Channelling demand

Mobile phone penetration varies massively across African continent, and there is huge potential for growth.

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By  Ronan Shields Published  September 23, 2007

With its population currently estimated to stand at 924 million and set to grow further to 1.4 billion by 2025, according to figures from the African Union, the importance of gaining traction in a continent the size of Africa is clearly apparent.

With the total number of African mobile phone subscribers expected to increase at a CAGR of 13.36%, giving a total of 351.9 million, and penetration set to rise to almost 31% by the end of 2011, according to analyst firm RNCO, efforts are being made to shore up the availability of handsets across the continent.

Handset average selling prices (ASPs) continued to decline across the EMEA region during 2Q07 as vendors looked to expand more aggressively into mid-range and entry-level segments of the market in geographies such as Africa, according to research from IDC.

Motorola has reported that despite its recent gloomy figures in the global market, its operations in Africa are proving a solid base for the company to rise from the the doldrums and rebuild market share.

These claims have been backed up by figures recently published by analyst firm ABI Research citing the US firm as the top vendor in the ultra low cost handset (ULCH) price bracket (sub-US$50).

"Motorola has the strongest patent portfolio in GSM technology and got a head start in the ULCH market," says ABI analyst Shailendra Pandey.

"Having won the tender for the GSM Association's Emerging Markets Handset initiative, Motorola provided 12 million ULCHs to emerging markets in Asia, Africa, and the Middle East," he adds.

However, Pandey also points out that Nokia is catching up quickly adding that Motorola will find it difficult to maintain a leading position in the ULCH market.

"Nokia on the other hand will benefit from the fact that it holds a much higher share of emerging markets and also has better and more well-established distribution networks," he adds.

Nikesh Patel, sales director at Motorola for Eastern, Central and Southern Africa, says that the African market is the "last frontier" for all handset vendors in the market, highlighting the rapid rate of growth across the continent.

"Obviously Africa is a very diverse place and South Africa is the leading market by a large margin with a mobile penetration rate of approximately 70%," Patel says.

"On the other hand we have countries where penetration is so low, such as the Democratic Republic of Congo, that the market is growing at a rate of 75% year-on-year," he adds.

Motorola's push in the entry-level handset market began in earnest two years ago when the vendor successfully bid for the GSM Association's emerging markets handset programme, and has gone on to ship more than 12 million devices as of 1Q07 under the terms of the agreement.

"Although the market is rapidly expanding, Africa is a poor region and we have to tailor our product offering accordingly by entering the market at the right price point," says Patel.

He also states that the comparative absence of fixed line telephony as aiding the continued growth and says that cost control is an added concern when dealing in market segments that yield such lower profit margins.

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