Double digit growth is expected in the East African mobile market over the next 5 years. According to a recent report, East Africa (Kenya, Tanzania, Uganda, Rwanda) currently has 37.6 million mobile subscribers with a penetration rate of around 30 per cent. The East Africa mobile communications market is expected to show strong growth as low quality fixed-line networks are being replaced my mobile telephony. The total number of subscribers is expected to reach 99.5 million in 2015, representing a compound annual growth rate of almost 15 per cent. Additionally, the launching of undersea cables is expected to substantially reduce the cost of telecommunications by as much as 60 per cent over the next seven years, which in turn will further drive the demand in mobile internet access as well as mobile telephone handsets.
In 2010, Kenya had the highest number of active subscribers and revenues among the four east African countries. Tanzania, Uganda and Rwanda are likely to witness significant growth over the next five years by increasing network investments, continuing product innovation and reducing handset costs. “The key drivers of the East African mobile communications market include rising gross domestic product (GDP) growth rates, increasing demand for mobile money transfer services, and declining mobile handset costs. Despite the low disposable incomes of the East African consumers, the rising GDP growth rate indicates greater consumer spending on mobile communications due to the low fixed-line network coverage, underdeveloped banking system, and the current limited availability of inexpensive handsets,” the report says.
However, there are challenges faced by those wanting to expand their interests in the East African markets. These include high tax rate on mobile services, lack of network coverage in rural areas and the relatively low demand for data services. Additionally, data services uptake by corporate clients has dwindled due to the economic downturn. “The East African region imposed one of the highest taxes on mobile services in Africa, limiting the demand for mobile communications due to the majority of low-income population,” explains the report. “The lack of network coverage in rural areas, where most of the population resides, restricts the expansion of the subscriber base.”
Mobile network operators are expected to enhance their services by continuously investing in new infrastructure like call-switching capacity. This will help in developing innovative solutions like mobile money transfer services, and initiates managed services by outsourcing non-core businesses like network maintenance. These strategies will step-up the demand for mobile services, boosting subscriber and revenue growth. The double digit growth in East Africa’s mobile market will undoubtedly have a positive ripple effect in the growth of supporting sectors such as advertising, retail, software and content. While some sectors such as retail banks may be eyeing the telecom industry with tempered anxiety over the overwhelming popularity of services like mobile banking and money transfer, there is no stopping the demand that is driving this growing sector in East Africa. The sectors that are at risk as a result of this growth in the mobile sector include the retail banking sector that is keeping close tabs on the success of mobile money transfer services in the region as this will further escalate demand for their services in the coming years.
With such high growths predicted for the mobile telephony market in East Africa, many countries are already eyeing the East African market to supply mobile handsets to this growing market. As expected, many Chinese firms have been quick to meet the rising demand for mobile handsets in Kenya, Uganda, Tanzania, Burundi and Rwanda where they have appointed agents and distributors for their products. Being a price-sensitive market, most East Africans prefer to buy low priced goods instead of products made by multi-national firms based in Europe and the USA. As a result, mobile handsets manufactured in the Far East and the Indian sub-continent have found a ready market in East Africa. In fact, a company in Zambia is also assembling mobile handsets to meet the rising demand in Southern Africa region.
As competition grows, more and more players are expected to join in the scramble to establish a foothold in the lucrative markets of East Africa. Undoubtedly, as one of the fastest growing markets in the world for mobile telephone, East African countries offer numerous opportunities in the coming years.