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Value Added Services In Africa - The Way ForwardProduct Type: Market Research ReportPublished by: Business Monitor International Published: August 2009 Product Code: R302-7832 Description VAS In Africa Africa is big news in telecoms. As opportunities for straightforward subscriber growth dwindle in other parts of the world, investors are flocking to the continent where there are still estimated to be at least 500mn potential new mobile subscribers. At the end of 2008, the average mobile penetration rate of the 22 African mobile markets that BMI regularly surveys was 55%. Bearing in mind that included in this select group are the most developed mobile markets in Africa, such as South Africa and Algeria, the average for the continent as whole was certainly much lower. The mobile subscriber year-on-year (y-o-y) growth rate across these 22 countries was over 33% in 2008. Clearly, there is excellent growth potential still in these markets. Combatting Falling ARPUs Despite the exciting growth prospects, however, African mobile markets have their problems, and one of the most significant for investors looking to the future is expressed in average revenue per user (ARPU) figures. Taking data from Africa’s largest mobile operator by customer numbers, MTN, as an example, we can see that ARPUs across Africa are generally very low, and are getting lower. MTN is active in 16 markets in Africa. For the first quarter of 2009, the highest ARPU it recorded on the continent was in its home market of South Africa, where blended ARPU was US$17 for Q109. The lowest was US$5 in Sudan. Of the 16 countries, more came in with ARPUs closer to the lower extreme of Sudan than the upper limit of South Africa. What is more, every single one of these ARPUs fell during the first quarter of 2009, by an average of 11% in local currency terms. A trend of falling ARPUs may have been exacerbated by the current economic climate, but the trend is nonetheless there. African mobile markets are generally very price sensitive, and as competition increases in many countries, price wars are pushing prices down and affecting ARPUs. Also, the abundant growth that is still available in many markets is almost entirely at the bottom end of the market. As mobile companies are striving for more growth, they are reaching out to offer services to the poorer end of society, gaining new subscribers who will have increasingly lower amounts of money to spend on mobile services, so ARPUs will naturally go down. While the number of subscribers is still rocketing up, operators are willing to put up with this pattern of decline, but although their revenues continue to increase, the pattern will increasingly squeeze their profit margins. Also, growth at this rate cannot continue forever, and the number of net additions will eventually begin to diminish. Although African markets face very different dynamics from the saturated markets of Western Europe and elsewhere, operators are likewise facing the problem of diminishing returns and need to find new ways to keep their revenues growing. As in Europe, value-added services are the key to this process, although the necessary approach is quite different. As yet, there is only a fairly limited value-added services market in Africa, but it is starting to grow in various areas. These green shoots of VAS growth are something that operators need to observe and take note of if they are to nurture them into greater expansion, or emulate the success elsewhere. For most of the millions of new mobile users added to the market, especially during the past two years, this has been their first access to any type of communications service. The penetration of the much longer established fixed-line services, and of fixed-line-based internet and data services, is barely above 1% in the majority of African countries. As new users of communications services, most mobile subscribers are using only basic voice services. Indeed, many of the first VAS to be offered by mobile operators were voice based, such as missed call notification and voice mail services. However, if operators want to really diversify their revenue streams to keep them resilient, they need to find ways to move new and established African mobile consumers away from basic voice services into data-based services. Although the movement may be small to begin with, building a substantial trend will be very important for ensuring their future growth. Table of Contents
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