Home Africa and the Middle EastAfrica and the Middle East 2005 Transforming Africa and the Middle East

Transforming Africa and the Middle East

by david.nunes
Bert NordbergIssue:Africa and the Middle East 2005
Article no.:9
Topic:Transforming Africa and the Middle East
Author:Bert Nordberg
Title:Executive Vice President
Organisation:Ericsson Sales and Marketing
PDF size:88KB

About author

Mr Bert Nordberg is the Executive Vice President of Group Function Sales and Marketing at Telefonaktiebolaget LM Ericsson. He served previously as Senior Vice President, Group Function Sales and Marketing, Head of Business Unit Systems, Head of Business Unit Global Services, Executive Vice President Division Global Services and as Executive Vice President of Ericsson Services. Mr Nordberg joined Ericsson as the Head of Enterprise Services, which provides all services for Enterprise Segments within Ericsson. Before joining Ericsson, Mr Nordberg worked in various positions with Data General Corporation and Digital Equipment Corporation in Sweden. Bert Nordberg graduated with a Bachelor’s degree in Electronic Engineering, and later as an Engineer in the Marines, from Berga. He subsequently complemented these studies with courses in International Management, Marketing and Finance at Insead University, France.

Article abstract

For many people in Africa and the Middle East, the mobile phone is their primary means of communication. Mobile service there is growing 30 per cent each year, and will reach 150 million subscribers by 2007. WCDMA high-speed mobile access, in the 850 MHz band, will help bring the Internet and many other vital services to Africa and the Middle East. The combination of high efficiency WCDMA and enhanced coverage 850 MHz technologies means operators can make a profit in low-income regions.

Full Article

The development of Information and Communications Technology (ICT) across Africa and the Middle East is far from uniform. Not only is ICT infrastructure more advanced in some countries than in others, but disparities between the rural and urban areas of a given country often also exist. However, there is a constant thread connecting all the continents’ diverse markets. Mobile telephony, whether it be from surfing the net over 3G in Saudi Arabia, or making a pre-paid voice call in Tanzania, mobile communications is impacting economics, education, medicine and more, right through the region. With mobile uptake in Africa increasing by about 30 per cent each year, there will be more than 150 million subscribers on the continent by 2007 – making it one of the world’s fastest growing mobile communications markets. In North Africa there are currently some 29 million subscribers, which puts penetration at about eight per cent. This figure is expected to rise to 20 per cent by 2007, with most of the growth occurring in Morocco, Egypt, Libya, Algeria and Tunisia. Further south, subscriber rates in high-growth markets such as Nigeria, South Africa and Tanzania are expected to rise even further over the next few years. In the Middle East, growth will be fastest in the Gulf countries, where penetration is about 19 per cent and demand for advanced services is high. Although growth rates are not as rapid outside the aforementioned countries – across much of Africa and the Middle East penetration is less than 10 per cent – mobile penetration in the entire region is still far greater than that of fixed telephony. According to a March 2005 report from Vodafone, there are about 52 million mobile users in Africa today, while only 25 million fixed lines are installed. In 19 African countries mobiles account for at least three quarters of all telephones, and at the end of 2003 there were 6.1 mobile telephone subscribers for every 100 inhabitants, compared with three fixed line subscribers per 100. It is true to say that for many people in Africa and the Middle East, the mobile phone is their primary means of communication. While the reasons behind the wider spread of mobile telephony are manifold, two in particular stand out. First, it is still common for people in the region to spend many years on a waiting list for a fixed line, which means that there is a lot of pent-up demand for telecom services. When the African telecom market started deregulating around 1994, mobile operators stepped in to respond to this demand. Second, mobile networks are quicker, easier and cost far less per connection to roll out than fixed networks. The return on investment from a mobile rollout is therefore realized far faster. Transforming the economic landscape What then has been, and will be, the impact of telecommunications on economic and social development in Africa and the Middle East? Certainly telecommunications is vital to achieving developmental goals anywhere, as is evidenced by the growth of the “Asian Tigers” of Taiwan, Singapore, Hong Kong and Korea. These countries used telecommunications as a basic part of their development strategies. Professors Lars-Hendrik Röller (Professor of Economics at the Humboldt University, Berlin) and Leonard Waverman (Chair of the Department of Economics at the London Business School) have made a serious attempt to quantify the impact of telecommunications on economic growth. Their findings suggest that between 1970 and 1990 the spread of modern fixed-line telecom networks accounted for one-third of the growth in output across the OECD countries. The Vodafone report mentioned earlier suggests that mobile telephony is playing a similar role today in developing countries. One of the most tangible ways in which telephony is transforming the economic fabric of developing nations is by easing access to information. The oft-mentioned example is that of the farmer who can now use a mobile phone to call different markets to determine the going price of his produce on a given day. Buyers and sellers who use mobile phones to make deals can cut out middlemen who artificially inflate prices. By limiting monopoly buying power, mobile phones allow for the fairer dispersal of price information and a more transparent market. Similarly, mobile phones can act as an information aid to people seeking employment. Instead of commuting long distances in the hope of finding work, job hunters can simply call ahead. In low-income countries where walking is often the primary means of transport, a phone call could save an unnecessary journey on foot. Mobile telephony also impacts national economies by boosting existing sectors and opening completely new ones. For example, in the more developed regions of Africa and the Middle East, high-speed mobile networks can advance both e-commerce and entertainment services, while software manufacturers will also gain from being able to compete on the international market with speedy outsourcing services. In rural economies, the mobile phone itself is at the centre of a new entrepreneurship concept that has come to be known as the Grameen model. Named after the micro-credit organisation in Bangladesh that started it, the Grameen bank concept involves providing small loans to villagers so they can develop such micro-enterprises as, for example, a local phone operator. The villager uses the loan to buy a mobile phone, which is then rented out to others in the local area. The Grameen model has proven extremely popular in South Africa, Botswana and Uganda, where the concept of sharing a mobile phone is not a foreign one to begin with. Health monitoring and education are also set to get a significant boost from mobile telephony. Moves are already afoot to develop practical, safe and cost-effective tele medicine services. This is because most doctors in developing countries are located in major cities and specialist care hospitals are generally concentrated in certain pockets of a given country. As a result, patients seeking medical attention must often travel long distances, which is both expensive and impractical. With high-speed mobile data transfers, however, even detailed clinical examinations can be conducted remotely with the help of a paramedic, and simpler routines can often be dealt with directly by the patient. Similarly, high-speed mobile networks could be used to deliver educational content in remote areas where there is a lack of teachers. A place for all technologies In terms of applications, the African and Middle Eastern mobile markets are very much voice driven and there is a preference for pre-paid solutions. The popularity of pre-paid stems from an absence of adequate credit checking facilities, as well as the high cost of mobile starter packs. In addition, the pre-paid concept has a familiar resonance in Africa, where people are used to paying in advance for utilities such as water and electricity. When it comes to the technology used for wireless communications, African and Middle Eastern mobile telephony is still GSM dominated. However, high-speed technologies such as EDGE have a bright future in certain of the regions’ markets. This is particularly so in countries where it is practically impossible to get a fixed line, and thus the only way that consumers can reach higher data speeds is for them to use a wireless technology. Operators are therefore starting to use EDGE as the means to tackle the DSL market, as well as to differentiate themselves in the face of increasing competition. WCDMA, wideband code division multiple access, also called UMTS, is a high-speed, third-generation (3G) version of traditional CDMA access, which is set to make its mark in the high-growth markets of Africa and the Middle East. There are a number of reasons for this. First, in terms of radio-spectrum efficiency, WCDMA systems have been shown to be at least twice as efficient as GSM systems. This means that more users can be accommodated per base station than with GSM, something that translates directly into lower costs for operators. Second, US operator Cingular’s commitment to deploying 3G service using the 850 MHz band is likely to encourage the uptake of WCDMA in many of the world’s rural areas, where the enhanced coverage provided by lower frequencies is crucial. This means operators using 850 MHz will be able to serve profitably areas where the average income of consumers is low. The third reason is that once China has issued its 3G licenses, this large and populous country is likely to spearhead the production of low-cost 3G phones. The secondary effects of this should be felt in Africa and the Middle East, where a handset that costs less than US$20 is essential to encourage mobile service uptake. While operators in Africa and the Middle East may think they do not need high-speed mobile networks just yet, by launching WCDMA today they open themselves up to the possibility of providing a richer set of services than just voice once a given market matures. As soon as an operator has made the investment in WCDMA coverage for voice users, additional services, such as high-speed data and mobile TV, can be offered at very limited extra cost. This is because the cost of the add-ons required to upgrade an existing WCDMA base station is small compared to the capital outlay for the full site. Challenges and opportunities Although opportunities abound, the African and Middle Eastern markets remain challenging ones in which to do business. Operators are often hampered by inadequate financing, lack of expertise in certain areas, weak currencies, price-sensitive customers and underdeveloped infrastructure. In addition, the fragmented nature of the operator market means each customer requires a specifically tailored package, rather than a one-size-fits-all solution. Despite the challenges, mobile telephony has a significant role to play in the development of Africa and the Middle East. Not only do mobile technologies help to remove economic and cultural divisions, but communication via mobile can assist in the battle against some of the more serious problems blighting the region. Indeed, Africa and the Middle East comprise a region in which the full power of mobile telephony will be realized in bringing about positive change and a higher quality of life for all.

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