For a telecommunications industry hungrily seeking new avenues of growth, a surprising opportunity is emerging. Sub-Saharan Africa -- home to more than 650 million people, three-quarters of whom live on less than $2 per day -- has become the world's fastest-growing market for mobile-phone service. Last year alone, the number of mobile subscribers in the whole region shot up 37%, to 34.4 million, compared with a 32% rise in Eastern Europe, the No. 2 growth region, according to researcher Gartner Dataquest. "It's just a huge opportunity," says Ali B.M. Conteh, chairman of Vodacom Congo (DRC), the No. 1 mobile provider in the continent's third-largest country.
Outsiders are starting to take notice. Sellers of wireless networks, such as Ericsson (ERICY), Alcatel (ALA), and Motorola (MOT) are piling into sub-Saharan Africa. "Equipment vendors are looking for their next billion customers, and a lot of those could come from Africa," says Matt Hatton, a senior analyst with telecom researcher Yankee Group (RTRSY) in London. The World Bank estimates that sub-Saharan Africa will spend more than $3.2 billion annually over the next five years on wireless infrastructure.
Mobile operators also are trying to capitalize on Africa's raging appetite for communications. Giants such as England's Vodafone Group (VOD) PLC and France T?l?com's (FTE) Orange unit have set up operations around the region, alongside Egypt's Orascom Group, Celtel of the Netherlands, and players from South Africa and elsewhere. "We're making good money in these countries," says Sizwe Nxsana, chief executive of South Africa's Telkom, (TKG) co-owner with Vodafone of Africa's largest mobile operator, Vodacom Group.
What makes Africa's mobile revolution especially significant is its potential economic impact. The World Bank forecasts sub-Saharan gross domestic product growth at 3.7% this year, and as much as a quarter of that could come from rising telecom penetration, says Leonard Waverman, an economics professor at the London Business School. Adds Pierre Guislain, a manager at the World Bank's Global Information & Communication Technologies Dept.: "Mobile has become a tool of economic empowerment." A classic example: Farmers in Senegal used their one mobile phone to find eggplant buyers in Dakar willing to pay three times the rate offered by local middlemen.
That's not to say there aren't concerns. Handsets and service still cost too much for the vast majority. Carriers now take in average monthly revenues of around $20 to $25, higher than in some of the developed world, says Guy Zibi, an analyst at Pyramid Research in Cambridge, Mass. That's because most users are from the wealthy minority. Poorer ones share phones. But as competition sharpens and growing numbers of lower-usage customers pile on, average revenues could fall to $10 by 2006, driving down profit margins and threatening the viability of smaller operators.
Still, that's not stopping the land rush. Africa has been especially fruitful for vendors that came early and stayed. Paris-based Alcatel, for instance, commands a 36% market share there, three times its worldwide position, thanks to ultra-cheap systems. Nokia Corp. (NOK) also is targeting developing countries with a package of inexpensive handsets and network equipment. And Chinese vendors such as Huawei Technologies Co. and ZTE Corp. are scoring successes in developing countries.
It's undoubtedly good to have wireless phone service. But could Africa's mobile rush divert investment in better Internet access? Not if you ask Vodacom CEO Alan Knott-Craig. Within five years, he says, wireless networks in Africa will be as able to provide Net access as their wired cousins. And to get people linked to the Web, says Knott-Craig, "the cell phone will be Africa's PC." With hundreds of millions of Africans eager to get online, that's an opportunity sure to attract some heated competition. By Andy Reinhardt in Paris