Rise in digital service usage will drive Africa’s mobile data business to be worth US$23 billion in 2018

Smartphone users in South Africa spend on average US$31 per month on their mobile phone bills.

This finding comes from research commissioned by Informa Telecoms & Media in July 2013 on trends in global mobile data usage. It highlights the fact that, of the 12 countries surveyed (a range of developed and developing markets), South Africans are the fourth biggest spenders, behind consumers in the US, Saudi Arabia and the UK*.

This is illustrative of a trend across the African telecoms market. The continent’s mobile data business is currently worth US$8.5 billion a year and will exceed US$23 billion in 2018. “It is consumer demand that is driving this growth”, explains Nick Jotischky, principal analyst at Informa Telecoms & Media. “But retail prices are still too high, smartphones are too expensive and there continues to be a lack of investment in connecting parts of rural Africa: These are barriers restraining even greater consumer demand.”

And yet, according to an industry survey commissioned by Informa on the outlook of Africa’s telecoms market, executives who are preparing to convene in Cape Town for AfricaCom 2013 are in confident mood. Over 40% strongly agree that they are confident about the prospects for the African telecoms industry over the next few years.

Matthew Reed, author of Informa’s recently published report “Africa Telecoms Outlook 2014: Maximizing digital service opportunities” explains that “much of this confidence is due to the fact that data and digital services are moving to the centre of many mobile operator strategies as the continent’s emerging middle class spends more of their disposable income on e-commerce, entertainment and utility services.”

This confidence is perhaps a little forced, as approximately half the survey’s respondents believe that if mobile operators do not seek to seize new digital opportunities now, they risk their very survival at the hands of more innovative and agile competitors.

Much will depend on the state of the smartphone markets as to whether consumer demand for data services in Africa can be met. Smartphone penetration across the continent is 11%. Despite the arrival of many low-cost smartphone brands, one in three respondents to the Informa survey believe that the cheapest smartphones on the market are still too expensive for most Africans and 37% call for Africa’s mobile operators to subsidise smartphones and other data devices if they really want to reach the mass market.

Jotischky comments that until now the challenge for operators has been one of ensuring connectivity for a growing number of consumers. But now the challenge has changed: It is about addressing new competition, serving evolving consumer needs and ensuring an excellent level of service – and all this at a time when margins are coming under intense levels of scrutiny.

There is every reason for Africa’s telecoms executives to be confident as they embrace a new phase of growth, but operators need to ensure they have the right strategy to maximize new digital service opportunities.