Business and Finance
Thoughts on Growth – The Future of Telecommunications in LEDCs | By Ndubuisi Kejeh
Between 2000 and 2010 mobile phone connections in less economically developing countries (LEDCs) grew by more than 1,100%, overshadowing the 200% growth within the most economically developed countries (MEDCs) . Some national growth figures were astronomical, such as that of Nigeria where mobile connections grew from from 30,000 to over 87 million subscriptions in 11 years.
Though seemingly pervasive from such figures, only 45% of people worldwide own and make use of a mobile phone, which differs substantially from the mobile connection figure, which counts SIM cards (approx. 94%). This comes from a new study by Wireless Intelligence , which considered in its estimation the number of unused SIM cards, and the global average of 1.85 SIM cards owned per consumer. An ‘unconnected’ market of 1.1bn people who lack network coverage in their area was also defined, which should grow to 1.8bn by 2017. This group predominantly occupies the rural and peri-urban regions in LEDCs.
The challenge of reaching those ‘unconnected’ to boost unique mobile users has long since been underway, with investments coming from international consortia and local institutions in LEDCs.
The submarine cable capacities for South Asia and Africa had the equivalent of 105% and 90% year-on-year growth between 2007 and 2011 respectively , and capacity growth is expected to hasten. In 2010-11 global investment in submarine cables was USD$3.7bn; however, in 2012-13, USD$2bn will be invested in Africa alone, which is more than double that aimed for Asia in the same period, and double the African investment in the previous two years . In 2009, investment in African backhaul mobile network infrastructure was USD$355 million, which should grow to USD$1.45bn by 2015 .
Such massive inflows have engendered vastly increased connectivity with 70% of the population in LEDCs now having access to GSM coverage , and 3G and even 4G connections already established in the larger and more data demanding urban regions of Nigeria, South Africa, Angola, and others  . However, the consumer response to the betterment of coverage, quality, and prices is frustrating operators.
Unique subscriber penetration within LEDCs is only 39% and a third in Africa, compared to 80% in MEDCs
. Africa’s high annual connection growth of 15% is mostly fuelled by multiple SIM acquisitions, with MTN Nigeria reporting of their gross customer additions in Q2 2012 that only 25% were “first time subscribers”, while the others were “attributable to rotational churn and multi SIM cards in the market” . Average SIM ownership per person in Nigeria and Indonesia is 2.39 and 2.62 respectively, compared to the 1.52 average for MEDCs . This SIM redundancy is driven by consumers continuously seeking out and changing to the best operator deals, and among the most frugal in these regions ownership is so high that “10-12 [SIM cards] per user per year is not uncommon” .
I believe there are two profound issues behind the lower than desired growth of new mobile acquisitions. These are the slow increase in liquidity, whether through rises in individuals’ incomes or supporting credit facilities , and the much slower proliferation of power infrastructure relative to that for telecommunication.
Poverty in sub-Saharan Africa and South Asia is pervasive, with 69.2% and 70.9% of people in these regions living on less than USD$2 a day respectively .
The scale of destitution in India is summed up by its 2011 census finding, showing that that there are more mobile connections in the country than toilets and pit latrines combined
 . The power problem – from an investor’s viewpoint – could be seen as more troublesome, as it is needed to further infrastructure growth and drive consumers’ phone use. Currently, a quarter of all cellular base stations in Uganda, Kenya, and Tanzania are run perennially by diesel generators , and by 2015, the cellular network in sub-Saharan Africa will reach more of the population than the national electricity grid.
The effects can be seen in many numbers, such as Africa’s low monthly Average Revenue Per User (ARPU) of USD$8 , its high churn rate, and the slow growth in new subscribers. Worrying still, unlike telecommunication statistics the power issue is projected to worsen in Africa, with 138 million people expected to be within range of the mobile network yet lacking grid access by 2015 . Poverty alleviation for the continent as a whole is less bleak but still not definitive, with sluggish increases having to keep pace with swift population growth    .
The barriers to telecommunication access in Africa and other developing regions are being vigorously addressed. Nevertheless, for investment returns to endure, even greater attention must be given to the fundamental power and economic problems, to allow consumer uptake and phone use to continue growing in real terms.
However, with reports postulating the sectors growing importance, stating a doubling of data use nationally can measurably provide a 0.5 percentage point increase in GDP growth figures , could government and profit motivated entities be tempted to prop up a foundation-less building with the same unsustainable solutions ubiquitous today? Considering power provision is usually a state issue, can governments in LEDCs – or any other region – initiate and sustain a power programme that produces telecom-like annual growth? Could such a programme give the necessary credence to power generation from alternative sources, considering the technology available today?
These questions are currently unanswerable, but a positive conclusion relies on the global community conjuring the required ingenuity, diligence, gusto, and passion from within itself. However attractive an investment might seem to economies in recession, corporations fighting pension deficits, or emerging markets competing with those already established, we must always try to focus on robust long-term growth, which invariably requires the development of the consumer – and their surroundings – in order to continue fuelling consumption. The worst thing we could do is allow any desire we have for rapid ‘progress’, in any field or sector, cause a gradual and insidious fall back to bad habits.
EPG and De-Charles Energy are working together to highlight sustainable global opportunities and business models, and promote awareness of the changing economic climate in emerging and frontier economies.
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Ndubuisi is an entrepreneur focused on global economic development, for which he deems power and liquidity requisites. He has a strong focus on Africa and Asia, which he currently considers the two most compelling and exciting regions; although, he is also conscious of worldwide problems that require solutions.
Ndubuisi has undergraduate and postgraduate degrees in Electrical & Electronic Engineering from Imperial College London, which while undertaking, he co-founded an NGO whose rural electrification work in Africa was lauded by the IEEE, MIT, GE, and JP Morgan, among others. Upon graduation he founded De-Charles Energy, with the aim of addressing difficult issues in international markets by marrying engineered technologies with imaginative strategies and models.