The trend in Africa’s growing telecommunications sector has increasingly been towards consolidation over the last few years, with Vodafone being an example of this. Be it infrastructure sharing or a host of mergers and acquisitions, Africa’s operators are working together, and the space is getting less competitive as a result.
In fairness, infrastructure sharing and the selling of towers to independent management firms such as Eaton and Helios – an accelerating trend across the continent – make complete sense.
Tower companies have more focus, and operators shed the responsibility and cost of managing towers and can focus more on services. Operator bottom-lines and quality of service should be improved.
Yet the slowly stagnating competition within Africa’s telecoms sector should be of concern to regulators and customers.
That is not to say any market has reached the point of an unhealthy monopoly, though Kenya has occasionally risked this. But there have been a number of high profile mergers and acquisitions in the last few years, removing a number of players from the space.
Airtel Uganda acquired Warid Telecom in 2013 for US$100 million, taking Warid out of the game and making Airtel the country’s second largest operator. In May last year, Orange exited the country, in spite of being the country’s third operator. In Kenya, yuMobile was hoovered up by Safaricom and Airtel, and with suggestions Orange is looking to exit that market as well there could be just two players in the country before too long.
The trend is not only clear in East Africa. Last year saw South Africa’s leading operator Vodacom agreed the 100 per cent acquisition of fixed line firm Neotel, while shareholders of listed IT services company BCX agreed a buyout by operator Telkom. Competition remains to an extent, but the big behemoths are starting to engulf smaller competitors.
Frustratingly, there is no need for such consolidation at this stage of the game, and mobile penetration rates and customer service in Africa would benefit from more competition rather than less.
Quality of service has been a constant issue across Africa, notably in Kenya and Nigeria, and portability and choice between operators is vital for consumers. The continent’s telecoms sector has enough room for growth to sustain existing companies and additional ones.
The number of mobile subscriptions in Africa is growing faster than any region worldwide, with Ovum estimating it at 9.8 per cent year-on-year, compared to 6.3 per cent globally. Africa’s number of subscriptions rose from 808 million mobile subscriptions at the end of 2013 to 851 million at the end of the second quarter of last year.
Subscriptions are set to pass one billion in 2016, and 1.23 billion by 2020. The potential is huge, and the untapped market still large, so there is no need for operators to be consolidating as companies have in smaller markets, say e-commerce.
Everything in African telecoms is growing. Data is overtaking demand for voice – the number of mobile broadband connections is expected to grow to 950 million by the end of 2019 – but even voice services are still projected to grow, the only region in the world where this is the case.
Analysys Mason predicts African telecoms service revenue will increase at a 6 per cent compound annual growth rate (CAGR) until 2018, from US$49 billion to more than US$65 billion.
And yet the trend is towards consolidation, rather than competing for these new customers and growing revenues.
Vodafone bucked that trend in the last week, however, entering Uganda for the first time. Vodafone Uganda has launched voice and 4G LTE high-speed data services in the country, initially in Kampala and Entebbe. There are plans to expand 4G services across the rest of the country soon.
Vodafone is raising the stakes in Uganda by offering the first unlimited data plans for the consumer market to ever be available in the East African country. New customers that purchase an unlimited plan will also receive a 4G data device for free. Sounds like it makes sense, but actually a new launch and competitive pricing have been lacking from many African telecoms markets for some time now.
“Customers say the entry price for mobile devices is too high and we have lowered it. They have requested for the option to pay a fixed daily, weekly or monthly price for data without worrying about running out of bundles and we have introduced the unlimited plan,” said Jackie Namara, head of marketing at Vodafone Uganda.
With the exciting growth that lies ahead in African telecoms, let’s hope this new launch signals a revival of the era of competitivity rather than the continuation of consolidation. Everyone stands to benefit.
