Mobile data service in Africa: too much talk for very little revenue

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At the presentation of Vodacom’s interim results for the six months ending 30 September 2011, Pieter Uys, Vodacom Group CEO commented on South Africa’s good data revenue performance adding that “the growth rate of smartphone data traffic is ten times higher than that of dongles and other modems”. There is no doubt that South Africa leads the way regarding mobile data service penetration and revenue but is it an isolated case or the early sign of a trend that will sooner rather that later spread across other countries in sub-Sahara Africa.  Isabelle Gross looks at mobile data revenue in South Africa, Kenya, Nigeria and Ghana and concludes that behind all the well orchestrated PR work around the launch of 3G data services, current data revenue are very small.

Whichever mobile operator you look at in South Africa, their figures show a strong growth in mobile data revenue. Between March and September 2011, Vodacom South Africa recorded an increase of 29.4% in data revenue and generated nearly US$450 million revenue over that six month period. MTN South Africa has generated close to US$250 million in data revenue during the first half of 2011. While absolute figures are interesting, they are pretty useless when it comes to comparing data revenue across several mobile operators in different African countries. Data ARPU (data revenue/total mobile subscriber base) is a much better indicator for a comparison purpose. In South Africa, both Vodacom and MTN register a data ARPU above US$2 (US$2.59 for Vodacom SA and US$2.07 for MTN SA). On this comparison basis, how are mobile data services performing in Kenya, Nigeria and Ghana? In Kenya, Safaricom’s data ARPU is currently US$0.32. while in Nigeria, MTN’s data ARPU stands at US$0.21. The latter operator registers a data ARPU of US$0.11 in Ghana. MTN’s data ARPU in South Africa is ten times what it is in Nigeria and that says a lot about the low level of mobile data service penetration in Nigeria. The figures for Ghana and Kenya are not more encouraging even if Safaricom’s CEO could argue with reasons that his data ARPU is three times higher than that of MTN’s operation in Ghana.

When it comes to compare data ARPU versus total ARPU, South Africa is well ahead again. For Vodacom SA, data ARPU represents now 15.2% of its total ARPU while for MTN SA it accounts for 10.4%. In Kenya, Safaricom’s data ARPU represents 6.4% of its total ARPU. In Nigeria and Ghana, MTN’s data ARPU accounts respectively for 2.1% and 1.6% of its total ARPU. Kenya is the second best after South Africa but Safaricom’s data ARPU versus total ARPU is still 10 points behind that of Vodacom SA. MTN Ghana’s data ARPU versus total ARPU is ten times lower than that of Vodacom in South Africa. If MTN’s Ghana data ARPU versus total ARPU were to double every year, it will still take more then three years to reach the current level of Vodacom in South Africa.

While these figures show that mobile data service revenue still account for very little in African mobile operators overall revenue (except for South Africa), they also raise serious doubts on how well the strategy of using mobile data revenue as way to hedge overall revenue from falling voice revenue (this is currently what mobile operators in developed countries are betting on) will work for African mobile operators. As of September 30th 2011, Safaricom’s voice revenue over the last six month stood at US$356.6 million down by US$26.6 million compared to the same period a year earlier. Data revenue was US$34.8 million up by US$9.3 million when compared to the same period a year earlier. Safaricom’s SMS revenue were slightly down (-0.4%) but the revenue from M-Pesa, its mobile money service was up by US$29.9 million from US$59.8 million to US$89.2 million. It is clear from the above figures that mobile data revenue only, was not enough to cover for the loss of voice revenue for Safaricom. It is more that the revenue Safaricom got from its M-Pesa service covered for the loss of voice revenue.

Most African mobile operators have a long way to go before generating any serious revenue from mobile data services and further, in the short term, this doesn’t give them much leverage to play when it comes to compensate for falling voice revenue.

On the Balancing Act You Tube Channel this week a Nigeria special:

Nadeem, Juma, CEO, Mobipay on m-payments and social media in Tanzania

Scott Bain, Director of Sales, Range Networks on Open BTS and low cost BTS for Africa

Doron Ben Sira, CEO, SkyVision on changes in the satellite market in Africa

Arvind Rao, CEO, OnMobile on comparisons between African and Indian mobile content

Gour Lentell, CEO, biNu on this new feature phone platform taking off in Africa

Jonathan Osler, Managing Director-Africa, Intelsat on its strategy in Africa

Marc Rennard EVP Orange AMEA, on the challenges it is facing on the continent

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