Telecommunications has transformed Africa from a continent where you would struggle to find a phone just 10 years ago, to the fastest growing mobile market in the world.
Even with the current economic downturn, it is expected that telecommunications in African will continue to develop faster than any other region 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 region.
"Even with great disparities between African countries, overall penetration rates remain low and there is significant room for expansion," says 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," says Julia Lamberth, co-leader of Ernst & Young's Global Telecommunications Center – Africa (GTC – Africa). "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."
Despite a commitment by the telecommunications 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.
Other key findings of the survey include:
* Profitably and return on investment are favourable indicators for many African operators
* 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
* The East African region is seeing increased focus as a significant growth area. The Horn of Africa has lagged behind the rest of the continent in terms of mobile penetration, but a more responsive political environment could unlock additional growth.
* Large, mainly single country, operators, such as Globacom and Safaricom, have the potential to challenge the established regional operators. By leveraging their considerable existing operations, they have the opportunity to expand regionally through acquisition or by competing for new licenses.
* Finding and retaining key skills remains a key challenge for operators.