Unlocking opportunity: With a high mobile penetration rate, 3G promises to be profitable

The long-awaited arrival of 3G in Côte d’Ivoire, and the expected subsequent boom in data usage, is a welcome development for local telecoms operators. However, a number of issues will need to be resolved if the operators are to take full advantage of the new service. Specifically, the government issued the first 3G licences in March 2013, with three permits granted to South Africa-based MTN, France Telecom’s Orange Côte d’Ivoire and UAE-based Etisalat’s Moov.

Each licence is good for 10 years and costs CFA6bn (€9m). Moreover, operators are required to provide coverage for at least 95% of the country within four years. Given the high cost of the licence and the capital investments required not only to roll out 3G coverage but to meet the government’s ambitious coverage objectives, it may be some time before the fourth and final licence is acquired by another firm.

GETTING STARTED: The three licence holders’ 3G rollouts came amid much fanfare. In Abidjan, billboards with giant “3s” abound. Although the operators brand their services in different ways, whether 3G+, 3.5G and 3.75G, they all provide high-bit speeds of 2 megabits per second, allowing the user to access data services, mobile television and live-streaming, as well as the traditional voice and SMS services.

The introduction of 3G offers significant potential for services and products in the ICT sector, given the low internet penetration rate of around 2.4%, according to the International Telecommunication Union. As with elsewhere in Africa, internet access in Côte d’Ivoire occurs primarily through mobile connections, with only 50,000 fixed-line internet subscriptions as of 2011.

Although Côte d’Ivoire was relatively late in acquiring 3G networks, the technology has expanded rapidly in Africa in recent years. According to a Deloitte and GSM Association report entitled “Sub-Saharan African Mobile Observatory 2012”, 3G networks were available in over 30 countries in the region in 2012, compared to only 10 in 2008. However, maximising the benefits of these new services and ensuring that they provide a sustainable stream of data revenues and sufficient added-value can be challenging in Africa, and Côte d’Ivoire is no exception to this.

NETWORKS: For example, operators must already grapple with significant issues of congestion on existing networks. All of the operators failed a recent audit in 2012 by the regulator to measure call reliability and connectivity; this also revealed that traffic congestion was above the maximum amount allowed by the regulator. A large part of the blame rests on issues of force majeure, with infrastructure having been severely damaged during the unrest in 2010-11 and problems of site security presenting a constant challenge.

A shift towards site-sharing will help resolve some of this, and the results from the management of Orange and MTN transmission sites by Nigerian tower operator IHS on the market will be closely watched by both other firms and the government. Nonetheless, additional investment in back-haul infrastructure is needed to ensure that data services do not overburden existing networks, said Mamadou Coulibaly, the deputy director of strategy at Orange Côte d’Ivoire.

Lastly, improving international connectivity is equally crucial. Three submarine cables connect Abidjan to Europe, where most sites are located, and include the South Atlantic 3/West African Submarine Cable system, which goes from Portugal to about a dozen coastal African countries. There is also the West Africa Cable System, running from the UK to South Africa as well as the Africa Coast to Europe cable.

USAGE: For stakeholders to be able to reap the benefits of these costly investments, a welcoming environment needs to be created to foster demand for 3G. The trend in other parts of the continent is that mobile internet use is fast overtaking desktop internet. In some cases, such as Zimbabwe (58.1%) and Nigeria (57.9%), more people access the internet on their phones than via any other medium. Côte d’Ivoire is expected to follow the same trend, especially as its fixed-line teledensity fell to 1.15% in 2012. However, today, few subscribers in the country currently access the internet from their phones. According to market researcher StatCounter Global Stats, in 2012 only 19.8% of internet users accessed the web by mobile phone. Didier Kla, the director of research and development at Orange Côte d’Ivoire, estimates that about 8% of the phones on the market are smartphones. That penetration rate drops when the number of those that are actually connected to the internet is factored in.

LOWER END MARKET: As a result, one of the key issues limiting 3G uptake is the simple availability of 3G terminals, such as phones, tablets and computers. USB fobs and data cards are common, but the arrival of an increasing number of low-cost 3G-enabled smartphones will help spur further growth. Currently, taxes on smartphones can be prohibitive, reaching upwards of 40%, but phone manufacturers are already targeting this lower-end segment of the market, with products ranging from Samsung’s Chief Hero to the Huawei 4Afrika phone, as well as devices from ZTE and LG. Operators are also offering subsidised smartphones, both pre- and post-paid, to try to stimulate further interest.

However, there is now a push from the private sector to encourage additional government support. “The government needs to contribute; operators cannot do it alone. They need to help make phones more widely available, like by exempting them from tax,” Coulibaly told OBG. Another concern for the proponents of 3G networks and the internet in general is the lack of local content. That most of the major websites used in Côte d’Ivoire are located abroad certainly does not help the problem. Unsurprisingly, given the relatively limited number of local sites, internet traffic monitoring website Alexa lists Facebook, Google, Yahoo! and YouTube as the most visited sites in the country.

The government is developing a series of initiatives as part of its e-Gouv project promoting a digital Côte d’Ivoire and using ICT for improved efficiency and accelerated development. The e-Gouv project will incorporate such initiatives as e-Education, which is meant to help more children and teachers have access to education tools, and e-Health, among others. The increased investment in the national backbone, which will expand and reduce the cost of connectivity, should encourage increased use of local and government websites.

Yet while the Ivoirian government is aggressively looking to improve digital literacy in Côte d’Ivoire through its promotion of local content, most of the initiatives so far have come from the private sector. MTN, for instance, launched a competition in Côte d’Ivoire called “Kiff Your Day” in a bid to promote the blogging culture. Even as 3G gets deployed in Côte d’Ivoire, a handful of other African countries such as South Africa and Tanzania are already rolling out 4G networks. According to local press, the new code for telecoms, slated for 2013, states that no new licences will be required to deploy 4G services for operators holding 3G licences, allowing 4G roll-outs from the three major operators.

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The Report: Côte d'Ivoire 2013

Telecoms & IT chapter from The Report: Côte d'Ivoire 2013