The new ' mobile ' in Africa

The mobile operators have been the ‘unicorns’ of Africa for the last 20 years.   Consistently outperforming, not only their global peers, but also all other sectors in Africa – even resources.   Historically African MNO’s have enjoyed higher EBITDA margins than their developed market peers – but it seems the African mobile fairy tale is coming to an end as we approach the bewitching hour of midnight.  The nasty sisters of MTN’s Nigerian Cinderella have reared their ugly heads with the imposition of a punitive $5.2bn fine.   Like Apple, whose once unstoppable iPhone sales have started to slow, most African MNO’s  need to come up with something new and smart or risk marginalisation as demand slows.   The killer App in Africa to date has been voice – but this market is saturated now with  customers from the very bottom of the pyramid – and so voice ARPU’s have declined.   According to McKinsey, for the last 10 years Africa’s Telco market  has enjoyed a growth rate 12 times that of the rest of the industry.  Those halcyon days are gone.

The next generation technologies like 3G and now LTE represent a mixed blessing for the MNO’s.   Increased data revenues and better services on the one hand,  while on the other the cannibalization of voice revenues through the take-up of OTT services like WhatsApp and Skype.  When Vodacom and MTN appeal to the Regulator for ‘protection’ then you know they are scrambling. 

The problem with most MNO’s is that they have become complacent.   They have ridden on their golden laurels funded by the super-profits they extracted from their naïve and willing  customers.   MNO’s have operated largely within oligopolistic markets where cosy pricing arrangements meant that customers needs were not put first.   The profligacy in the industry has become legion and customers who now have real alternatives are starting to vote with their feet. 

So mobile is in decline – what next?  What will be the new ‘mobile’ for Africa?  I posit that it will be a combination of connectivity and services.  Connectivity means ubiquitous broadband.  Internet access.  A digital platform that will ride on the new IP networks that are spreading across and around Africa in the form of 4G and LTE networks, undersea cables,  terrestrial fiber networks,   Metro wireless networks and also very importantly, new technology satellite networks.   I don’t believe that the Google Loon project is either practical or sustainable.  High Throughput Satellite (HTS) Ka band technologies are being deployed which will allow for rural areas to become connected to the Internet in an affordable and sustainable way.   VSAT networks have hitherto been used by multinationals, banks and to a lesser extent the MNO’s for backhaul but they will increasingly become the primary route for Internet access to the majority of rural Africans.

In addition to providing the network this new ‘mobile’ for Africa must also package the services offerings to the customer.   The majority of Africans today are either under-connected using old generation 2G phones or are not connected at all.   The new ‘mobile’ must ensure that affordable smartphones become ubiquitous and that smart phone apps become the de-facto gateway to the Internet.     These Apps must be customised to ensure that the they are accessible to the rural poor.   They should include: basic communications like voice and chat;  mobile money;  education,  agricultural applications and even health care.    While the consumption of video and music are growing rapidly amongst the urban African customer (who is more like her developed economy counterpart) – it will take longer in the rural areas.  Innovative marketing and pricing structures will need to be created to make access affordable.  

There is a role to be played by the DFI community who are seeking high leverage points for intervention in African development.   They will need to find innovative ways of financing both the infrastructure as well as the services that will be delivered.   This digital platform will comprise the networks mentioned above, the fiber optic cables,  the wireless networks,  the microwave backhauls,  the VSAT networks but perhaps the most vital component of this digital platform will be the data centres through which all data will flow.  They become the critical piece of the infrastructure that provides processing, connectivity and security for all African data.   New rules about data sovereignty and other regulatory issues will require that data centres be established in-country.   Multi-nationals, banks and indeed Government departments will no longer be allowed to host their data off-shore like North Carolina or Iceland.   The upcoming investment wave in Africa will be in data centres. 

By ensuring that they focus on providing bespoke content and services to both their high income customers as well as new emerging lower end customers MNO’s can start to find a way out of their current hole – but the landscape is moving fast and there will be casualties on the way.   A new cohort of data service providers is emerging that will start to dominate unless the MNO’s act fast and hold onto the land which they have grabbed over the last 20 years.   The industry is in for a shake-up.   And it wont be long before we see the arrival of big international players who have run out of opportunities elsewhere in the World and seek them now in Africa.