Monday, July 20, 2009

East Africa Serves as Laboratory for Competition in the Telecoms Industry

The top mobile markets in East Africa and the Indian Ocean islands are amongst the most liberalised on the continent. The top three markets are Kenya, Tanzania and Uganda and they all have about 10 million subscribers.
Each of these three markets has been a laboratory for competition. For example, Tanzania has issued seven mobile licences and Uganda has issued six. The number of operators has resulted in increased investment and marketing spend in the top three markets. And in all three countries, this competition has benefited African consumers as the cost of owning and using a mobile phone has fallen
Tanzania and Uganda have what is known as a unified licensing framework and this has encouraged operators to offer mobile broadband to their subscribers. Each country now has several hundred thousand subscribers who access the Internet using their mobile phone.
Based on data gathered for a new report from Balancing Act, there have been dramatic drops in mobile charges, opening the market to a wider number of users. For example in Kenya, between Q3, 2007 and Q4,2008, calls to other subscribers on the same network fell by over half, from KS18.10 to KS8.98. Over the same period, SMS text messages to subscribers on another network fell from KS5.03 to KS3.69.
Amongst the 15 countries in this report, there are really only 5 countries that have any scale in population terms: Ethiopia (83 million), Tanzania (39.5 million), Kenya (38 million), Uganda (29.5 million) and Madagascar (20 million). At the other end of the scale there are five countries and territories - Comoros, Djibouti, Mayotte, Reunion and Seychelles - with populations of below 1 million.
Nevertheless, it is in the main the Indian Ocean Islands with small populations that have much higher GDP per capita than the more populous countries: Reunion (US$23,501), Seychelles (US$18,700), Mauritius (US$11,300) with a population of 1.27 million, Mayotte (US$4,900) and Djibouti (US$3,700). Tourism has driven growth in Mauritius and Seychelles and the connection to France for the territories of Mayotte and Reunion has had a similar effect. All the other countries in this report range between US$160 (Ethiopia) to US$1,100 (Comoros). None of these countries has oil but Tanzania has natural gas reserves.
The reason? The Seacom international cable started operating on 23 July 2009 and the Kenyan Government initiated project TEAMS will follow shortly thereafter. And in Q3, 2010 will come EASSy, the fibre project that started it all but is now lagging well behind in the field.
In addition, France Telecom has a project called LION that will connect various of the Indian Ocean islands into these new international cable connections in October 2009: the build has been completed and it now awaits licensing approval.
The mainland East African countries currently connected by satellite will see a large increase in international bandwidth used as prices come down from around US$5,000 per mbps to something more like US$500 on the new fibre connections. This cheaper bandwidth price should lead to cheaper Internet prices for consumers.

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