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Regulatory Problems Still Haunt African Telecoms Growth
Fitch Ratings says in a special report released today that Africa's telecommunications sector is set to continue to grow and eventually undergo a consolidation phase.
"Africa's mobile telecoms sector has enjoyed remarkable growth and despite the current global economic slowdown the continent's communications industry is expected to continue to grow faster than other developing markets" says Apostolos Bantis, Associate Director at Fitch's European TMT Group.
Government intervention, uncertain regulatory and political regimes, and poor network infrastructure are some of the key issues that will continue to challenge most telecom players in the region. In Fitch's view, as the market is becoming more competitive and operators are looking for new growth acquisition targets, Africa's telecoms sector is set to undergo some major consolidations.
Today Africa is clearly a mobile continent. However despite the rapid growth of mobile telephony in recent years, mobile penetration, of c.35%, remains very low providing significant new business opportunities. The development of fixed-line telephony has remained stagnant and only about 5.5% of Africa's population has access to the internet. Clearly, the future of Africa's telecommunications development depends heavily on fixed-mobile converged technologies.
Delivering low-cost services at profitable rates will remain challenging for most African operators who are rushing to establish a presence in some of Africa's least tapped but very poor markets, as profit margins and average revenue per user (ARPU) are beginning to fall. The cost of telephony and internet access in Africa is very expensive relative to other developing markets, however the gradual liberalisation of the market and rise in competing mobile operators have prepared the way for cheaper connections.
The development of Africa's telecommunications sector is vital to the continent's socioeconomic growth but requires significant capital. Several African governments are progressively opening up the telecoms sector to foreign investors, although much more needs to be done to attract new investment.
The full report can be downloaded from the Fitch Ratings website (registration required).
Posted to the site on 9th March 2009