty as to what extent the global economic crisis will affect the region, two forecast scenarios are presented for each country, a low growth one and a high growth one. This can assist readers in their selection of the most lucrative markets and in their business planning for investing in any of these mobile markets.

African Mobile ARPU, Subscriber and Market Size Forecasts (2009-2013) covers the following 24 countries: Algeria, Benin, Botswana, Burkina Faso, Cameroon, Chad, Congo-Brazzaville, Cote d’Ivoire, Democratic Republic of Congo (DRC), Egypt, Gabon, Ghana, Kenya, Madagascar, Morocco, Mozambique, Niger, Nigeria, South Africa, Sudan, Tanzania, Tunisia, Uganda and Zambia. This 180 page report contains 121 charts, 50 tables and detailed countries maps with most showing population densities, GSM coverage and networks.