Ericsson Mobility Report: Connecting the Unconnected
Ericsson’s latest Mobility Report places Africa in the spotlight as one of the world’s fastest growing markets in terms of mobile subscriptions, with the continent expected to reach 100 percent mobile penetration by 2021
Just five years ago, there were 500 million mobile subscriptions across Africa; and by the end of 2015, this number doubled to one billion.
Rising urbanisation levels are driving the growth of mobile subscription penetration on the continent, as well as growing investment in rural network coverage by mobile operators; something which is being heavily encouraged by an evolving regulatory policy. Moreover, the increasing internet speeds and rise of 3G and 4G technologies, alongside the unprecedented growth of the middle-class in some of Africa’s largest economies, is contributing to the growth of the telecommunications industry.
These are just some of the highlights detailed in Ericsson’s latest Mobility Report, recapping a year of huge opportunity, leading into yet another as we enter 2016. Fredrik Jejdling, President & Regional Head of Ericsson sub-Saharan Africa, discusses the Report in-depth and the main factors that will drive mobile penetration in the future.
Africa Outlook (AfO): What findings stood out for you the most in the Africa Mobility Report?
Fredrik Jejdling (FJ): For me, it is the rapid change that the continent will experience over the coming years that stands out the most. Decades of progress in technology and telecommunications across Africa has laid the foundation for what is set to come. Today, mobile subscription penetration in sub-Saharan Africa is estimated to be 80 percent. Five years ago, mobile penetration was just above 50 percent. By 2021, it is expected to reach 100 percent in the region.
Growing smartphone ownership and a lack of fixed broadband availability has resulted in mobile broadband being the most common way to connect to the internet. The benefits of connecting the unconnected through mobile broadband access cannot be overlooked; with one example of this being how increased connectivity improves the prospect of financial inclusion for the 70 percent of Africans that are unbanked, through an offering of mobile money services taking form across Africa.
The hasty shift from 2G to 3G, and now, 4G mobile broadband services that we will experience over the coming years I find astonishing. In sub-Saharan Africa today, GSM/EDGE-only is still the most popular technology for mobile subscriptions. It accounts for more than 70 percent of total mobile subscriptions. This, however, is expected to change rapidly up to 2021, when WCDMA/HSPA combined with LTE technologies will account for almost 80 percent of subscriptions.
AfO: What are the macro-economic factors driving mobility and how has this evolved over the years?
FJ: In the past decade, the African continent has experienced improved international trade and an accelerated pace of foreign direct investment (FDI). Sub-Saharan Africa’s strong economic growth is driven by improved political stability, the global commodity boom and greater regional integration. The growth has led to improved living standards for many, giving rise to a new class of consumers.
The combination of mobile broadband access, affordable devices, and the resultant transformation in the way businesses and society operate has the capacity to yield opportunities for empowerment and inclusion.
It is true that most markets in sub-Saharan Africa are seeing a rise in consumer spending, driven by growth in economic output. The large youth population continues to drive demand for consumer goods, with their characteristic entrepreneurial mindset stimulating even further economic growth.
Despite these rising numbers, there is still a large unconnected market in sub-Saharan Africa. Operators are aware of this opportunity and are aggressively pursuing growth in mobile broadband. Their effort is supported by the proliferation of lower cost devices and evolving regulatory policies. In addition to this, service providers have increased their focus on extending offerings around increasing mobile financial inclusion and media delivery.
In addition, device affordability - where we now see low cost smartphones at less than US$50 - has driven further uptake; with a quarter of handsets in 2015 being smartphones.
Furthermore, mobile operators have continued to increase mobile network coverage and will continue to do so in rural areas and remote locations. To put this in context, 70 percent of people in sub-Saharan Africa are within mobile coverage areas, compared to about 95 percent globally.
AfO: What factors have allowed Nigeria’s mobile penetration to soar in recent times, and how does Ericsson see this progressing?
FJ: In 2015, Nigeria, Ethiopia and Cameroon were among the top 10 countries globally for net mobile subscription additions in the third quarter of 2015; with a new mobile subscription is activated every two seconds in Nigeria. Our Ericsson ConsumerLab research shows that in Nigeria, 83 percent of mobile phone users rely solely on this method to connect to the internet.
A rise in consumer spending, driven by economic growth, and the proliferation of low cost smartphones are two key contributors to the country’s technology boom.
Mobile data traffic continues its steady growth within the region; with the increasing spread of LTE, this trend is expected to continue. Findings from the Ericsson Mobility Report show that mobile data traffic will grow 15 times between 2015 and 2021. With enhancements in international connectivity following the upgrade of mobile data networks and expansion of fibre optics, the prices of data subscriptions will decrease and, in turn, encourage even more mobile broadband subscriptions. By the end of 2021, monthly mobile data traffic in sub-Saharan Africa is expected to be almost 2,200 Petabytes (PB); with Smartphones accounting for almost 95 percent of mobile data traffic by 2021, up from close-to 80 percent in 2015. By contrast, voice traffic over the same period is set to only marginally increase.
AfO: How is Ericsson hoping to continue to drive the growth and penetration of technology in Africa into 2016, and what wider industry trends will dictate this?
FJ: Having observed how the introduction of mobile data services has enabled access to even more services that benefit individuals and transform industries, I firmly believe mobility is a driver of industry transformation in Africa. Technology acts as a change agent across Africa, and in line with this, mobile broadband services have enabled access to both inclusion services that benefit individuals, and efficiency and productivity improvements that have the power to change whole industries as well.
With so much innovation taking place in the mobile space, mobile financial services in Africa are one of the great unique success stories on the continent. It has allowed the 70 percent unbanked and marginalised segments of the population to start to see the promise of financial inclusion as mobile money services take form across Africa.
Starting from basic person-to-person money transfers, many platforms now provide savings, insurance and credit applications. This has further progressed to mobile commerce and stock management solutions.
Purchasing goods and services is increasingly done via a mobile phone. According to the World Bank, sub-Saharan Africa transfers more money domestically via mobile money than any other region in the world. In 2014, up to 28 percent of the population had received a domestic remittance. By comparison, only four percent of the population in South Asia did so in the same period.
The next wave of services in sub-Saharan Africa within the mobile commerce eco-system will include more mature offerings such as microinsurance and advanced subscriber-to-subscriber/subscriber-to-merchant solutions.
Governments are increasingly realising that the widespread availability of payment and other financial services is a key pillar in socio-economic development and are taking actions to improve the regulatory environment.
AfO: What do you hope to report back at the end of next year in terms of subscription growth, and what factors will dictate this?
FJ: Subscription growth within the region will continue to be driven by a number of factors, including better network coverage in rural areas and remote locations, ownership of multiple SIMs, the continuous reducing cost of devices and call rates, and M2M (machine-to-machine) technologies.
At the core of this is enabling mobile broadband access to the unconnected population through increased 3G and 4G network deployment. This will drive the uptake of services such as mobile commerce and infotainment, enabling service providers to differentiate their revenue streams and at the same time offer higher value services to their customers.
Today, half of mobile data traffic globally comes from video. By 2021, we estimate it will comprise about 70 percent of traffic. As more of Africa’s population become owners of smart and digital devices, new modes of content consumption are increasingly being explored. But even as mobile broadband networks become increasingly accessible across the continent, TV and media experience satisfaction levels are low, which indicates that consumers in some places are in need of higher speeds and better quality connections to experience the full potential of these services.
Read the full article in the latest issue of Africa Outlook here.