Africa’s mobile telecoms market is becoming an increasingly divided world, with huge profits raked in by the top-tier players while almost half the continent’s operators are bleeding money.<\/p>\n
The handful of top players are enjoying “stupendous value creation” as some countries report triple-digit subscriber growth and seemingly boundless potential, says a report by AfricaNext Investment Research. But its principal, Guy Zibi, says that despite the “gaudy top line revenue and subscriber growth figures”, between a third and half of African operators are not enjoying net profits, and a third are unlikely to do so within three years.<\/p>\n
The report studied the profitability, operating and capital expenditure, earnings and cash flows of mobile players in 40 countries in an increasingly competitive environment and a severe economic downturn. AfricaNext estimates that Africa had 375-million subscribers last year, up from 280-million in 2007, and growing by about 40% a year. “The boom is not over, despite the global economic downturn,” Zibi says. “We expect African mobile operators to add another 300-million subscriptions between 2008 and 2013, taking Africa’s mobile subscription base to 700-million.”<\/p>\n
He expects 10 African countries to surge through a 100% mobile penetration mark by 2013, while some will double their penetration levels and at least one — Rwanda — will quadruple it by 2013.<\/p>\n
The report predicts continued subscriber growth for the next five years, helped by the falling cost of infrastructure that makes network roll-out more affordable for untapped rural areas.<\/p>\n
However, Africa’s mobile industry has ceased to be about skimming profits from the few and is becoming a commodity business that depends on driving profits by building up scale. Yet fewer than 10 of Africa’s 53 markets are large enough to provide such scale.<\/p>\n
Another drawback is that most operators’ operating expenses grow faster than their revenue. The average player spends about $90 a year in operating expenses per customer, yet some customers spend as little as $5 a month.<\/p>\n
Meanwhile, much of their capital expenditure is funded by debt, and the credit crunch may drive some players out of business.<\/p>\n