African Telecoms Growth to Persist, Says Ernst & Young

Ernst and Young reports that telecommunications has transformed Africa to the fastest growing mobile market in the world, and even with the current economic downturn, it is expected that the region will continue to develop faster than any other over the next three to five years.
This is one of the key findings of Africa connected: A telecommunications growth story, Ernst & Young’s first telecommunications study focused on the African continent, based on interviews with global and regional operators across the continent.
“Even with great disparities between African countries, overall penetration rates remain low and there is significant room for expansion,” said Vincent de La Bachelerie, Global Telecommunications leader for Ernst & Young. “Those countries that have established independent regulators and switched to unified licenses are likely to find themselves at the forefront of African telecommunications.”
Past growth has been driven by increasing numbers of subscribers, all using basic voice services. Future expansion is expected through the variety of services on offer.
“The construction of new submarine cable systems is likely to have a fundamental impact on African telecommunications,” said Julia Lamberth, co-leader of Ernst & Young’s Global Telecommunications Center – Africa (GTC – Africa), at a press conference last week. “The availability of more reasonably priced bandwidth could open up the market for cheaper connectivity across the continent and create a platform for a new era in African communications.”
Serge Thiemele, Francophone lead for the GTC – Africa, adds that while opportunities for operators on the continent are expanding, the market is expected to see substantial consolidation in the next few years.
“Large regional and multi-national operators are actively pursuing acquisitions across the continent to consolidate their positions in African telecommunications,” he says. “Operators that have African experience should have a decided advantage over new entrants. Complexities in dealing with multiple regulatory environments and rolling out and maintaining infrastructure in challenging environments is not something that can be learned overnight.”
 The firm says that despite a commitment by the telecoms industry to the African continent, there remain significant challenges to overcome. Operators interviewed in the study highlighted regulatory and political uncertainty, rising levels of competition and a lack of reliable infrastructure as their main external challenges.
The study found that profitability and return on investment are favourable indicators for many African operators; that affordability is a key issue, with the cost of telecommunications in Africa remaining amongst the highest in the world, opening the door for low cost operators in the future; that the East African region is seeing increased focus as a significant growth area, having lagged behind the rest of the continent in terms of mobile penetration, but that a more responsive political environment could unlock additional growth.
It also established that finding and retaining key skills remains a key challenge for operators; and that large (mainly single country) operators, such as Globacom and Safaricom, have the potential to challenge the established regional operators, having the opportunity to expand regionally through acquisition or competing for new licenses by leveraging their considerable existing operations.