The outlook for the African telecommunications market in 2014.
Despite some difficulties and constrained environment related to political instabilities,
regulator pressure, the escalation of cost to do business in Nigeria, Overall, operators
in the region recognize the opportunity
and have expressed openness to market consolidation. In fact year-on-year, it
is obvious that, smartphone ownership
explodes , telecom users become more sophisticated in their use of mobile
applications and the ongoing rapid deployment of 3G networks across the
continent and the fledgling expansion of LTE services as key drivers of this
growth
in content are effective.
Connectikpeople.co has captured for you the IDC's Africa Telecommunications
Market Top 10 Predictions for 2014, as presented in a Webinar.
1. Enterprise Mobility Holds Promise, but Strong Growth Is Yet to Materialize.
Despite the publicity surrounding enterprise mobility, IDC does not expect
the uptake of such services to take off significantly during 2014, at least
where mobile service providers in the African market are concerned. Current IDC
research indicates that the key issues affecting enterprise mobility adoption
in the region relate to the cost of deploying these services and the quality of
local connectivity. Despite the growth in 3G deployments and commercial LTE
services in the region, the coverage of these networks is relatively limited,
and the quality of networks is not up to the standards required for enterprise-grade
connectivity. Furthermore, mobile data costs in Africa remain relatively high,
which has created legitimate concerns around the cost of implementing
enterprise mobility solutions within end-user organizations.
2. The Lines Between IT and Telecommunications Services Will Become
Increasingly Blurred. IDC expects an increased
number of African telecom providers to actively pursue IT service strategies in
2014. While several African telecom providers have taken advantage of the
IT–telecom convergence trend, most have yet to introduce enterprise-related
solutions beyond basic voice and data services. However, the slowing growth in
consumer segment revenues, exacerbated by price wars and intense competition,
has placed unprecedented pressure on the top-line revenues of telecom
providers. IDC believes that the best alternative for countering this trend
lies in telecom service providers enhancing their IT–telecom convergence
offerings.
3. Verticalization Will Be a Key Differentiator in 2014. Most telecom service providers have successfully delineated the enterprise
segment by enterprise size, and solutions targeted at small, mid-size, and
large enterprises are well established. However, current service offerings are
standardized, with very little attention given to the specific needs and
requirements of different vertical segments. In fact, it is often left to
end-user organizations to customize and contextualize service offerings to the
unique business needs of their particular vertical sector. Verticalization,
therefore, is a key area of differentiation that remains untapped by telecom
providers in the African market.
4. Fiber Strategies Will Move From Backhaul/Backbone to fiber to the
"x" (FTTx). IDC expects the motivation
for terrestrial fiber rollouts in Africa to change in 2014. Specifically, FTTx
deployments will become an emerging reality in the region. The coastal arrival
of several undersea cables over the past five years has increased bandwidth,
lowered the cost of Internet access, and driven deeper Internet penetration in
Africa. While governments have made some efforts to increase terrestrial
connectivity, this responsibility has largely been left to telecom operators.
As a result, the expansion of terrestrial fiber connectivity has been slower
than expected. In countries like South Africa, Kenya, and Nigeria, fiber
backbone rollouts have intensified, but this has been achieved mostly for the
internal use of telecom providers themselves (particularly to backhaul voice
and data traffic). Even with independent fiber providers such as Dark Fiber
Africa in South Africa and MainOne in Nigeria entering the market, most of the
continent's terrestrial fiber has been provided to telecom providers for
backhaul and backbone purposes. IDC expects to see a shift in the focus of
terrestrial fiber rollouts in 2014, with telecom service providers expanding
their current fiber infrastructures to offer last-mile, enterprise-grade
connectivity to enterprises.
5. A Shift in Business Models Will See Operators Transform into Multisector
Operators. Telecom operators in Africa have generated the
bulk of their revenues from voice and data connectivity solutions. In
particular, most operators have provided data connectivity on a 'dumb pipe'
basis (i.e., simply ensuring bandwidth provision and network speed). But they
will be drawn out of their comfort zones in 2014 and compelled to offer
cutting-edge services such as TV, financial services, content stores (that are
not third-party owned), and other media services. The advent of OTT services
has resulted in service providers losing out on a notable chunk of
communication services revenues, while the commoditization of both data and
voice services has also resulted in slower revenue growth for African telcos.
In an effort to counter these losses, IDC expects providers to branch out of
their traditional voice and data connectivity services and offer
telecom-related services to the finance, retail, health, education, and
agriculture sectors.
6. Greater Rural Connectivity Will Become a Reality in 2014. The growing availability of locally developed and highly functional
devices in Africa will be central to addressing the issue of device
affordability in the rural market segment. In line with this, 12 African
governments have revised and finalized their national ICT policies and are
expected to begin implementation during 2014. Common themes across these
revised ICT policies include the drive for rural communication, guidelines on
the use of universal access funds, the establishment of public–private
partnerships, and incentives for telecom operators looking to rollout rural
networks.
7. Governments Will Become Important "Customers" of Telcos in
Africa. IDC expects to see more active partnerships between government agencies and
telecom firms in 2014. Indeed, governments are expected to be key customers of
telecommunications services in 2014. For example, the central Kenyan government
has recently been devolved into 47 county governments across the country. This
is expected to boost demand for connectivity solutions among government
institutions, small office/home office (SOHO) entities, and individuals
relocating to the newly defined regions in the country. At the same time, the
Rwandan government is implementing a new national ICT policy, while in Senegal
the government is pushing for the digitization of education, health, and public
services. Implementation of South Africa's broadband policy is also expected to
kick off during 2014, and the government will be at the forefront of propelling
access to local content and services. Meanwhile, the governments of Morocco and
Kenya are also directing various state-driven ICT initiatives. IDC believes
that the increased investment in ICT services by regional governments will
present a strong business opportunity for telecom providers in Africa during
2014. IDC also expects to see closer collaboration between government and
telecom companies in ICT-driven socioeconomic development initiatives during
2014.
8. The Role of Telecommunications Companies in the IT Convergence Space Will
Change from Foe to Friend. African telecom providers
have made notable but unimpressive inroads into IT services provision. The
strategies of most telecom companies operating in the IT–telecom convergence
space have been focused on building internal IT capabilities, and the available
options for mergers and acquisitions have been few and limited. Additionally, a
degree of skepticism exists in the enterprise segment about the IT capabilities
of telecom service providers. Conversely, telecom companies in Africa enjoy
stronger brand awareness than most tier 2 and tier 3 IT service providers.
Telecom companies also have a large addressable enterprise customer base
through their voice and data connectivity offerings, and offer IT service
providers a viable, alternative channel to market. Due to these factors, IDC
expects to see greater collaboration between IT service providers and
telecommunications companies in 2014.
9. Market Consolidation Will Increase in 2014. IDC
believes that the African telecommunications market is ripe for consolidation,
given the current imbalance in competitor dominance across most markets in the
region. At present, only Airtel's ongoing acquisition of Warid Telecom in
Uganda is an example of such consolidation. In 2013, Vodacom and Neotel in
South Africa announced talks on a possible merger, while Telkom Mobile also
announced it was exploring options to reverse its losses, including a possible
merger with one of the country's local players. Other leading operators in the
region (e.g. Airtel Africa, MTN, and Cell C) recognize the opportunity and have
expressed openness to market consolidation. Indeed, as markets become
increasingly crowded, growth rates decline and spectrum availability becomes
even scarcer. Consequently, IDC expects to see a stronger push for market
consolidation by telecom providers in 2014.
10.
The Nigerian and South African
Markets Will Remain Ripe, But Not for Consumer Services. Historically, Nigeria and South Africa have been identified as two of the
most lucrative markets by companies looking for a launch pad into Africa.
Nigeria has been favored for its high growth potential, while South Africa has
been considered to possess a sound and effective business environment. However,
Nigeria is plagued by numerous challenges, including poor infrastructure (which
often results in very high operating costs), and ineffective private and public
business systems that generally create a challenging operating environment. The
cost of doing business continues to escalate, and with ongoing political
instability and an aggressive regulator demanding lower termination costs and
improved customer service without releasing the required spectrum, market
complexities continue to escalate in the country. Indeed, operators that have
braved the market, such as MTN and Airtel, are starting to feel the negative
effects of doing business in such a constrained environment. South Africa, on
the other hand, is generally more of an unregulated oligopoly. Operators that
entered the market post-2005 have struggled and, in IDC's opinion, will
continue to struggle to gain a notable foothold in the market for the
foreseeable future. There is also no indication that the status quo will
noticeably change in the short term. However, when evaluating the enterprise
segment in South Africa and Nigeria, the above challenges appear minimized.
Global multinational corporations (MNCs) still maintain a presence in these
countries, and in terms of the local enterprise segments, these countries hold
significant revenue potential for established MNCs.