Touch Points by Steve Finikiotis

Africa is leading the world in annual growth among mobile users. In markets where we’re working, penetration is still under 35% while annual growth has been over 50%.  In a continent of 800+ million potential mobile users there are only about 80 million users today, making it one of the hottest global markets in any industry.  This breakneck growth is leading to some interesting developments…

To add some perspective, there is only about one landline per 33 people in Africa and that’s unlikely to change much given the high cost of installing fixed lines in the continent’s vast, remote regions. However, mobile networks are relatively easy to install and maintain.  Thus, mobile phones have become the primary communication channel throughout the sub-Sahara.

The large transnational telecoms, hungry for growth and finding saturation elsewhere, are quickly swooping in to the region hoping to grow their user bases.  Mobile operators are investing millions of dollars in  extending their coverage across the continent.  And as competition grows, they’re pouring millions more in to expand and fortify their networks.

This injection of capital is creating jobs and raising living standards in the region, and this is only the beginning.  It certainly feels like we’re at an inflection point and the socio-economic impact will be enormous.

But the African market poses some vexing challenges to operators. First, they’ll need to help the continent’s large base of very low income consumers to overcome the cost barrier of using mobile services.  Bottom line: these consumers who make under $2 a day need lower cost handsets.

Operators have been working with handset makers to produce units for as little as $15 USD. Refurbished handsets, recycled from other markets, are bringing prices down further.

Low income users are mainly interested in a phone’s basic functions—voice calls and SMS text messages—and little else. For them, battery life – especially in regions with unreliable electricity – is more important than ring tone options.

But, low income users are “leapfrogging” to mobile banking which I’ve mentioned previously.  Mobile phones are now being used in developing cash economies to pay for things or transfer money across distances. The implications of the rise of m-banking and other mobile-based services among low income users is enormous.

Meanwhile, mobile operators must also compete for higher income users. They’re rolling out and bundling higher end products like managed data services, Blackberry, WiMax, 3G and more – all of this while reinforcing their infrastructures and business processes to deliver higher service quality and reliability.

It gets even more interesting.  Most of the people who are gaining access to communications and the Internet via cell phones have no other way to access the web, unlike developed country where cell phones are used mainky for voice with Internet access being an occasional activity.

Reliance on mobile devices for Internet access means that content developers in Africa, like other emerging regions, see mobile devices not as a substitute for their desktop, but as a primary data platform.   We’re already seeing some promising examples of voice-data convergence aimed at this growing market. We may witness the first wide-scale convergence applications coming from Africa and other developing markets.

I’ve worked with some talented, dedicated people in the region’s telecom sector.  The speed with which they’re adaptaing to the market’s growth has been impressive.  They’re making strides in building their management capabilities and business processes to meet rising consumer demands.

It’s an exciting time to be working in this market. I can’t think of a more interesting, fertile business environment today than Africa’s nascent telecom sector.  It’s a veritable hothouse for business innovation on so many levels.