Mobile Uptake in Africa: Competition Is Key

September 18, 2009

When it comes to mobile penetration rates in African countries, personal income levels are not the only deciding factor. For example, Burkina Faso enjoys a slightly higher level of income than does Ghana, and yet mobile penetration rates are less than half that of Ghana. Although income levels are an important factor in determining mobile penetration, as the graph demonstrates, there are other variables at work.

The most important is the level of competition: In Burkina Faso there are just two operational networks, while in Ghana there are five, soon to be six. This affects the market in a number of ways, most notably in pricing: Per minute rates in Ghana are around a third of those in Burkina Faso.

Competition also drives coverage and capacity investments, which are markedly better in Ghana, offering higher-quality services to a larger portion of the population. And stronger competition gives operators incentive to target lower-spending groups. For example, in Ghana, market leader MTN offers the lowest top-up amount — $0.07; in Burkina Faso, the lowest top-up amount offered by the largest operator, Zain, is $0.45.

The degree of competition, however, is not always measurable based on the number of operators — for instance, in Tanzania there are six operational networks but only three that compete nationally.

Still, there are other factors that affect penetration. Political instability lowers overall penetration in a number of ways, and explains why the DRC’s penetration is so low, despite the fact that there are five live networks there.

Finally, income distribution can also skew adoption; an extreme case is Equatorial Guinea, which has a GDP/capita of $19,200 and a mobile penetration rate of just 53% due to the concentration of oil wealth. Poland, which has a GDP/capita of around $14,000, has a penetration rate of 115%, as a comparison. Another consideration is the availability and affordability of fixed lines, public phone boxes in particular, as well as the size of the informal economy, which can add a significant percentage onto GDP/capita levels.

What does this mean? African governments that want to drive mobile penetration should encourage competition. This means more than simply issuing new licenses but also including coverage requirements within these licenses.

— Jan ten Sythoff, Analyst at large

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