Spirit of innovation driving growth in Africa

African telecoms operators have faced several challenges in 2009. The global economic downturn, a fiercely competitive landscape, and pressure to expand networks into rural areas have tested the mettle of the region’s carriers both big and small.

And yet, forecasts from Informa Telecoms & Media show that mobile subscription growth is still set to increase by 26.6 per cent year on year in 2009, with the total number of active subscriptions to exceed 473 million by the end of the year.

This figure is projected to increase to approximately 800 million by 2014, by which time SIM penetration across the region should reach 70 per cent, the analyst predicts.

“African operators have always recognised the need for innovation in meeting the demands of a low-income population, but the need to stand out from the crowd and differentiate from one’s competitors is taking this requirement to a new level,” said Nick Jotischky, Informa’s principal analyst covering the Middle East & Africa.

Chris Gabriel, chief executive officer of Zain Africa is delivering the opening keynote on day one of the Africa Com event, “Reassuring Operator Strategies in Challenging Times,” which focuses on Africa’s innovative spirit in the telecoms market.

“There is still plenty of growth potential in Africa,” said Gabriel. “The rules of the game have changed with a paradigm shift from customer numbers to customer value (share of wallet) and business models must adapt to optimising asset utilisation through right sizing, outsourcing and infrastructure sharing.”

Gabriel believes that collaboration between regulators, industry players, carriers and vendors is key to success in creating new products, services, ventures and partnerships, and the potential for future growth remains.

Indeed, a sign of the harsh operating environment facing African telecoms firms is the need for operators to manage their costs and maintain margins. Informa’s Jotischky notes that offsetting the ongoing fall in voice revenues is becoming central to operator strategies across the world. Not only are data services important as an income generator, but they are also useful as a customer retention tool. Investing in infrastructure to provide reliable data services to corporate and consumers will also be a focus of discussions.

“Those operators that adapt to the increased intensity of competition and the evolving role of communications will be best suited to surviving a dynamic but harsh operating environment,” said Jotischky.

In fact, there is a great deal that the African communications sector can teach the rest of the world’s telecoms markets. “There is great potential and value in emerging markets – relevant, affordable and localised products and services together with a lean optimised business model are key to creating value in low ARPU markets,” said Gabriel.

But there is also likely to be more consolidation ahead. Despite the failure of a number of big potential mergers in the region, Gabriel expects that in the medium term just three to four major players will emerge in the market and few medium scale operators will remain. “Scale is king,” Gabriel added.