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Posted on Friday, 16 March 2012 15:40

Telecoms: Ringing up profits

By Gemma Ware

Telecoms operators are slowing their price wars and rolling out new products as the mobile market becomes more saturated.

photo/ reutersWith 649m connections, Africa is now the world's second largest mobile phone market, according to the GSM Association.

This growth has fuelled the rise of telecoms within The Africa Report's Top 500 ranking, with total revenue from telecoms firms on the list more than doubling from $34bn in 2006 to $78bn in 2011. 

The sector is a huge employer, with an estimated five million people working in the African telecom ecosystem. 

The share of telecoms companies' revenue in the Top 500 fell from 12.4 percent last year to 11.3 percent in this year's ranking. 

The startling growth figures of the past decade have turned more modest as penetration levels stopped climbing. 

Companies are building their growth strategies around data services such as mobile internet. South Africa is so far the biggest market for mobile data, where data accounts for 10.4 percent of MTN's (#22) average revenue per user (ARPU), but just 2.1 percent of MTN Nigeria's (#26) ARPU.

Analysis by ICT consultancy Balancing Act shows that data revenue is not yet replacing the money lost from reduced voice traffic. 

Still, the next price war will be on data promotions: Vodacom South Africa (#14) announced it was cutting the price of prepaid data bundles by 87 percent between November 2011 and January 2012.

While MTN Group's (#4) subscriber base grew to 158.6m in September, it was facing trouble in Nigeria, where it has 41 million subscribers.

A badly run process of registering SIM cards has slowed subscriber growth. Regulators also warned MTN, Globacom and Airtel Nigeria (#147) in late 2011 that they wouldface sanctions if they do not improve service quality.

The next big test for operators will be how to make money from mobile payments.  

Bharti Airtel, which bought Zain's Africa assets in 2010, features on our ranking through its local entities. Although the company reached 50 million African subscribers in November, its operations are struggling to make money.

The Africa Report's Top 10 Ranking of Telecoms in AfricaAfrican ARPU is falling and the division reported a net loss of R4.27bn ($80m) between June and September 2011.

Unbowed, Airtel plans to open 2,200 shops across Africa in 2012 and announced a two-year exclusivity deal with Samsung for certain handsets. 

The telecom price war cannot continue forever. In November, after Kenya's Safaricom(#126) announced a 47.4 percent drop in net profits for the first half of 2011, chief executive Bob Collymore announced it would raise call tariffs for the first time in its 11-year history. 

The profits of floundering South African operator Telkom (#27) dropped 36 percent in the first half of 2011. Facing declining revenue from its fixed-line business, Telkom's mobile brand 8ta has also struggled in a highly competitive market place and could struggle to make profits by its target of 2016.

In October, Telkom announced it was in talks to sell a 20 percent stake to South Korean operator KT Corp for around $600m. 

African assets are also proving attractive to European telecom operators. France Telecom is expanding its footprint to Morocco through a 40 percent shareholding in Médi Télécom (#197).

There could also be a bidding frenzy ahead for the assets of Libya's LAP Green, which operates in Zambia, Uganda and Rwanda. 

This article was first published in the 2012 February edition of The Africa Report, on sale at newsstands, via our print subscription or our digital edition.

Also Read:

Africa: 3G, 4G and the speed of evolution

Telecoms: Smart money is on Smart phones

Mobile phone banking and remittances: An African boom

Ethiopia launches ICT Park, after Kenya

Africa: Fast internet is coming!

Huawei, ZTE eye Ethiopian telecom

Africa Company Outlook: turbulence

Mining: Prices up, production down

Oil and Gas ranking: Gas is power

Air travel: Business class "Best in show"



Last Updated on Monday, 19 March 2012 14:58

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