Data consumption is rising rapidly in Africa, and companies are now focusing on a new generation ￼￼￼￼￼￼￼￼￼￼￼of telecoms networks to increase speed and capacity. While voice is not dead, analysts predict slower growth in the years ahead
Gone are the days when you had to make a phone call to book a taxi–now there are apps for that. An urgent money transfer? Use the bank's platform on your smartphone. A lengthy phone chat with a loved one in Europe? Sit down with Skype. Today, data services like voice over internet protocol (VoIP), apps and instant messaging platforms are shaping Africa's communication landscape.
data is the thing [...] it's the bomb
"Most people's consumption patterns have changed. And all that requires data, so data is the thing," says Devine Kofiloto, a freelance telecoms consultant. "It's the bomb." Africa's data revolution is in full swing, and telecoms operators both old and new are adopting different strategies – from cheap smartphones to the roll-out of 4G networks – to maintain and increase their data revenue, yet not writing voice off completely.
Mobile data usage and revenue are growing strongly in Africa and at a significantly faster rate than voice revenue, says Informa, a telecoms analysis company. The information technology giant Cisco sees Africa as the fastest-growing region in terms of mobile data traffic, for which it predicts 17-fold growth between 2013 and 2017.
David Eurin, chief strategy officer of Africa-focused telecoms provider Liquid Telecom, explains: "Globally, data grows and the data requirement for the internet grows by 40-50% per year. In Africa, it's more like 50-60% [...]. In some of our countries, we see data requirements double every six to nine months."
Companies are seeing the impact on their bottom lines. The GSM Association's 2014 Mobile Economy report showed that MTN Nigeria's data revenue had grown at a compound annual growth rate of 185% over the previous five years. South Africa's Vodacom recorded data revenue growth of 35% to R4.8bn ($344.5m) between 2014 and 2015. Informa predicts that annual mobile data revenue on the continent will rise from $8.5bn in 2012 to $23.2bn in 2018.
Made in China
Increased affordability of data-enabled devices is one of the factors Informa suggests is fuelling this data explosion. With the surge in data use, devices that are simple voice calling machines are losing their lustre, and several African operators are now selling lower-priced smartphones.
Many of these offers have been made possible through partnerships with Chinese device manufacturers such as Huawei and Tecno, says Informa. It expects the number of smartphones in Africa to rise from about 79m in 2012 to 412m by 2018 as ever more people use Facebook, Twitter, Instagram and Snapchat on their phones.
An expanding group of operators is also targeting opportunities for Long Term Evolution (LTE) – a 4G technology that is up to 10 times faster than 3G – in several African markets. According to research firm Ovum, there were already 34 LTE network deployments across the continent in February 2015. Among that group are telecom firms with existing 2G and 3G networks that are now accelerating the roll-out of 4G services. France-based operator Orange has already deployed commercial LTE networks in Mauritius and Botswana, and plans to create another five LTE networks in Africa this year.
Another batch of data-only LTE players is also arriving on the scene. With no history of providing voice services, these newcomers have bypassed 2G and 3G networks and directly built LTE networks. Examples are Ghanaian operator Surfline Communications, which launched the country's first LTE network in August 2014 and will be expanding its network after securing $30m in funding this year.
With LTE services in Nigeria, Tanzania and Uganda, Mauritius-based Smile Telecoms announced in September that it will be setting up an LTE network in the Democratic Republic of Congo in early 2016 after raising $365m in investment capital. Swiss-owned wireless broadband provider YooMee has also been very successful, launching Côte d'Ivoire's first LTE network in April 2014.
Kofiloto, the telecoms consultant, explains that most governments are now awarding data-only licences whereby new operators can only start offering voice when they have hit certain penetration levels with data: "The classic example is Ghana, where within the past two or three years we've seen the likes of Surfline and Blu Telecoms coming on board," he says.
But the evidence does not all point in the same direction. Speaking to The Africa Report last year, Bob Collymore, chief executive of Kenya's Safaricom, pointed to the company's 2014 half-year results. They showed that voice revenue had grown about 17%.
"Many European operators and many African operators, too, are seeing voice on the decline, but we are actually seeing voice grow," Collymore explained.
Russell Southwood, chief executive of the London-based Balancing Act telecoms consultancy, echoes that view: "You also have to remember that even on the most optimistic projections, the bigger countries will have 50% smartphones [as a percentage of total devices]. And then if you say there are 20-30% feature phones – which are a bit like smartphones and have internet access – that still leaves you somewhere between 30% to 70% of people still with basic phones. So it will become a two-way marketplace where different people have different devices. It's not going to be a complete [data] takeover within five years."