mobilising africa & middle east - whitepaper

8/6/2019 Mobilising Africa & Middle East - Whitepaper

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Mobile Grows in South America

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Mobilising Africa & Middle East

Market OverviewJuniper Research defines the Middle East and African region as encompassing the continent of Africa, theLevant, the Gulf States, other Southwestern Asian countries (including Iraq, Iran, Syria and Yemen) and theCentral Asian republics which comprised the majority of the Commonwealth of Independent States (CIS).

With the exception of the Indian sub-continent, this vast geographic region had the lowest mobilepenetration rate in the world at the end of 2003, at just 7.4%, well below that in South America (22%) andEastern Europe (35%). However, in recent years the region has witnessed dramatic growth: by the end of2007, the mobile subscriber base had risen to 391.6 million, representing cumulative average annualgrowth over the 2003-7 period of nearly 49%.

Unlike, say, Latin America, where the development of cellular markets proceeded along a common pathand a broadly common timescale, the extreme diversity of the markets within the Middle East/Africaregion means that historical development cannot be depcited with such a broad brush. That said, there area number of clear trends within sub-regions: across the Gulf States, for example, market liberalisation is avery recent phenomenon. Bahrains second operator launched in 2003, while the second operatorlaunched in Oman and Saudi Arabia in 2005, and in the United Arab Emirates in 2007; Qatar is still amonopoly.

In sub-Saharan Africa, mobile penetration rates have historically been amongst the lowest in the world.Only in South Africa, where penetration exceeded 50% in early-2005, has mobile achieved a significantlevel of adoption until very recently. (Indeed, at that time, only Botswana in that sub-region had apenetration rate in excess of 20%.) However, the combination of increased competition and perhapsmost significant the increased investment by a number of major multinational players, notably from

within the region has provided a major fillip to mobile in the sub-region, with a number of countriesexceeding the 20% penetration mark; Nigeria passed 30% in Q1 2008.

Non-Voice Services the Key Drivers for

Mobile Service RevenuesWhile voice services have traditionally provided the overwhelming majority of revenues in the mobileenvironment, in recent years a number of non-voice services have increased dramatically in popularity.Juniper Research believes that the following four core sectors will provide significant revenues across theMiddle East/Africa region in the medium and longer term.


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Mobile Advertising

Within the Middle East/Africa region, mobile advertising is still in its relative infancy. The market isdominated by SMS-based campaigns, which in 2007 accounted for around 82% of regional adspend of just$29 million. While adspend is expected to increase significantly in 2008, this is still very much attributableto continued utilisation of SMS-based campaigns, and reflects the realisation that many handsets in the

region are entry-level; to attain maximum reach, campaigns are targeted accordingly, using a technologythat most consumers can access. Indeed, SMS will remain the most popular campaign tool in the regionthroughout the forecast period, although by 2013 its share of adspend will have declined to 36% as otherdelivery channels most notably on-portal advertising gain in popularity.

Mobile Entertainment Services

At the present time, mobile content service revenues in the Middle East/Africa region are areoverwhelmingly dominated by ringtones, logos and downloadable games. However, we envisagesubstantial development of the market across a range of product areas over the next five years, both interms of 2.5G and 3G/3.5G-oriented products. Only recently have operators begun to offer a fairlysubstantive array of on-portal content, meaning that consumers have been obliged to surf off-portal fortheir desired content. As the amount of content readily available to consumers increases, and as userinterfaces are enhanced, so will revenues increase.

Mobile Financial Services

Mobile financial services, that include both mobile banking and mobile payment applications and services,are already available in most regions in a variety of formats, and where they are being adopted, either intrial or commercial mode, the user feedback has been very favourable.

In developing world economies, such as sub-Saharan Africa, there is restricted access to financial andpayment services. Furthermore, a vast majority of financial transactions are classified as being micro.

Traditional methods of finance have found it difficult in managing small amounts of money. Cash has beenthe dominant micropayment method for hundreds if not thousands of years but cash is not the idealsolution; it can be counterfeited, it wears out, it can be difficult to transfer and the bank has been thetraditional distributor of it.

Meanwhile, Africa has enormous potential for mobile banking services and is often quoted as a regionwhere the mobile phone could easily become the main method via which the population banks.

Mobile Ticketing and Coupons

Juniper Research defines a mobile ticket as an electronic ticket that is stored in a mobile phone for laterredemption, and a mobile coupon as a retail coupon that is delivered and stored on the mobile phone which canbe exchanged for a financial discount or rebate when purchasing a product. Coupon exchange, or redemption,can either occur at the physical storefront or online at an eCommerce or mCommerce retail store.

There are very positive signs for the development and growth in both mobile ticketing and mobile couponmarkets. Throughout 2007, the market, especially for mobile ticketing, developed strong traction in all keysectors in a number of developed markets, and we expect this trend to be replicated across the MiddleEast/Africa over the next few years as services are rolled out.


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Regional Forecasts

Subscriber Growth

Juniper Research envisages that the Middle East/Africa mobile market will reach 485.9 million by the endof 2008, representing y-o-y growth of 24.1%. This is markedly lower than the 40.3% recorded in 2007, dueto a number of factors:

Many Gulf States have now exceeded 100% penetration South Africa is approaching 100% penetration Many North African countries have exceeded 50% penetration

Thus, the majority of net additions are likely to come from sub-Saharan Africa (outside South Africa).Annual subscriber growth is expected to fall gradually over the 2008-2013 period, falling to 5.8% by 2013;compound annual growth over the five year period is expected to be 10.5%.

There is a substantial variety amongst the 3G adoption rates across the region. Many countries in sub-Saharan Africa, North Africa and the CIS have yet to deploy 3G services; conversely, Israel and the UnitedArab Emirates have adoption rates which exceed those in many Western European countries, while SaudiArabias 3G base (3.1 million in 2007) was the tenth-highest in the world at that time. That said, fourcountries (Israel, Saudi Arabia, South Africa and the UAE) accounted for nearly 94% of all 3G subscribersin the region in 2007, with the result that 3G penetration of all regional handsets stood at 2.7%. Thiscompares well with the Indian sub-continent (where services have yet to be launched), South America(0.4%) and Eastern Europe (1.0%), although well behind both North America (20.2%) and Western Europe(16.1%).

As 3G deployments proceed across the region, we will see adoption gradually increase, although thecomparatively high cost of 3G/3.5G handsets means that in many countries, 3G penetration will notexceed 10% until the end of the forecast period at the earliest. Conversely, 3G penetration is likely toexceed 50% in Israel and the UAE by 2010, and in Saudi Arabia by 2011.

With the exception of Saudi Arabia where a number of providers have been licensed there has beenlittle activity in the Mobile WiMAX environment in the region. Indeed, by the end of 2007, only two othercountries South Africa and Nigeria had even announced technical trials, although there is thelikelihood that South Africa will launch a service for high end business customers in the short term.Therefore, Juniper Research does not envisage that there will be a substantial takeup of WiMAX servicesuntil 2013 at the earliest.

ARPU and Service Revenues

Middle East/Africas regional ARPU in 2007 was $16.58, down by 12.1% on 2006. However, we envisagethat blended regional operator-billed ARPU will decline by an average of 5.3% per annum over the 2008-

2013 period, due primarily to an increase in subscribers from low GDP, low-ARPU markets. In 2007,markets where monthly blended ARPU exceeded $25 accounted for 13% of the regional subscribers; by2013, this proportion will have declined to 9%. Furthermore, within individual markets, increasingcompetition will also place downward pressure on pricing, most notably in the case of voice services,where ARPU will decline by an average of 14.6% per annum over the forecast period.

However, the decline in voice ARPU with be partially offset by a marked increase in data ARPU. Datausage in the Africa/Middle East region is exceedingly low: it accounted for just 7.5% of service revenues in2007; only in a handful of markets did ARPU exceed 10% of service revenues, and in many cases lay belowthe 5% mark. This is partly due to handset limitations, with a number of entry-level handsets permitttingonly SMS, basic ringtones and simple graphics, and also due to the fact that many leading global contentproviders have not yet offered services in many of the markets across the region.

Operator-billed service revenues in Middle East/Africa in 2007 totalled $66.7 billion, up by 24.2% on 2006.Voice revenues for the region rose by 22.3% to $61.7 billion, while non-voice revenues rose by 52.5% to$5.0 billion.


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Based on the subscriber growth and ARPU forecasts outlined above, Juniper Research believes that totaloperator-billed service revenues will rise from $79.3 billion in 2008 to $107.4 billion in 2013, representingaverage annual growth of 6.3% over the forecast period.

Figure 1.9: Africa & Middle East, Operator-Billed Service Revenue ($m), by Key Country(Saudi Arabia, South Africa, UAE, Nigeria, Israel, Egypt, Other) 2008-2013

Source: Juniper Research

Amongst the six countries profiled by Juniper in this report, average annual growth is expected to behighest in Nigeria (10.8%). By contrast, we expect operator-billed revenues in Israel to peak in 2009 andto decline marginally thereafter. Over the 2008-13 period, the market will generate a cumulative total of

$575.3 billion in service revenue: Saudi Arabia will account for the largest share (12.8%), followed byNigeria (10.8%).

Order Full Report

Mobile Africa & Middle East: Opportunities, Markets & Forecasts

2008-2013

This whitepaper is taken from Mobile Africa & Middle East: Opportunities, Markets & Forecasts 2008-2013.

This regional report provides a complete market overview for the Africa & Middle-East region focusing onsix key countries, United Arab Emirates, South Africa, Saudi Arabia, Nigeria, Israel and Egypt. Thecountries included in this report are available to purchase individually.

The study forecasts prepaid and postpaid subscriber numbers as well as 3G subscriber growth as a wholeand for each of the six key countries. It also includes service revenues split by voice and data as well asdata on operator subscriber numbers and ARPU, again for both the region and split by key countries.This study provides current operator market share and analyses key players within each market. Keyregulatory developments such as 3G licencing, mergers and acquisitions are presented along with recentnetwork developments.


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Key questions the Africa & Middle East report answers:

How will mobile service revenues develop over the 2008-2013 period?

Which markets in the region will experience the highest level of subscriber growth?

What is the likely adoption rate for 3G services across the region?

What are the prospects for mobile financial services in Africa & Middle East?

Which countries have licensed new operators in the past year?

What major mergers and acquisitions have occurred recently or are planned in the near future?

For more details on this report visit the website www.juniperresearch.com or phone +44 (0) 1256830002.

About the Author

Dr Windsor Holden is the Principal Analyst with Juniper Research. He is responsible for developing Juniper Researchs report portfolio and designing a forthcoming range of market intelligence servicesfocusing on the mobile content market. He is also the author of a number of recent reports includingMobile Advertising: Delivery Channels, Strategies & Forecasts, Mobile Entertainment Markets:Opportunities & forecasts (2nd edition), Mobile Music Ringtones: Full Track Downloads & Streaming (4thedition), Mobile Gambling: Casinos, Lotteries and Betting (4th edition), Mobile TV: Opportunities forStreamed and Broadcast Services (3rd edition) and Mobile User Generated Content: Dating, SocialNetworking and Personal Content Delivery.

Previously with Analysys, Dr Holden has written extensively on mobile content, emerging telecomsmarkets and digital TV. He is also a regular conference speaker and a former Research Fellow of theInstitute of Communications Studies, University of Leeds.

Publication Details

Publication date: July 2008

For more information, please contact:

Michele Ince, General Manager [email protected]

Juniper Research Limited, Wakeford Farm Business Park, Pamber End Tadley, Basingstoke, Hampshire

RG26 5QN England

Tel: +44 (0)1256 830002/889555 Fax: +44 (0) 8707 622426

Further whitepapers can be downloaded at http://www.juniperresearch.com

mobilising africa & middle east - whitepaper

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