We noticed you're blocking ads.

Keep supporting great journalism by turning off your ad blocker.

Questions about why you are seeing this? Contact us

Font Size

- Aa +

Sun 5 Mar 2006 04:00 AM

Font Size

- Aa +

Giving Africa a voice

The world’s telecoms vendors gathered in Barcelona for the 3GSM Conference last month where the key debate was on emerging markets, especially in Africa

|~|3GSMleadbody.jpg|~|Visitors browse the range of new mobile phones and PDAs on display at the 3GSM 2006 Conference in Barcelona, where vendors showcased innovations such as DVB-H. |~|Talk of mobile television, fancy new features on handsets and the struggle to maximise the average revenue per user (ARPU) through technology seems now to be decidedly old hat in the mobile arena. The hot new thing for the mobile industry? Voice.

This may seem surprising. Literally thousands of suppliers and developers have for some time been touting their own jigsaw piece in the next ‘killer application’ puzzle — that something that will transform user experiences and ensure that old operators can hang on to customers.

Or new operators can win them over — whichever one chooses to deploy first or, as seems more likely, whichever one they are trying to sell to.

But the slow uptake of 3G and the equally slow move to new value-added services, even in the most developed markets, means that voice remains the primary feature.

And with a large part of the world still to be tapped in that respect, there is still significant money to be made and people for businesses to sell to.

Connecting the ‘unconnected’ — as the mobile-free market is refered to — was a main theme at the 3GSM 2006 conference, which took place in Barcelona, Spain last month.

Despite the buzz of IP multimedia systems (IMS), digital video broadcasting-handheld (DVB-H) — a technology for delivering mobile television — and a host of other acronyms supposedly ready to set the world alight, the relatively mundane activity of providing simple mobile solutions to the millions who may never have seen a handset in their lives was one of the key issues for some of the biggest names in the industry.

In a bid to persuade governments to lift regulatory barriers, senior executives from some prominent mobile players used their platform at 3GSM to talk about the potential benefits of greater mobile penetration.

“Every time you have ten more phones per 100 people, you have an increase in gross domestic product (GDP) of 0.6%,” according to Motorola CEO Ed Zander. (See IT Weekly 25 February - 3 March 2006).

“We stand on the brink of a new world where mobile communications will help people overcome poverty and realise their potential,” he added.

Zander can hardly be said to be a disinterested party: his company sells 31,000 low-cost (less than US$40) handsets to developing nations everyday, and the chance to add to that would clearly be beneficial.

A cynic may suggest that the ‘economic development’ argument is simply being used by someone eager to pick up business from the new markets.

But this factor is one which many governments and analysts are finding too.

While China and India have been talked about in these terms in recent years, the explosion in mobile growth from these two countries — China is thought to be adding in the region of five million mobile subscribers a month — have moved them off the ‘emerging’ radar.

Instead it is Africa which is seen as the next big market, where millions of rural communities do not even have a landline service available to them.

Tarek Kamel, Egypt’s minister for commerce and IT, is another firm believer in the importance of mobile communications, and claims that using such technology to spread news, medical information, education and emergency services to people in poor, rural areas is a “real revolution”.

Celtel, the pan-African operator now stretching over 14 countries, can be seen as right at the centre of this focus, an example of a mobile provider with the reach and potential to be at the forefront of this debate.

Now with Middle East funding following the 2005 purchase
by MTC, a company with aggressive expansion plans for
the African continent, Celtel has a real opportunity to move into new markets, and really connect vast populations without mobile communications.

“It’s interesting to see that there is an increasing interest in the emerging side of the business,” says Celtel CEO Marten Pieters. “Coming from that side it’s nice to see that the world changed so much in the last two to three years,” he adds
The challenge for Pieters is to find cost effective ways of
increasing penetration into the more rural areas.

“And of course, more rural in Africa is much different to more rural in Europe, Japan or the US. So that means we’re looking for very efficient technologies, probably bigger cell sites, so we don’t have to build so many,” he continues.

Pieters describes the move from the cities to the rural areas as a Catch-22 situation, costing much more to increase penetration, but in return getting much lower purchasing power from subscribers and hence lower ARPU.

“What we often see when we open a new rural area, we look at the total traffic, and 80% goes there from the city, and 20% comes back. So you could have a look at the 20% and say it’s not that much. But the reality is that people from the city are calling to family, friends, business partners in rural areas, so if you don’t have the connection there you don’t have the revenue,” he claims.

MTC is now taking care of the financing of the whole Celtel group, which Pieters says makes it a lot easier for the operator to get its hands on money for further expansion.

“Africa has always been difficult for us from the banking side, there’s not been much exposure from the international banks in Africa, and it’s always difficult to get money. Now of course, channelling it through the Middle East there is far more available, and it is cheaper,” he states.

With Celtel branching out in new rural areas — Pieters claims that it could cover 80% of each country it has operation in within a few years — and with MTC’s money helping them move into further territories, the most recent being Madagascar and Sudan, suppliers are eager to
get a piece of the pie and are looking to tailor their technology accordingly.

Although not a current vendor of Celtel, Motorola is keen to use its traditional relationship with MTC to leverage some of the African action for itself.

“Motorola is strategic partner to MTC, and have been a supplier to them for many years now,” says Ali Amer, Motorola’s director of network sales MENAPAK.

“Things could change,” he says with regard to getting Celtel’s business. But with the Celtel management team kept in place by its new Middle East owners, it is essentially a decision for the African operator which suppliers to use, rather than an MTC one.

Even Khaled Al Hajeri, MTC Group’s CTO admits that it
is “up to Celtel”. Pieters says that he is currently looking at the US-based vendor.
||**||Network costs|~|Egyptianbody.jpg|~|Tarek Kamel, Egypt’s minister for commerce and IT.|~|But it is not just the initial cost of infrastructure that is the main spend for operators.

“Most of the cost to operators in emerging markets is not just the capital expenditure (capex), but how much it costs to run the network,” says Laith Sadiq, Motorola EMEA’s wireless broadband business development director, who adds that a major factor for focus is in the backhaul.

“Motorola is investing a great deal in backhaul technologies, in the unlicensed spectrum, as well as the licensed spectrum, such as WiMax,” he claims.

“What you can enable operators to do is use these wireless technologies to have their own backhaul,” he adds.

Such a move would rule out the need for expensive satellite services, previously used across Africa for backhauling.

Outside of the technology realm, governments can play
a major part in mobile growth, with many industry figures pushing for the scrapping of taxes imposed on handsets, and further deregulation to drive competition.

Egypt has recently repealed taxes on mobile phones from other countries. “The more we deregulate, the more we re-
regulate in the right direction, we get growth,” says Kamel, Egypt’s minister for commerce and IT.

“The more we reduce the price, this drives growth and this brings opportunities,” he claims.

Egypt has just recently released a request for proposals for a third operator, in order to further open up its telecoms market to investment and competition. Mobile penetration currently only stands at 19% in Egypt, but demand is overwhelming its two present operators Orascom and MobiNil.

Across the Middle East, still considered an emerging market to some despite countries such as the UAE nearing 100% penetration, there is room for growth.

Jordan, listed by consulting firm Arab Advisors as the region’s most liberal market, still has a relatively low penetration, under 50%, but the demand for mobile services is clear.

Umniah, which launched its mobile operations in June 2005, claimed it experienced a growth in subscribers far beyond its
initial expectations.

“We were planning to have something like 100,000 subscribers by the end of 2005,” says Ihab Hinnawi, Umniah’s director of operations.

“But we were shocked, because after five days we had 50,000 subscribers. We reached our year-end target of 100,000 customers within two weeks,” he reveals.

Many believe that a similar level of pent-up demand is available in Africa, should the operators provide the communities with the possibility for mobile services.

In the four years of liberalised communications in Jordan, the number of employees in the mobile sector increased by 42%, according to recent research by Zawya commissioned by MTC.

The report looks towards markets in Africa, finding that in Egypt, if the ICT investment doubled, 1.3 million new jobs would be created, and the rate of GDP growth would rise from 4% to 8% and upwards.

The recent emergence of the sub-US$100 laptop is believed to be a major driver for growth and education in poorer parts of the world, but mobile communications is also considered an extremely important factor, especially for areas such as business, enabling farmers to easily find the going market rate of produce, for example.

The continual reduction of handset costs — talk in Barcelona touched on a sub-US$15 model — is expected to play a major role, not just cheaper infrastructure costs for the operators or more efficient technologies.

Mohamed Ibrahim, chairman and founder of Celtel and celebrated ‘connector’ of the unconnected in Africa, is confident of growth, indicating that last year the continent added more new mobile customers than Europe or the US.

“There were two million people using phones in Africa in 1998, and now there are 120 million. There’s a lot of wealth at the bottom of the pyramid, and we mean to tap it.”

Arabian Business: why we're going behind a paywall

For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Real news, real analysis and real insight have real value – especially at a time like this. Unlimited access ArabianBusiness.com can be unlocked for as little as $4.75 per month. Click here for more details.

Read next