Telecoms firms urged to brave new African frontiers

According to a report by investment bank Imara released last week, the cellphone has become arguably the most ubiquitous gadget in the world as it is used for making calls, gaining access to the internet, for banking and organising revolutions as seen in some countries in the Middle East.

However, telecoms companies still face the daunting task of staying "relevant" beyond their existing business models of just being airtime factories, Imara says.

Many mobile operators, including those in SA, are under pressure from regulatory bodies to lower prices.

They are also under pressure to contain costs and at the same time to grow in the saturated voice markets.

"There is also a growing fear that operators will be turned into pipes while the real money is made by media, tech and internet companies such as Google and Apple," Imara says.

Although analysts expect more consolidation in the market, they also predict that the next big growth will come from the enterprise market and the general data market.

Dobek Pater, a telecoms analyst at Africa Analysis, says the submarine cables linking Africa to the rest of the world will stimulate the adoption of data services such as the internet, applications and video by the enterprise market.

Thecla Mbongue, senior research analyst at telecoms and media group Informa , says opportunities in Africa lie increasingly in the data segment as voice revenues flatten.

"This includes mobile internet/broadband but also non- voice value-added services relevant to the African consumer such as mobile money or m-health, agriculture alerts or education."

MTN Business and Vodacom Business, focusing mainly on the corporate market, already have a presence in Africa with an eye to expanding their businesses.

Imara says Africa is not only attractive for lower than average mobile penetration rates, but also provides new ground for operators to roll out data/internet as a new cash cow.

Africa's operators include MTN, which recently said it would look for regional consolidation as large-scale acquisitions become scarce; Bharti Airtel, which has sparked a price war in many markets; and Vodafone. Vodacom, which lags behind local competitor MTN, is another key player.

However, Vodacom, which operates in four countries outside SA, could see its presence on the continent reduced if it sells its troubled unit in the Democratic Republic of Congo.

Mr Pater says although there will be a scramble from technology companies, data service aggregators and telecommunications operators to enter that market, he expects consolidation and collaboration from companies.

"In the next two to three years we will see medium-sized companies starting to demand this type of service (data-related services). Mobile operators, or any other company that provides this service should start positioning themselves," he says.

Source: Business Day