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The East African : Dec 12th 2015
36 The Af≥ican ICT landscape: six t≥ends to watch in 2016 COMMENTARY GARETH MELLON “Africa is the birthplace of mobile payments and one cannot ignore this key feature of the ICT landscape on the continent.” nications’ sector is growing rapidly. The continent is seeking to A ride on technology to drive economic growth. On the continent, Kenya, Nigeria and South Africa are on the front line in mobile penetration and mobile payments. For example, Kenya is us- ing information and communications technology to provide citizens access to various public services under one roof — Huduma Centres. Cut-throat competition among telecommunications service providers has seen one operator — Essar Telecom — close shop while Airtel is pushing the regulator to declare Saficom a dominant player. Still, another player, Orange is poised to quit the market after reaching a deal 1. s 2015 comes to a close, it is an undeniable fact that Africa’s telecommu- with Helios on a buyout. Large numbers of mobile phone and Internet users have become a challenge to telecommunications firms that requires them to invest more in infrastructure and spectrum to ensure quality communication. Regulators are working overtime, reining in those who don’t conform. A case in point is Nigeria, where a telecommunication company was slapped with a $3.9 billion fine for failure to meet the quality threshold set by regulator. A new niche for the fast and reliable fourth generation (4G) is headache for investors in the ICT industry due to lack of clear spectrum distribution models and infrastructural rollout. With such a background, what does 2016 hold for the sector? Here are some of the likely trends. PUBLIC SECTOR ACTORS BECOME MORE INVOLVED 2. The EastAfrican BUSINESS DECEMBER 12-18,2015 FIXED LINE MAKES A COMEBACK While technically not a “comeback” in many African countries, where fixed line hardly got out of the starting blocks, demands for fibre connectivity have soared. Across the continent, submarine cables have boosted international connectivity and, while terrestrial coverage remains a challenge in most countries, investments in fibre backhaul and access layers have picked up. As this proliferation continues, high capacity last-mile access is becoming more viable and FTTX services have become established in key markets such as Kenya, Nigeria, and South Africa. While individual services remain relatively expensive for early-adopters, ongoing investment will lead to price reductions and make fixed line attractive for both businesses and consumers. 5. TELCOS SHOWCASE ‘DIGITALISATION’ Students using e-readers application to download ebooks. Picture: File Typically, telecommunications providers distinguish between their consumer and enterprise offerings, and the latest fad in the enterprise market is “digitalisation” — identifying all areas of a business that can be transformed by ICT in order to offer integrated and enhanced products and services. The starting point will be to show how connectivity can improve profitability in sectors as diverse as oil exploration, agri-processing, and the clothing industry — but expect ICT providers to start positioning themselves as complete, endto-end partners with the ability to transform their clients into digital pioneers. Laying of fibre optic cable in Nairobi. Picture: File 3. INDUSTRY CONSOLIDATION TO MEET INFRASTRUCTURE COSTS Etisalat’s recent acquisition of a majority stake in Maroc Telecom means that 5 major multinational operators now account for over 60 per cent of all telecommunications subscribers in Africa. Consolidation in the telecommunications market is driven by a desire for scale to help overcome margin pressures: the provision of network infrastructure is enormously costly and all operators have been subjected to the worrying reality of increasing infrastructure costs versus declining average revenue per user. With increased pressure on operators 4. to provide LTE services, which requires further investment in existing infrastructure, Frost & Sullivan expects this drain to continue. South Africa’s Cell C has made headway in claiming some portion of the market from the two dominant players, but its sustainability remains questionable. Meanwhile, mutterings in Kenya point to Orange’s troubles in achieving profitability in a market dominated by Safaricom. And, across the continent, even start-ups promoting new technologies struggle to break the dominance of the big players. CONTENT IS KING IN THE BATTLE FOR ACCESS TO CUSTOMERS A computer lesson in a Kenyan school. Picture: File As governments increasingly see connectivity as a critical means to encourage economic growth, we can expect them to become more involved in the market, helping to stimulate telecommunications investment in some cases, but also threatening to add increased uncertainty in volatile markets. While MTN Nigeria’s massive fine has naturally attracted the most attention, regulators in Kenya and Uganda have also imposed penalties recently, and the fallout from each of these points to the potential impact that both the government and regulators have on the telecommunications market. As debates concerning the allocation of spectrum, the implementation of national broadband plans and the provision of e-services continue unabated (not forgetting, of course, the constant delays in digital migration), expect the role of public sector bodies to become even more influential. The other driver of telecommunications consolidation is the battle to retain access to customers. In the customer’s eyes, the question is now: “Who can provide me with the best access to everything I need?” And, while operators currently occupy an enviable position in this respect, other telecommunications providers — including hardware providers, device manufacturers, and OTTs — are all seeking to offer aggregation services. The key differentiator will be content — in particular highdemand content — whether it is local or global, live or recorded. DStv remains the undisputed leader in content distribution across Africa, but its dominance is being challenged by the growth of alternative channels such as fibre to the home.Battle lines have been drawn in key markets such as Kenya, Nigeria and South Africa, and the first casualties have already been incurred. The year 2016 will quickly reveal which services are critical to customer requirements and, ultimately, how profitable they can be. 6. Machine learning will be critical to this implementation, but watch out for other buz terms such as wearables, the sharing economy, and the blockchain. Maintenance of a telecoms tower. Picture: File THE MOBILE PAYMENTS ECOSYSTEM EXPANDS Africa is the birthplace of mobile payments and one cannot ignore this key feature of the ICT landscape on the continent. In 2016, we can expect growth in three areas: First, while Kenya is often cited as the forerunner in mobile payment proliferation, this leadership is likely to be challenged by countries like Tanzania, Zimbabwe, and Zambia, all of which have experienced significant growth in mobile payments. Second, while peer-to-peer transactions currently account for three quarters of all payments, other areas such as merchant payments and international remittances should show healthy adoption, expanding the broader mobile payments ecosystem. Finally, while operators and banks have typically spearheaded mobile money development, there are a growing number of actors seeking to grab a share of the market, concludes Frost & Sullivan. The most prominent among these are the major Internet players – namely; Google, Facebook, and Apple – who, although not necessarily established in Africa, are leveraging their communication platforms to obtain access to customers’ wallets.
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