Infrastructure sharing, a business model pioneered by Indian telecom operators to become cost effective in the wake of low ARPU, is now becoming an emerging trend in Africa as Kenyan mobile operators — Safaricom and Telkom Kenya are already in talks to form a joint venture for tower management.
Africa and India are two major developing countries and teledensity is a lifeline for business growth. Over the five years, the strongest growth rates in mobile subscription are expected to be recorded mainly in East and Central African markets. Ethiopia, Democratic Republic of Congo, Eritrea and Madagascar are likely to witness more than 100 percent increase in 2015.
By 2015, there will be 265 million mobile broadband subscriptions in Africa, a huge increase from about 12 million and accounting for 31.5 per cent of the total of 842 million mobile subscriptions that the continent will have in five years’ time.
The huge growth will put pressure on operators’ investment plans. They are forced to offer cost effective services to subscribers. The cost is provoking operators in Africa to share their existing infrastructure.
African mobile players are considering infrastructure sharing as an effective way of capital cost reduction and for surviving in the telecom market that faces cut-throat competition. Infrastructure sharing and tower consolidation has been widely adopted in the US, Europe and India.
According to a Nielsen study, South Africa’s mobile phone consumers are overwhelmingly loyal to their network providers, with 95 percent having been with their current provider for an average of 4.2 years. This means operators need to continue investing in network to maintain quality of services.
As a result of infrastructure sharing, service providers, tower companies, regulators and other telecom equipment companies will be able to offer better and cost effective services to customers. Tower sharing will also help mobile service providers in reducing their operating costs, enhancing profit margins and speeding up the process of rolling out new technologies faster.
Africa is facing problem akin to India, massive upsurge in mobile data, increasing cost of expanding coverage but decreasing voice revenues.
African mobile service providers in Sub Saharan Africa have been placed under pressure due to decreasing voice revenues and the increased cost of expanding coverage. This has led providers to consider changes to their business model in order to reduce costs and create alternative sources of revenue. Tower sharing will become the preferred business model for service providers,” said Iyembi Nkanza, ICT Research Analyst, Frost & Sullivan.
Infrastructure sharing will reduce overall operational and capital cost. But operators will be forced to compromise on quality. Moreover, tower sharing hampers risk of information leakage between operators as different tenants will share same towers.
However, African operators are considering positive aspects at present. Hope Bharti Airtel’s presence in Africa will be a value addition to other African operators.
By Rashi Varshney
editor@telecomlead.com
