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Next Wave: Africa’s mobile revolution has hit a plateau

November 1, 2023
in Technology
Next Wave: Africa’s mobile revolution has hit a plateau
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First published 29 October 2023

The new goal for African telcos is becoming technology platforms not just old goody mobile carriers.

Twenty-five years ago when Mohammed Ibrahim was setting up MSI Cellular Investments, the mobile network provider better known as Celtel, in Africa, few people thought mobile phones had a future in Africa. But the Doubting Thomases were wrong and the few hardy believers like Mo were right. From a few thousand telephone connections in the late 1990s, sub-Saharan Africa has today become the epicentre of the GSM mobile phone revolution.

Today, the mobile calling boom has now cratered as internet services displace traditional voice calls and SMS. In its place, a small but dynamic market of software solutions and businesses is growing. This market—and offspring of the mobile calling boom—is mostly based on using internet-dependent software tools at the personal and corporate levels. Most people in Africa do not only want their mobile devices to send texts and make calls; their devices are becoming business tools that need the internet.

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In their latest report launched during this month’s Mobile World Congress in Kigali, the GSM Association (GSMA) predict that 200 million new mobile subscribers will be added to African mobile carrier networks by 2030. Ethiopia and Nigeria will contribute the bulk (about 33%) of these new subscribers. Two hundred million new subscribers is a big number. But, assuming it refers to subscribers in previously unreached areas, then it doesn’t quite have the ring of significance it might have once had just five years ago because the bulk of Africa’s revenue-capable market in cities and urban areas appears to have already been captured today.

A new focus on the demand gap over the usage gap

Broadband internet coverage now reaches 85% of Africa’s population, GSMA analysts write, but a lot of the available capacity is not being used, partly because the costs of internet packages remain high. This creates a sad loop. Internet costs are partly high because only a small number of people use and pay for it. As a result, more people cannot pay for it because it is expensive.

At the same time, in areas where usage is significantly high, telcos face an inability to meet demand with reliable service. Faced with this demand gap, it is easy to see why telcos might prefer to focus on developed markets where they can fully and reliably satisfy demand. Given that telco customers in developed markets represent the bulk of revenue, it is also easy to see why telcos will pay attention to how they can earn more revenue from the activities that they enable. So instead of simply providing the internet that allows a shopkeeper to make bank transfers to vendors, a telco may want to also be the platform where those financial transactions happen.

To be honest, that telcos are fascinated with stuff outside of their core remit is not completely new. It is similar to how telco operators and leadership milked value-added services (VAS) like caller tunes and SMS dating in the days that followed the start of the mobile calling boom. But the VAS market of yesteryears was too small and quickly eroded.

The emerging VAS market (think multiple fintech products, enterprise IT services, and so on) will consist of quasi-independent products that directly go after complimenting or even wildly unconnected software or IT servicing market opportunities.

This trend is something that has received passing commentary. But it deserves more attention, especially for Africa’s sprawling digital market where everything from fintech startups to delivery drone companies and WhatsApp-based edtech services are competing for business customers and consumers.

Enter the age of super telcos

Building technology platforms beyond mobile carrier network services was at the core of MTN Group’s 2022 rebrand as a technology company. Said Bernie Samuels, MTN’s group head of marketing: “We are living in a completely different world. We were born into an analogue era and our customers today live in the social and digital space. Quite frankly, we don’t want to be left behind. Our competitor set has changed. We don’t only compete with the telcos down the road, we are competing with the biggest digital brands across the planet, so it’s a battle for mind share.”

What WorldRemit (remittances) wants is what MTN Ghana wants. And the insuretech that is rapidly growing in Zambia may find itself going up against a Zain version of the same offering, hypotethically speaking.

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A cursory look through the annual filings of some of Africa’s largest telecom/mobile carrier networks bears my hypothesis out. In the latest Integrated Report 2023, Vodacom self-describes as “a leading and purpose-led African connectivity, digital and financial services company”. MTN’s strategic priorities for 2025 include building the largest and most valuable platforms, by which it is referring to its portfolio of digital financial services, infrastructure sharing (network-as-a-service) and its API marketplace, Chenosis. Orange Group is doubling down on its core telco model, but it also wants to accelerate the transformation of Orange Money and reorient the service “towards a platform-based model offering new digital services in addition to money transfer and payment services”.

Safaricom’s M-Pesa super app, on the other hand, retains too much of a Send-Money/Receive Money primary function, and with its expansion to Ethiopia and a strong chokehold on the Kenyan market, it has little room to pay attention to developments that may not pay off in the immediate future. It is something for which it has received some criticism. Airtel Africa is playing catchup, so it is understandably laser-focused on core mobile carrier programs and mobile money. But even the bitter fight for market share has not stopped it from creating Airtel Digital Labs, an in-house digital hub for creating and launching wholly-owned technology platforms and digital products.

We are seeing telecom firms in Africa leverage the incredible arsenal of distribution and infrastructure under their direct control to bulldoze their way into verticals that internal leaders and their consultant partners see long-term promise in. It doesn’t mean they will succeed.

But it does mean that startups will increasingly have to worry about competition from telecom giants in addition to legacy enterprises and fellow upstarts. In an ideal world, this should create an opening for active corporate venture capital and even mergers/acquisitions, especially where arms-length collaboration is not feasible.

Abraham Augustine,

Senior Reporter, TechCabal.

Feel free to email abraham[at]bigcabal.com, with your thoughts about this edition of NextWave. Or just click reply to share your thoughts and feedback.

We’d love to hear from you

Psst! Down here!

Thanks for reading today’s Next Wave. Please share. Or subscribe if someone shared it to you here for free to get fresh perspectives on the progress of digital innovation in Africa every Sunday.

As always feel free to email a reply or response to this essay. I enjoy reading those emails a lot.

TC Daily newsletter is out daily (Mon – Fri) brief of all the technology and business stories you need to know. Get it in your inbox each weekday at 7 AM (WAT).

Follow TechCabal on Twitter, Instagram, Facebook, and LinkedIn to stay engaged in our real-time conversations on tech and innovation in Africa.

>>> Read full article>>>
Copyright for syndicated content belongs to the linked Source : TechCabal – https://techcabal.com/2023/10/31/next-wave-africas-mobile-revolution-has-hit-a-plateau/

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