Opportunity, but no smooth ride
July 21, 2009
Telecommunications management advisory and investment firm Delta Partners said on Tuesday that the mobile broadband market in the Middle East and Africa (MEA) region would be worth $6 billion by 2011.
A new white paper from Delta entitled "Mobile Broadband in MEA: Promises opportunity but not a smooth ride" estimates that Africa would contribute substantially to this figure, primarily down to the stagnating fixed line penetration in Africa of around 4 percent.
"The Middle East and Africa region has been the world's fastest-growing region in terms of mobile penetration growth in the recent past," said principal at Delta Partners' Johannesburg office, Daniel Torras.
"In addition, fixed line penetration has stagnated at around 4 percent across Africa, which is further driving the growth of mobile on the continent."
Delta pointed to a lack of fixed infrastructure coupled with high costs of service provisioning as "severely" hindering the development of broadband such as ADSL, particularly in Africa.
Torras said: "Owing to coverage restrictions and a lack of bandwidth, large parts of the region still witness connectivity delivered via satellites."
The white paper highlights two key developments expected to change the existing telecoms and broadband landscapes.
"Firstly, improved international connectivity, which comes as a result of the various submarine cables being laid on both the East and West coasts of Africa, will enhance bandwidth and lower prices over time," said Torras.
"Secondly, mobile operators aggressively developing their 3G networks to go beyond their core voice offerings will result in enhanced availability of high speed networks.
Broadband is increasingly seen as the growth driver for mobile operators and the mechanism towards creating the stickiness factor particularly for retaining high value customers," he added.
Delta estimates that nearly 70 percent of the broadband services in the Middle East and, particularly Africa will be delivered over wireless networks by 2011, up from about 38 percent today.
Mobile broadband subscribers are expected to grow from 2.5 million today to about 40 million in 2011.
"It will represent a market worth around $6bn in 2011, versus $1bn today," Torras said.
However, Delta stressed that key risks existed especially due to high capex investments required.
This is particularly true for late entrants who struggle to capture minimum scale in order to recover their investments, it said.
"There are a few success factors operators should consider, such as gaining access to international connectivity at competitive prices, an efficient network operation and developing an effective go-to-market approach," said Torras.
"Operators can invest in undersea cable projects to ensure competitiveness, make informed urban/rural rollout decisions and even consider 3G network sharing in some regions," he added.
"Setting up a dedicated customer care channel and targeted value proposition can also go a long way in ensuring customer development and retention.
This is especially important as high-value customers in MEA tend to constitute only 10-20 percent of the subscribers but 50-60 percent of the revenues," Torras concluded.
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