Africa and LTE #2: Leapfrogging Fixed Broadband

Africa is catching up with the technology advances of the West, and they’re doing it by leapfrogging over technology that’s become irrelevant, pioneering next-generation solutions. Solar PV lights (like those from Sunny Money) are rendering it unnecessary to build expensive electrical grids. Mobile payments (from M-PESA and others) have replaced old systems of remittance in many areas. Mobile bank accounts (like AccessAccount from Standard Bank in South Africa) are replacing branch-based accounts. LTE networks are making landline telephony obsolete.

Africa is never going to have widespread, fast fixed-line broadband. Angola, Tanzania and Uganda have all launched LTE. Note that fixed broadband penetration in these countries is just 0.12%, 0.007% and 0.25% respectively, because there’s no high capacity backbone infrastructure.

Mobile operators in these countries, and also Mauritius (see my post about that here), and Namibia, are jumping straight from GPRS to LTE, or evolving WiMax to LTE. And just like that, LTE becomes the default broadband option. No need to mess about with anything in between.

Enabling data connectivity through LTE gives operators an immense economic opportunity. When subscribers use feature phones on a slow network, they can only consume voice minutes and texts. If those same people use a feature phone like a Nokia Asha on a faster network, they can also consume data. For operators, that leads to an increase in average revenue per user (ARPU) and the opportunity to offer new services that weren’t feasible before.

Operators certainly understand the value of mobile broadband (more on that here) and even now are trying to shift people’s perception of mobile phones from something that lets you talk to others to a device that lets you connect to the internet. For example, the scratch cards that subscribers use to top up their phone minutes have begun to position the value of the cards in terms of data—not voice.

Since the ARPU in Africa is about $4-6 USD and data revenue contribution is even lower, purchasing power is big barrier to break in these markets. However, Africans spend a larger percentage of their income on mobile than people in the U.S.: a Kenyan operator’s ARPU is about 7 percent of average income whereas an American operator’s ARPU to average income is only about 0.2 percent.

It’s really all about value, and there is absolutely business opportunity here. Watch out. Here comes Africa.