Broadband opportunity calls in Africa

Calculations by telecoms advisory firm Delta Partners suggest that revenue from mobile broadband could boom from US$1bn today to hit US$6bn in the Middle East and Africa, with Africa contributing most of that growth.

The region was developing an insatiable appetite for connectivity, said Daniel Torras, a principal at Delta Partners in Johannesburg, but opportunities came with risks.

The Middle East and Africa is the world's fastest-growing region for mobile penetration, while the growth of fixed-line penetration has stagnated at 4% across Africa. That lack of connectivity and the high cost of rolling out fixed lines had severely hampered the development of broadband services, and many countries still got much of their connectivity via notoriously expensive satellites.

Torras said the situation would change over time as improved international connectivity arrived through various submarine cables being laid around Africa's east and west coasts, promising enhanced bandwidth and lower prices.

The Seacom cable will be switched on tomorrow, hugely increasing the bandwidth supply. Yet the effect on pricing remains to be seen as operators buying its bandwidth will decide how much of the saving to pass on to clients.

Torras also said connectivity would improve as mobile operators aggressively developed high-speed wireless networks to go beyond their core voice offerings. Broadband was seen increasingly as their growth driver and the way to create the “stickiness” needed to retain high-value customers, who accounted for 10% - 20% of subscribers but 50% - 60% of revenue.

Nearly 70% of broadband services in the Middle East and Africa would be delivered by wireless by 2011, up from 38% today. That would trigger a subscriber growth from 2,5-million today to about 40-million in 2011.

The risks come from the high capital expenditure required, particularly for late entrants who struggle to win enough customers to recoup their costs.

Tomorrow's Seacom switch-on would start a bandwidth revolution by providing faster and cheaper internet connectivity, said Arthur Goldstuck, MD of World Wide Worx. But those great expectations were only feasible in the long run, he said. For now it would be business as usual.

Seacom's initial capacity would double that of the existing SAT3 cable on Africa's west coast, but prices would not show immediate disruptions. Moreover, the speed would still be determined by the product being sold to the customer, rather than by the new capacity, Goldstuck said.

One benefit should be that internet service providers would allow users a higher volume of data downloads every month, but probably for the same fee as now.

Source: Business Day

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