AFRICAN cellular network operators need to sharpen up their acts to make a profit in countries where already poor consumers are trying to cut back their spending even further.
Operators must begin sharing infrastructure to cut costs, lobby governments for relief from arbitrary taxes, argue against politically imposed rate cuts and offer locally developed data content to keep consumers interested.
That list of crucial steps was cited at the AfricaCom conference in Cape Town this week as the only way for operators to survive the economic gloom in highly competitive markets.
Although analysts and operators still view Africa as having a huge growth potential, the main message of the conference is that the easy times are over.
Africa's growth potential was confirmed by a record attendance for AfricaCom, however, which is thriving while similar events in Europe have declined.
Network equipment supplier Alvarion recently exhibited at an International Telecommunications Union event in Geneva and a trade fair in Amsterdam, which were quiet compared with AfricaCom, said Rick Rogers, MD of Alvarion SA.
Informa Telecoms analyst Nick Jotischky said the economic environment had grown harsher and operators needed to manage costs better to maintain margins. They also needed to work out how to offer relevant and affordable data services to compensate for falling profits from voice calls. "Customer retention is absolutely vital in the face of competition," he said.
By 2014 the world should have 6,4-billion SIM cards in operation, with a penetration rate of 88% as some people own multiple accounts. Africa would continue with its historic lag in penetration rate, Jotischky said.
SA and Nigeria rank in the world's top 20 countries for subscriber growth. Yet SA's position has begun to slide, with MTN and Vodacom's customer growth slowing. Both blame a new law requiring customers to present identification documents when joining a network. This week Vodacom CEO Pieter Uys predicted the law would kill off its previous ability to add 1-million new subscribers in a month.
Jotischky said Africa was dominated by vibrant operators with ambitious growth strategies and high demand for their services. Many countries' cellphone penetration was less than 20% so the potential was enormous, yet with three or more operators already playing in most territories competition was intense.
The answer was to boost nonvoice services such as mobile banking, SMS and the ability to buy goods and services over the networks. Those were revenue generators as well as customer retention strategies, he said.
So far data services account for only 13% of cellular revenue in Africa, against 20% globally, but it should climb to 18% by 2014. Informa predicts data revenue of 4bn in Africa this year, of which basic SMS will contribute 3bn.
The poverty gap and lack of infrastructure meant African players had great opportunities but also a social responsibility to provide essential services such as banking, Jotischky said.
Zain Africa CEO Chris Gabriel said the old model for cellular operators had gone and they needed to adapt to a collaborative world.
They must learn to share core infrastructure such as base stations to roll out coverage more quickly and cheaply. They should look at outsourcing operations such as information technology services, call centres and even the running of their network. Operating a network was not their core competency, but owning the customer was, he said.
"It's not about customer growth," he said. "It's about profitable customer growth."
Some countries were issuing more licences, and new players were starting up and launching a price war to win customers, simply in the hope of being bought out by a rival, he said.
Customer retention had become essential for the serious players, and that could be achieved by developing compelling data content that was locally relevant to people surfing the internet by cellphone.
Gabriel also took a swipe at efforts by politicians in SA to force down the cost of a cross- network call, saying it was an ill- advised attempt to impose a European business model in a market that was less mature.
It would deter operators from investing more to grow network infrastructure, he said.