Africa mobile sector facing growth challenges

A report on mobile telecommunication growth in Africa has identified high taxation, low income, illiteracy, unreliable electricity supplies and corruption as the major challenges to the sector's growth and development.

The Africa Mobile Factbook 2008 shows that many African mobile markets, especially in East Africa, have high-tax models, with charges applied to both the usage and the sale of mobile phones. Currently, East Africans pay taxes of 25 percent to 30 percent on mobile phone services, compared with an average of 17 percent across Africa. Kenya, Tanzania and Uganda have levied excise taxes at 10, 7 and 12 percent, respectively.

The report highlights the fact that Tanzania and the Democratic Republic of Congo are the only countries in Africa that still impose customs duty on imported mobile handsets, making the cost of handset ownership prohibitive for many individuals.

The report, published by Africa and Middle East Telecom Week, further notes that the low income per capita in many African countries will hamper the growth of any kind of advanced mobile industry.

"If there are not enough subscribers to make value-added services viable, operators will not invest in network upgrades, which, in turn, will hold back market development," the report states.

Regarding illiteracy, the report states that the illiterate population finds it difficult to use even basic data services, such as SMS (Short Message Service). SMS is identified as the major value-added service offered by many mobile phone companies across the continent.

To boost growth, the study suggests the subsidization of handsets or the bulk supply of inexpensive handsets, which would encourage low-income earners to adopt mobile services. Mobile operators are also expected to work with manufacturers, or to enter into manufacturing themselves, to bring handset prices down.

The African mobile market is dominated by MTN, Vodacom, Zain, France Telecom and Orascom. MTN has the largest market share with more than 73.9 million subscribers, followed by Vodacom (33.4 million), Orascom (32.4 million), Zain (30.6 million) and Orange (27.7 million). At the end of 2007, there were 280.7 million mobile phone subscribers in Africa, representing a penetration rate of 30.4 percent.

Prepaid offerings, the continued liberalization of the telecom sector and the expected uptake of 3G (third-generation) services have been identified as major contributors to mobile growth.

African governments have embraced the liberalization of the sector, slowly selling their stakes in telecom companies. Tunisia, for instance, has already launched the tender to privatize Tunisia Telecom, and major companies such as France Telecom and Telecom Italia have already submitted bids.