Delta Partners, a leading telecommunications management advisory and investment firm, says that the Middle East and Africa region has been the world’s fastest growing in terms of mobile penetration growth.
In its latest white paper entitled: “Mobile Broadband in MEA: Promises opportunity but not a smooth ride” – Delta Partners assesses the potential and risks for Middle East and African mobile operators to develop their data offerings – amidst a market that is developing an insatiable appetite for connectivity.
“The Middle East and Africa region has been the world’s fastest growing region in terms of mobile penetration growth in the recent past,” says Daniel Torras, a principal at Delta Partners’ Johannesburg office. “In addition, fixed line penetration has stagnated at around 4% across Africa, which is further driving the growth of mobile on the continent.”
The lack of fixed infrastructure coupled with high costs of service provisioning has severely hampered the development of broadband such as ADSL, particularly in Africa.
“Interestingly enough,” says Torras, “owing to coverage restrictions and a lack of bandwidth, large parts of the region still witness connectivity delivered via satellites.”
According to the white paper, two key developments are expected to change the existing telecoms and broadband landscapes.
“Firstly, improved international connectivity, which comes as a result of the various submarine cables being laid on both the East and West coasts of Africa, will enhance bandwidth and lower prices over time,” Torras points out,
“Secondly, mobile operators aggressively developing their 3G networks to go beyond their core voice offerings will result in enhanced availability of high speed networks. Broadband is increasingly seen as the growth driver for mobile operators and the mechanism towards creating the stickiness factor particularly for retaining high value customers.”
Nearly 70% of the broadband services in the Middle East and, particularly, Africa will in fact be delivered over wireless networks by 2011 – up from about 38% today.
This will translate into significant growth potential for mobile broadband across the region, with subscribers expected to grow from 2.5m today to about 40m in 2011.
“It will represent a market worth around $6bn in 2011 – versus $1bn today,” he adds.
However, key risks exist especially due to high CAPEX investments required. This is particularly true for late entrants who struggle to capture minimum scale in order to recover their investments. To be able to drive success, there are a number of suggestions the late entrant broadband player should consider.
“There are a few success factors operators should consider, such as gaining access to international connectivity at competitive prices, an efficient network operation and developing an effective go-to-market approach,” says Torras.
“Operators can invest in undersea cable projects to ensure competitiveness, make informed urban/rural rollout decisions and even consider 3G network sharing in some regions.
“Setting up a dedicated customer care channel and targeted value proposition can also go a long way in ensuring customer development and retention. This is especially important as high-value customers in MEA tend to constitute only 10-20% of the subscribers but 50-60% of the revenues,” he concludes.
