Providing high-quality broadband to consumer and enterprise customers is a key issue in Africa that affects both fixed and mobile operators. Broadband will be the major growth area in Africa over the next five years – it is the fastest-growing segment in the region. Most of the growth will come from mobile broadband, as this is the major channel through which customers can access the Internet.
The advent of LTE will also drive adoption, although it is unlikely to be particularly prevalent before 2014. Therefore, the availability of high-quality, properly priced bandwidth and related services is a national priority in terms of achieving growth. The lack of backhaul networks which has been a crucial problem across the continent is now being addressed. Wireless backhauls are very attractive given that the largest share of the demand is driven by internet over mobile devices. Domestic operators have a business case to invest in their domestic infrastructure, as they now have an access to an abundance of low cost, competitively priced bandwidth.
“The African continent is at a point where domestic investment will be stimulated by virtue of the success of the submarine cables – this will be very significant for the whole continent”, says Ed McCormack of network specialist Ciena. “Submarine became prevalent in Africa for a number of reasons – these networks don't present the same challenges as domestic networks, such as rights of way or cross border agreements. In addition, African entities couldn’t necessarily afford to build large scale networks.”
However, the case is now more compelling to invest in domestic networks, with major operators now taking large positions in the continent. This will lead to a combination of fixed and wireless infrastructure being built. Country by country, the larger economies such as Nigeria and South Africa all have several backhaul routes. In ‘second tier’ economies, there is a bit more of a race to build connectivity to the major cities.
It will be easier to build out wireless backhaul networks – the challenge of laying fibre across cities or remote areas is eliminated, along with the issue of theft. Fixed backhaul is being built in abundance, and 3G/4G wireless developments are stimulating wireless backhaul investment. This exponential growth will be sustained with the user experience on the continent focusing predominantly on the mobile device.
Mobile broadband is therefore key in Africa; according to Isabelle Paradis of analyst Hot Telecom, the continental market is similar to other emerging regions such as Latin America. “Voice revenues are declining, so operators are turning to data as a means of offsetting this”, she says. “Mobile broadband will be stimulated as providers develop services and push them to customers. Similarly, increasing smartphone penetration – and lower price points for devices – will be a major growth driver.”
Colin Brooks, also of Hot Telecom, explains this using the example of Botswana, a large country with a low population density. Most of its population lives in dense urban centres, and it has one of the highest mobile penetration rates in the region with 151%. It also has 18% fixed penetration, but broadband penetration sits at just 1%. While the cities are typically fairly modern, outside of these areas the country has vast expanses of rural land, making nationwide coverage difficult.
“The appetite for telecoms is significant – the country has a young average age, and these people are keen for new services”, explains Brooks. “There are three major players - Botswana Telecom, Orange and Mascom (MTN) – scrambling over a fairly low number of subscribers. MTN is by far the largest with 1.5 million customers, and subscriber numbers are unlikely to grow. Therefore, operators have to grow their revenue from their existing base, and mobile data presents the best opportunity to do this.”
The first challenge is how this is delivered. Current infrastructure is unlikely to cope with the strain of providing mobile broadband, and considering most subscribers are prepaid, it may be difficult to encourage enough usage to make a launch financially viable.
To address this issue, the government of Botswana has taken an initiative to separate the fixed segment of Botswana Telecom into two businesses. One will deliver the wholesale, core network service, while the second will focus on product and service deliver on a retail basis. This will allow operators to focus on delivering services locally, rather than spending vast amounts of money on building and developing a core national network.
Considering that Botswana has a small population, internet penetration is particularly poor. Botswana Telecom’s fixed business may well remedy this – even with LTE or a number of core networks, the appetite for bandwidth will surpass anything that these networks can cope with. Whether consumer or enterprise, customers need some way of offloading the service onto a fixed network to take the strain off the mobile network.
LTE will help with this but it won’t solve the issue completely; countries with extensive rural regions such as Botswana are therefore placing a greater emphasis on having a good quality fixed infrastructure to relieve mobile networks.
Mobile companies now aspire to acquire fixed assets if they don’t already own any, to allow for Wi-Fi offloading. Governments meanwhile are likely to improve the service provided by their fixed assets rather than selling them, as this is the only way that they are likely to increase their value – it doesn’t take much investment to drastically increase a network’s performance, which would boost the value by a factor of ten or twenty within months.
McCormack notes “Revenue opportunities are enormous as penetration of smartphones is very low – single digits in the majority of countries. Mobile broadband access is therefore a major growth area; there’s a lot of headroom before saturation is reached. It’s not the same challenge as five years ago – it’s a matter of building the towers and rolling out fibre infrastructure. It’s a challenging market but it is very dynamic.”
