The phenomenal growth of Africa's mobile telecommunications industry is one of the continent's greatest success stories.

The future of mobile telecommunications in Africa is still looking bright in spite of a number of challenges and new trends that operators will have to deal with.

Speaking about telecommunications in Africa during the Exporta 3^rd Annual Trade and Investment Conference in Cape Town, Martin Edge, executive director of FirstAfrica said the penetration rate for telecommunications in Africa is still quite low but offers high sustainable growth.

According to Edge, as of the first quarter of this year there are more mobile phone users in Africa than in the United States of America.

Nigeria has recently become Africa's largest mobile telecommunications market with 58 million subscribers, followed by South Africa and Egypt.

Challenges

Edge mentioned a number of challenges facing the industry going forward. One of these is how do deal with price sensitive subscribers willing to jump from operator to operator in order to get better pricing.

The majority of mobile users in Africa use prepaid accounts and these users have several sim cards. Edge said that in Kenya, if you want to talk to someone who is richer than you are, you send them a 'missed call' by letting it ring twice and then hanging-up. The person on the other side will then look at which network you called from, put a sim card from the respective operator in his/her phone, and call you back from that network in order to save costs. 

He said that because of this trend, new operators who enter the market with very low prices are putting pressure on the more established players' profit margins.

Voice over Internet Protocol (VoIP) calls are also posing a threat to mobile operators. "We all love the idea of broadband, it is fantastic, it is going to bring new services, but from the point of view of the mobile operators, it also brings VoIP. VoIP calling is a great way for customers to avoid ultra-high cost calls. It is not that big yet in Africa, for the simple reason that broadband itself in not very pervasive and that many people do not have access to computers to make use of this," Edge explained.

"People are now looking at handsets which have VOIP capability on it. The handsets can be switched to VoIP function and will therefore by-pass the normal mobile tariffs. [This] hasn’t happened in Africa yet but when people get their hands on these [devices] they will try and make use of it, putting pressure on operators."

Trends for 2009

As the economic crisis makes capital expenditure more difficult, the sharing of network infrastructure is set to be one of the main trends for 2009. Operators have in the past built and managed their own networks. Traditionally an entire infrastructure was built by one operator and for one operator only.

Edge said that because of the current global economic situation there is a huge argument for the sharing of infrastructure. "It makes the capital costs for each participant proportionally less and it also makes the maintenance cost [for the infrastructure] more economic."

"[Mobile] companies were started and founded by engineers, and for those engineers their network was their asset. The businesses they ran were engineering-based businesses. These days those companies have moved away from being technical businesses to customer-based businesses where what they have is a brand, an airtime concept, pricing packages, and a look and feel that people associate with. That move has distanced the operations a bit  from the network [infrastructure]," he explained.

Asked for his thoughts on mobile banking, Edge was not terribly enthusiastic. "It is a really good consumer product, but it is not becoming a focused business in its own right. It is a slightly marginal business for all the people that participate in it. But as long as they keep developing it, it will happen. I don't think it is going to spawn big companies which are exclusively focused on mobile banking."

Edge ended his presentation saying, "African mobile telecoms have been a great success story for the continent and I think that will continue. It provides holistic benefits to investors who get good returns from it, consumers who got better services from it, and governments who get better taxes on it."