Africa telecom firms face hard times

  1. Posted on Thursday 14 May 2009 - 11:00
    accreporter
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    Kent Mensah, AfricaNews editor in Accra, Ghana Photo: photo:Kevinzim
    Telecom firms face hard times ahead as a telecom consultancy firm predicts that their average revenue per user (ARPU) levels in Africa would drop by half in 2013. The Arpu will drop from $12 today to $6 in Sub-Saharan Africa by 2013 and that poses major challenges for operators, the report added.
    mobile_phone_photo:kevinzim
    “In fact the most recent growth has come from emerging markets with high population and relatively low rates of penetration, such as sub-Saharan Africa and South Asia for these telecom firms,” Oliver Wymann said in its report on itnewsafrica.com.

    The report explained that these regions are where future growth in mobile market lies, as they are expected to contribute 44 per cent of mobile subscriber net additions through 2012. “Obviously, adding more subscribers will generate further economies of scale. But scale alone will not be sufficient to sustain profitability and master the low-Arpu challenge,” said Joerg Hildebrandt, a Dubai-based partner of Oliver Wyman who led the low-Arpu study.

    The challenges for sub-Saharan Africa are considerable. “In most sub-Saharan markets, per-minute prices are still high relative to the purchasing power of the population. A customer with a budget of $1-2 per month for telecom services will only be able to make 6-12 minutes of outbound calls per month,” Hildebrandt said.

    “Such low usage levels will not provide incentives for poor segments in Africa to invest in a handset and Sim card.” African countries have seen a spree of new licencees over the past two years, which will intensify competition and drive down prices in most major markets.

    Yet lowering prices will cannibalize current voice revenues in the short term, the report added. African operators are bound to lose a significant portion of voice revenues generated by the high-income segment. These customers represent 40 per cent of their revenue today, and are not budget-constrained; hence price elasticity is likely to be too low to prevent Arpu erosion for this segment.

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