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African mobile subscriptions will exceed 1bn by year’s end, says report

Africa is expected to exceed one billion mobile telecoms subscriptions in the fourth quarter of 2016, reaching 1.02bn by the year’s end, according to a new report.23 Nov 2016

The research by market analysts Ovum also forecasts that the total number of mobile subscriptions on the continent will rise to 1.33bn at the end of 2021.

According to Ovum, which defines mobile broadband as mobile connections that are “based on 3G or more advanced technology”, growth in new mobile subscriptions is “slowing”, although the average rate of mobile penetration in Africa was 79% at the end of last June. Mobile voice revenue on the continent is set to decline over the five years to 2021, Ovum said.

However, data connections as well as data and digital service revenue, “will drive the next phase of growth in Africa’s telecoms market”, Ovum said. The company forecasts the take-up of mobile broadband “will rise strongly, as operators continue to roll out 3G and 4G LTE networks and as smartphones become increasingly affordable”.

“There will be one billion mobile broadband connections in Africa in 2021, including 157.4 million 4G LTE connections,” according to Ovum’s projections. “Additionally, the number of smartphone connections on the continent will reach 929.9 million at the end of 2021. And non-SMS mobile data revenue in Africa will rise from $6.40bn in 2015 to $27.56bn in 2021, a compound annual growth rate of 27.6%.”

Ovum said the number of fixed broadband connections in Africa is also expected to increase significantly over the coming years, “albeit from a very low base, from 13.78 million at the end of 2016 to 19.97m at the end of 2021”. “The number of fibre and fixed LTE connections will increase sharply over the next five years, but DSL will remain the dominant fixed broadband technology on the continent, accounting for 70.7% of African fixed broadband connections in 2021.”

Ovum’s Broadband Development Index (BDI) measures and ranks countries and regions according to their adoption of high-speed broadband. Each country or region is awarded a score out of 500 for its mobile broadband development, and a score out of 500 for its fixed broadband development, to give a combined BDI score out of 1,000.

Telecoms law expert Diane Mullenex of Pinsent Masons, the law firm behind, said: “Accelerated mobile penetration in Africa has paved the way for businesses to reach customers through apps and m-commerce. However, there are lessons to be learnt from other countries such as India, where mobile ownership increased but in-app spending and app purchases remained low.”

“The majority of mobile users in Africa have 2G handsets and so businesses should concentrate their efforts on ensuring that apps are data-efficient and compatible,” Mullenex said. “Meanwhile, in the financial services industry, retail banking is projected to grow at a compound annual rate of 15% until 2020 in sub-Saharan Africa. Therefore, banks should position themselves to roll out mobile banking across the region.”

Earlier this year, technology research and consulting services firm the International Data Corporation (IDC) said spending on information and communications technology (ICT) in South Africa is projected to exceed $26bn in 2016, as organisations “increasingly embrace digital transformation initiatives in a bid to streamline their costs and bolster their flexibility”.

The IDC said “the emergence of the internet of things (IoT) ecosystem... is a key facet of the digital transformation revolution beginning to take place in South Africa”.

A report published last year by The Boston Consulting Group said sub-Saharan Africa is adopting mobile financial services “at a pace seen in few other places, presenting banks and mobile-network operators with a set of strategic choices that will go a long way toward determining their success in the region”.

According to the report, the value of the region’s mobile money market could grow to $1.5bn over the next four years as Africa’s ‘unbanked’ use their phones for a variety of financial transactions.