Based on a series of interviews with operators and governments, the study concluded that consistent and transparent regulation could significantly reduce mobile operators' investment risks, allowing them to expand the coverage and capacity of their networks, while reducing the total cost of owning a mobile phone for Africans. The resulting increase in coverage and fall in retail prices could boost the number of mobile phone users in Sub-Saharan Africa to 108 million from 83 million today, PWC estimates.
"Uncertainty around regulation has a substantial knock-on effect on investment levels and retail prices in the mobile phone sector," said Tom Phillips, Chief Government and Regulatory Affairs Officer. "Removing that uncertainty would significantly boost the affordability of mobile phones in the region and have a profound impact on social and economic development; mobiles offer the only cost effective way of reaching the hundreds of millions who are still without a telecommunications connection."
Previous studies have found a significant link between mobile phone penetration and economic growth in developing countries where fixed-line networks are sparse. The GSMA estimates that an increase of 25 million mobile phone users would boost the gross domestic product of the Sub-Sahara region by around US$900 million per annum.
The study also found that inconsistent regulation in Sub-Saharan Africa manifests itself in many ways, eg, governments suddenly calling for the renegotiation of licences or large fluctuations in key parameters set by the authorities, such as the rates mobile operators pay to connect calls to the national fixed network.
PWC found that regulation is one of the main risk factors that raises their cost of capital. It identifies investment opportunities as typically being financed by a combination of debt and equity, the required return to both types of investor, including interest payable to creditors and compensation for equity investors taking on systematic risk, being known as the "weighted average cost of capital."
A high cost of capital limits the operators' scope to invest in their networks and forces them to recover costs quickly. PWC estimates that mobile investments would have been 25% higher in Sub-Saharan Africa (the equivalent of almost US$5 billion) if countries across the region had applied optimum regulation to telecommunications. Moreover, PWC found the total cost of owning and using a mobile phone would fall by up to 10% if governments were to create transparent and consistent regulatory environments that promote fair competition, reflect long-term policy goals and ensure independent procedures for resolving disputes.
Telecommunications investment horizons often extend well beyond the typical time frame for political decision-making. For that reason, the report strongly reinforces the need for governments to establish and communicate clear long-term policy goals, which can be enforced by an independent and well-resourced regulator, immune to short-term political pressure. Among the report's other key recommendations:
-
bridge the resource and skills gap often found within regulatory bodies. Here, PWC found a critical lack of economic expertise, often leading to key regulatory decisions being taken without an analysis of their commercial impact, in turn creating an environment where dispute resolution often ends up in the courts;
-
promote a stable and predictable environment - particularly on spectrum management - by committing to maintaining alignment with the ITU's globally harmonised spectrum and therefore ensuring global interpretability; and
-
endorse mobile as the solution for Universal Service provisions. Since 2000, eight times as many mobile connections have been made than any other access technology. Yet Universal Service contributions (paid by mobile operators) still typically go to the stagnating and costly fixed line operators. Regulators should recognise mobile as the most efficient and effective solution to providing Universal Service. A GSM line costs about one tenth of a fixed line.
