Mixed fortunes for Africa's telecoms operators

The handful of top players are enjoying “stupendous value creation” as some countries report triple-digit subscriber growth and seemingly boundless potential, says a report by AfricaNext Investment Research. But its principal, Guy Zibi, says that despite the “gaudy top line revenue and subscriber growth figures”, between a third and half of African operators are not enjoying net profits, and a third are unlikely to do so within three years.

The report studied the profitability, operating and capital expenditure, earnings and cash flows of mobile players in 40 countries in an increasingly competitive environment and a severe economic downturn. AfricaNext estimates that Africa had 375-million subscribers last year, up from 280-million in 2007, and growing by about 40% a year. “The boom is not over, despite the global economic downturn,” Zibi says. “We expect African mobile operators to add another 300-million subscriptions between 2008 and 2013, taking Africa's mobile subscription base to 700-million.”

He expects 10 African countries to surge through a 100% mobile penetration mark by 2013, while some will double their penetration levels and at least one — Rwanda — will quadruple it by 2013.

The report predicts continued subscriber growth for the next five years, helped by the falling cost of infrastructure that makes network roll-out more affordable for untapped rural areas.

However, Africa's mobile industry has ceased to be about skimming profits from the few and is becoming a commodity business that depends on driving profits by building up scale. Yet fewer than 10 of Africa's 53 markets are large enough to provide such scale.

Another drawback is that most operators' operating expenses grow faster than their revenue. The average player spends about US$90 a year in operating expenses per customer, yet some customers spend as little as US$5 a month.

Meanwhile, much of their capital expenditure is funded by debt, and the credit crunch may drive some players out of business.

Source: Business Day

Published courtesy of