Growth in Africa’s mobile phone users is set to slow sharply in the next five years, a study showed on Thursday, heralding an end to the boom in an industry that has spurred the continent’s growth.
A report by global industry body GSMA expects subscriber growth to slow to 6 percent between 2015-2020 compared with 13 percent growth in the first half of the decade, citing lack of commercial logic in setting up network coverage in some rural areas, where more than half of the population lives.
“I am bit surprised by this development because I expected strong growth to continue because the penetration rate in Africa is still well below 100 percent,” Mortimer Hope, GSMA’s Africa director, told Reuters.
“One reason for the slowing growth is that some areas especially in remote, rural communities are not economically viable for mobile phone companies to deploy their network because of the low spending power of people living there.”
By 2020, a little over 500 million people, or just under half the continent’s population, will have subscribed to a mobile service compared with the global average of almost 60 percent, GSMA said in the report.
Mobile phones have been one of the factors behind Africa’s recent growth spurt, by freeing people from the shackles of the continent’s awful landline infrastructure and allowing them to communicate and transact at low cost.
The simple SMS – and more recently mobile social media – have also become powerful political tools, used by grassroots political movements to mobilise support against oppressive states, such as happened in the north African ‘Arab Spring’.
While relatively low penetration rates suggested significant growth potential in most markets, the negative impact of increasing competition on profit margins is raising the prospect of more consolidation in the region, Hope said.
“Smaller players don’t have the economies of scale to drive their prices down and compete for long periods, so you’ll probably see some consolidation in the market,” he said.
There has already been deal activity in the sector in recent years with South Africa’s Vodacom buying fixed-line operator Neotel, which struggled to mount serious competition against larger rival Telkom.
United Arab Emirates’ Etisalat sold its struggling Tanzanian mobile phone business, Zantel, to Sweden’s Millicom in June.