Competition hots up in the last great growth frontier for cellphones
INSIDE a packed Vodafone store in the Zambian capital of Lusaka‚ a group of the city’s tech-savvy students wait in line for wireless modems they hope will transform their ability to surf the internet.
They do not even care that they will not be able to get a voice plan to talk over the network since Vodacom’s UK-owner does not have a licence for that.
“Vodafone’s coming is long overdue‚” University of Zambia student Anthony Kambeu said at the store‚ which opened in June.
“The other networks are exploiting us – poor service‚ high prices‚ everything.”
Kambeu said the Vodafone packages were good value even without voice‚ although he hoped the company would eventually be able to provide that as well. Vodafone’s data price of 250 kwacha (R348) for 10GB is almost two-thirds less than that offered by other providers‚ which include the units of South Africa’s MTN and India’s Bharti Airtel.
While Vodafone’s data bundle expires sooner than those of its competitors‚ undercutting its rivals could enable it and Amsterdam-based network partner Afrimax to establish market share.
Meanwhile‚ its customers can make calls to each other by using data services like WhatsApp.
The economic slowdown notwithstanding‚ Africa remains the last great growth frontier for European telecommunication companies.
More than half the continent’s population is expected to own a smartphone by 2020‚ compared with 23% at the end of last year‚ GSM Association has said.
That is helped by a relatively young population‚ which is more likely to embrace new technology.
The lack of a voice licence is just one obstacle for Vodafone as it targets 12 new African markets.
Vodafone is also up against MTN‚ which is the market leader in most of the 22 countries in which it operates‚ including Zambia.
Africa Analysis managing director Dobek Pater said: “Africa is one of the least-developed regions of the world in terms of information and communications technology‚ in particular once we move beyond basic voice and data.
“Some of the markets may be have problems now‚ but in the long term they are likely to demonstrate good positive growth due to the cyclical nature of commodities‚ diversification of the economy and socioeconomic upside.”
Vodafone’s French competitor Orange has been rationalising its Africa presence this year after agreeing to sell its majority stake in Telkom Kenya.
The Paris company agreed to buy Airtel’s units in Burkina Faso and Sierra Leone, alongside assets in the Democratic Republic of Congo from Millicom International Cellular.
Orange deputy chief executive Ramon Fernandez said: “Our ambition in these countries is to be No 1 or No 2‚ because you need to reach a critical size to be profitable.”
Revenue growth would be driven by higher customer numbers‚ increased smartphone usage and services like Orange Money‚ he said.
Amy Cameron‚ head of information and communications technology research at Fitch’s BMI‚ said from London: “In Europe‚ people are much more wealthy but the market is saturated.
“In Africa there is still a ton of people that do not have access. There is no legacy infrastructure.”
Cameron said to compete with MTN‚ telecommunications operators need scale.
“MTN is already there in terms of having reached across the region and being present in many African markets.
“It gives MTN bargaining power in buying equipment and it has experience working in difficult environments and developing services.”
MTN Zambia chief executive Charles Molapisi said the business had grown by double digits this year in Zambia and MTN had rolled out data packages for the youth.
Vodafone’s tie-up with Afrimax, announced in late 2014 along with a voice and data offering in Uganda, is designed to complement Vodafone’s two existing Africa vehicles – Vodacom‚ South Africa’s biggest wireless operator by customer numbers‚ and Safaricom‚ the market leader in Kenya.
Vodafone is the biggest shareholder in both those companies‚ although it owns no equity in the Afrimax ventures. – Bloomberg