2017 AfricaCom Conference Review

About the event

The annual AfricaCom event was held at the Cape Town International Convention Centre (CTICC) from 7-9 November 2017, with a line-up of global thought leaders who provided interesting insights on future technology trends and market developments in Africa. The event also offered a good networking platform for industry players and essential learning opportunities. The event also marked 20 years of AfricaCom, which has become the largest ICT event on the continent.

A summary of key discussion points and take-ways from the conference is provided below.

New trends

M-commerce was notably among the disruptive technologies that were under the spotlight at the event and is expected to be far more “disruptive” than PC-based e-commerce ever was. In the next 6 years Africa is expected to lead digital solutions, with companies with clear digital strategy expected to lead the market. Among the key messages delivered at the event was the need to encourage local manufacturing companies to take a leadership position in the region. Other notable topics that were discussed included Big Data, Artificial Intelligence, Smart Cities, Digital Health, SDN & VFN, and Blockchain.

A growing trend is that of governments trying to recreate monopolies in the market, instead of creating an enabling environment for competition to thrive and intervene in markets such as rural areas, where it often does not make economic sense for private sector companies to invest. This is coupled with a growing practice by governments of treating telecoms sector businesses as cash cows. Some of the operators claim that as much as 60% of their revenues are taken by governments. The key message from the operators on this issue was that ICT should not cross-subsidise other industries, so that revenues generated in the ICT sector can be reinvested to further sector development and innovation.

A single national network model, such as the WOAN proposed by the South African government, also came under scrutiny, with operators sharing a common view that this model could be harmful for the telecoms sector. Furthermore, market regulators need to be educated on a continuous basis, in order to be able to regulate very dynamic markets effectively.

IoT and high data costs

The issue of data costs was very topical. From an operator point of view, the cost of operating a telecommunications network remains very high in many markets across Africa. Lack of proper utility infrastructure negatively impacts the operational efficiencies of telecoms operators, which in turn results in higher retail prices of data than the public and the state would like to see. Moreover, there is also the question of economic principle, with operators in most markets opting to charge for data what they can, if not constrained by regulation. More can be done in terms of trying to reduce the retail price of data to benefit users. Operators such as Safaricom (Kenya) are reviewing their data charge models to see how prices could be reduced further.

However, other operators are of the view that MNOs no longer generate large profits as they had done in the past, largely due to competition from the OTTs who have negatively impacted the price of voice services. Decreasing voice revenues do not leave the operators with much room to move when it comes to lowering prices of other products (such as data).

A panel discussion on IoT resulted in a call to use IoT to transform the telecoms industry. IoT will also help businesses to be more efficient. Africa is expected to benefit considerably from IoT, particularly in sectors such as mining, transport, tourism, health and energy. As such, security around IoT platforms needs to become a priority.

The journey to 5G

3G is expected to continue carrying most of the traffic in Africa as the technology lifespan is usually 20 years. Most operators in Africa began 3G deployment 5 to 10 years ago. However, operators should not be rolling out 2G and 3G networks in isolation. As we enter the new era of high speed connectivity, when 5G eventually arrives, the technology is expected to drive real convergence. It is believed that in the next six years, the world will be ready for 5G, with the first subscriptions expected to start early in 2022. Africa is expected to reach 2 million 5G subscriptions by the end of 2023. However, the predicted commercial launch of 5G services could be brought forward, given that by the end of 2017 the first phase of 5G standard will be completed. This will allow early adopters to launch commercial offerings, particularly in the developed markets.

Some of the speakers at the event believe that Wireless-to-the-Home technology will drive connectivity globally and not fibre, as many anticipate. Nonetheless, the deployment of fibre will continue to be essential, as it does serve specific needs in the market more effectively than wireless technologies.

Bridging the digital divide

On the need to connect Africa’s next billion, a study revealed that of the 240 countries that were part of the study, some 104 do not have broadband strategy. For African countries to grow their GDPs, they need to prioritise broadband rollout. The example of Singapore was given, which came from a historically low ICT ranking to become one of the leading countries globally by prioritising broadband rollout. Currently, Africa contributes less than 5% of the global GDP and 75% of the people on the continent do not have smartphones. Moreover, 50% of the people in Africa are still serviced exclusively by 2G networks. Several initiatives are being undertaken by various companies to bridge the digital divide in Africa. These include:

  • SmartWIFI – The hotspot service is intended to bring WiFi to rural areas, enabling retailers, hospitality establishments, petrol stations, as well as healthcare centres or schools to become a connectivity point and a digital gateway to opportunity for the surrounding population. Access can be extended to several kilometres through off-the-shelf Wi-Fi repeaters.

Project Loon – A network of balloons located at the edge of space is designed to extend Internet connectivity to people in rural and remote areas worldwide at an affordable cost. If successfully rolled out across the African continent, Project Loon has the potential to assist countries with low Internet population coverage to achieve nation-wide coverage. Connection signal is transmitted up to the nearest balloon from  a telecommunications partner on the ground, relayed across the balloon network, and then back down to users on the ground. The demonstrated data transmission speed between balloons over 100 km apart in the stratosphere and back to earth (directly to LTE devices) is up to 10Mbps.

  • The Express Wi-Fi initiative will be expanded through a partnership with Facebook in Nigeria, with the goal of connecting more people to the Internet in a cost-efficient way. Express Wi-Fi in Nigeria is focused in areas where people gather and work, including markets, cafés and public outdoor spaces.

Creating an enabling environment

African countries are encouraged to start educating rural communities, empowering them to use devices to enable growth. However, lack of access to the Internet, lack of local content, lack of spectrum, lack of affordability (costly devices) and a poor demand side (due to lack of proper education, particularly in rural areas) are some of the key issues that are contributing to the current digital divide in many parts of Africa.

Furthermore, governments are urged by the operators to create enabling environments to support innovation in Sub-Saharan Africa. For their part, some of the state governments in Africa are already taking steps to improve ICT penetration and use it as a socio-economic enabler. Examples include:

  • Namibia – Currently, Internet penetration is around 50% of the population but the country has declared access to the Internet a basic human right and wants to achieve 100% population coverage in the next two years. New investment initiatives should be announced soon.
  • South Africa – The Ministry of Telecommunications and Postal Services is urging operators to consider bridging the digital divide through the greater use of satellite broadband services, with satellite technology offering far wider coverage than terrestrial networks. It is disappointing that of the 100 satellites to have been launched globally in 2017, only five will have been launched by African states. There needs to be greater focus on the use of satellite technology in Africa.
  • Zimbabwe – The government is the biggest spender on ICT in the country and intends to accelerate mobile network deployment. The government has interest in 2 out of the 3 MNOs operating in the country. New policies have been introduced, which will encourage infrastructure sharing between the operators.

To reduce the cost of communication, initiatives such as uniform roaming charges between operators in an economic community such as SADC and joint infrastructure investment by operators should be encouraged.

Africa Telecoms

NG Telecoms Africa Summit 2017 – Africa Analysis Feedback

Africa Analysis recently attended the GDS NG Telecoms Africa Summit 2017, held at the Raidsson Blu Hotel in Lusaka Zambia, over the period 26 to 28th of April 2017. The Summit saw the gathering of commercial, operational, marketing and technical executives from telecommunications operators and service providers across Africa. The event provided a platform to discuss the various challenges that telecoms operators face in their respective local and regional markets.

The three key challenges identified by the delegates were:

  1. The network and infrastructure related issues;
  2. The customer and how to improve service and experience quality; and
  3. The future development and trends that African operators are likely to face.

In addition, the keynote address delivered by Lucy Quist, CEO of Airtel Ghana focussed on the concept of “rethinking” telecommunications in Africa and the ability to create and deliver African solutions for the African telecommunications opportunities and challenges. The presentation highlighted the need to adopt fresh approaches to content, data services, infrastructure and devices as network operators across the region begin to look at evolving revenue streams and customer expectations.

The network and infrastructure challenge

The network and infrastructure related challenges emphasized the growing reliance on offshore data centres, cloud security, and a perceived lack of vendor support.

Other key infrastructure challenges identified included:

  • 4G LTE
  • Data centres
  • Cloud
  • Offshore data centres
  • Cloud and IoT relevance given the infrastructure challenges

The main points of concern were:

  • Why are these solutions not manufactured on the African Continent?
  • Do the equipment and solutions vendors have the African operators’ best interests at heart?
  • Operators maintain the status quo and new technologies and services such as 4G/5G will be irrelevant if it is constructed on a broken system implying that it will not be sustainable.
  • Services such as cloud and IoT will require operators to fix current problems and challenges.

Operators also highlighted the fact that operators also faced challenges as to political and regulatory stability noting that in certain instances network roll out projects were derailed by government or competitor intervention.

The customer experience challenge

The central theme of the discussion was the ability of network operators to be able to better understand their customers to deliver a better service. At the heart of this was the ability to leverage technology and services such as cloud and data analytics to get to know the customer better. However, operators will need to first develop a brand and loyalty before being able to implement cloud and big data services.

The future

Discussions concerning the future of the network operators in Africa focussed on:

  • Partnership and monetization potential of the over the top (OTT) players
  • Internet of Things (IoT) – the revenue potential and expected growth
  • Bandwidth demand and its growth
  • LTE – the upgrade path and the business case

The OTT services across Africa present operators with a threat and an opportunity. Many operators have sought to embrace the OTT players and have zero rated the data services of these players to entice additional customers and demonstrate value add for their customers. Others have attempted to offer OTT like services in the form of their own platforms. However, the real challenge for the operators has been the ability to monetize or grow their revenue from these services.

The IoT market presents another revenue growth opportunity. However, operators will need to ensure that they have the right platforms and ecosystems in place for these services to gain traction.

A key concern has been the massive growth of bandwidth consumption across the region. Operators find themselves caught between a rock and a hard place as they face pressure from consumers and regulators to reduce the cost of data services while costs of bandwidth decline, forcing them to offer more bandwidth at the same rates with a resultant growth in data consumption.
The development of 4G/LTE in Africa will depend on the ability of operators to develop a solid base and business case for their existing 3G networks.

Africa Analysis Assessment

The NG Telecoms Summit brought many challenges being faced by network operators to light. However, it appears that these challenges and opportunities are viewed as being separate from each other. Operators need to view the evolution in the communications services as part and parcel of the growth of services in Africa.

End users will become more sophisticated and demanding in services being consumed and the associated costs. This presents operators an opportunity to push more advanced services into the market and begin to re-align their roles from being the mere pipe or conduit for services to being the enabler of application and content. It is at the application and content point of the services stack that Africa can begin to create unique and tailored services to meet local demand.

In addition, the development of future platform and technologies such as 4G/LTE and 5G will depend on the operators and their ability to develop sound business cases for 3G to use as a foundation for these technologies.


IoT Pic

South African IoT/M2M Market Opportunity for Network Operators

The global IoT/M2M installed base is expected to reach between 12.5 and 13.3 billion by 2020, and show a CAGR of over 20% over the period 2015 to 2020. In South Africa, we forecast that the IoT/M2M installed base will reach 35 million by 2020, showing a CAGR of 32% over the same period. While these numbers grab many headlines, network operators need to recognise that their revenue opportunity will come from managed connectivity, which accounts for roughly 20% of the IoT/M2M service revenue, and not the connectivity itself. Revenue earned from connectivity itself, only accounts for around 11% of the service revenue.

Global Outlook

Network operators (mobile, fixed and wholesale) have started to turn their attention to the rising Internet of Things (IoT) and machine-to-machine (M2M) opportunity. Global predictions vary, with some reports such as the IHS Markit showing that the number of IoT/M2M connections is expected to rise to 12 billion while IDC have reported that IoT/M2M connection will rise to 28 billion by 2020. This range illustrates the challenge in forecasting a rapidly growing market.


For example, the following chart shows a comparison of the various global forecasts of the installed base:

2017 Global IoT Installed Base Forecast

Forecasts made in 2016 and 2017 for the 2020 global installed IoT base, show that the installed base is expected to reach between 12.5 and 13.3 billion. Most forecasts show a CAGR of over 20% over the period 2015 to 2020.

The South African IoT Connectivity Development

In South Africa, as in the rest of the world we can expect to see the Low Power Wide Area Networks (LPWA) IoT battle lines drawn along technology. The LPWA platforms include Extended Coverage GSM for IoT (EC-GSM-IoT), Long Term Evolution Machine Type Communications Category M1 (LTE MTC Cat M1, also referred to as LTE-M) and Narrowband IoT (NB-IoT).  In the first camp the main protagonists will be the mobile network operators, such as MTN and Vodacom, both of which have announced IoT plans based on LTE narrow band technology, using licensed spectrum.  On the other side, will be the LPWA platforms such as Sigfox, backed by Dark Fibre Africa subsidiary SqwidNet, using unlicensed ISM bands.

The mobile network operators will position their services based on service quality as their ability to manage the spectrum will ensure a quality service for the enterprise. The mobility factor will see applications such as the “connected car” and vehicle tracking being among the major drivers of IoT/M2M uptake for the mobile operators. Providers using platforms such as Sigfox will opt to focus on volumes, low power and short transmission distances to offer services and solutions for more static applications such as smart metering and utility services.

Forecast of the South African IoT Installed Base

Africa Analysis forecast that the installed base of IoT/M2M connections will rise from 8.8 million in 2015 to 35 million by the end of 2020, showing a CAGR of 32%.

  • A large slice of the market will be found in the LPWA technology, rising from around 290 thousand in 2017 to over 19 million by the end of 2020.
  • Other technologies such as mobile cellular, Wi-Fi will retain a steady growth of 14% and 11% respectively over the forecast period. Mobile cellular will rise to 8.7 million connections and Wi-Fi will rise to 7.4 million.
  • Satellite services will retain some importance in the local IoT/M2M market but the applications will be restricted to a niche market such as aviation and rural areas.

Network Operators and the IoT Service Revenue Stack

The forecast of the large installed base of IoT/M2M connections sounds very attractive, and these big numbers grab a lot of attention. But the sad reality is that the connectivity revenue opportunity for just proving network connectivity is limited. In 2016, the connectivity portion of the IoT revenue stack accounted for around 11% of total revenues. The lower cost of connection and the associated downward pressure on data tariffs will continue to keep this contribution under pressure.

The attractive revenue for network operators is found in the stack of services associated with connectivity. For example, managed connectivity accounts for roughly 20% of the IoT/M2M revenue.

Given this, we expect that IoT deals will likely to be driven by volumes that will see network operators sacrificing some of their connectivity margin to secure contracts.  However, this basic element of the stack will see operators use connectivity as a foundation to offer managed connectivity services. This way, the MNOs will be able to take advantage of both the basic and the managed connectivity services, thus increasing the portion of total revenue they will be able to access in the IoT environment.

Those network operators with the necessary resources are able to push themselves further up the value chain and possibly offer more complex services such as integration, which accounts for around 47% of total revenues while application development will account for around 22% of total revenues.

Contact Richard Hurst, Africa Analysis, for more information on this topic.

Data allowance, voice and messaging

Mobile Data allowance, Voice and Messaging Trends

The adoption of smart phones and the associated consumption of data is creating significant changes to the revenue mix of mobile operators. The trend in consumer adoption of messaging and calling apps is reported in Nokia’s recently completed 2016 Nokia Acquisition and Retention Study.

Data allowance

Voice and SMS revenue has been declining steadily for many years, largely due to the emergence of data-consuming messaging and calling apps. Although the usage of these apps differs by market, most consumers globally still prefer to use traditional phone services for making calls.

  • Consumers avoid using apps on the mobile network for three main reasons: data allowance, cost and speed.
  • Within transition markets, purchasing an additional amount of once-off data remains the most popular option for consumers, at 44%. This is particularly pronounced in South Africa, at 61%, but less so among Mexican consumers, at 30 percent.
  • Consumers from South Africa (36%), Mexico (30%) and Brazil (32%) are willing to pay for access to Wi-Fi hotspots from their operators.

Voice and Messaging

  • Globally, the use of messaging apps is far more common than calling apps.
    • The use of messaging apps is particularly popular in transition markets where 86% of consumers claimed to use them. Furthermore, 47% of all consumers in transition markets use messaging apps more often than traditional SMS services.
    • The total number of consumers using voice apps is considerably lower than the use of messaging apps. 74% of consumers globally still rely solely on core operator services for making and receiving calls.
    • IInterestingly, 45% of consumers use these apps even more than their phone service. This is driven by markets such as Brazil (46%), Mexico (56%) and South Africa (50%).
  • Globally, 74% of consumers don’t use voice and calling apps. Only 8% of global consumers use these apps more than their phone service, and another 8% use voice and video apps as much as traditional phone services.
  • In South Africa, 9% of mobile users use calling apps more than traditional phone services.

The following chart shows the app usage in different types of markets:

Source: 2016 Acquisition and Retention Study

Nokia 2016 Acquisition and Retention Study
The Nokia 2016 Acquisition and Retention Study has been designed to help mobile operators understand current trends in consumer behaviour, in order to make more informed decisions when developing acquisition and retention strategies. The focus of this extensive study is to uncover the core drivers of customer retention by providing detailed and granular insights around consumer perceptions, causes of dissatisfaction and the likelihood to churn across several scenarios.