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Continent's steep telecoms costs leave gap for cheaper operators
HIGH telecoms costs in Africa could open an opportunity for a low-cost operator to tap into the underserviced markets, according to the latest report by Ernst & Young on the state of telecoms on the continent. The report says affordability is a key issue, and with the cost of telecoms in Africa remaining among the highest in the world, this could open the door for low-cost operators. Africa is expected to have about 600 million cellular subscribers by 2012, compared with 300 million last year. The average penetration in sub-Saharan Africa is just more than 50 percent, with more than 70 percent of the population living in rural areas. "Even with great disparities between African countries, overall penetration rates remain low and there is significant room for expansion," said Vincent de La Bachelerie, the global telecoms leader for Ernst & Young. Julia Lamberth, the co-leader of Ernst & Young's Global Telecommunications Centre for Africa, said a new low-cost operator would have to outsource extensively and leverage off relationships with its vendors to reduce costs. The emergence of a successful low-cost operator in Africa should force many other operators to rethink their approach to doing business on the continent, she added. Lamberth said that low-cost operators should simplify the value chain. As most operators had been concentrating on urban areas, the challenge would be to reach remote pockets of potential consumers in a cost-effective way. Smile Communications, founded by Irene Charnley, the former executive at MTN Group, has positioned itself as a low-cost operator by providing affordable communications products and services in rural communities in Uganda. Smile plans to offer free telephone numbers and voice message boxes to customers whether they own a handset or not. A customer will be provided with a PIN. The Ernst & Young report finds that despite the current economic downturn, the African telecoms market will continue to develop more quickly than any other region in the next three to five years. Frost & Sullivan information and communication technology analyst Lindsey McDonald agreed, adding that Africa's status as an emerging market was expected to put it in good stead as investors aimed for growth markets. "Players from around the world have turned to Africa as a destination for investment," said McDonald. The result was that lower priced, more advanced solutions had reached the continent and technology vendors had benefited from the opportunities in an untapped market.
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