analysisBy Russell Southwood
London — Many crystal-ball gazers in 2011 point to what they see as the low penetration rates of African mobile telephony as an indication that there is plenty of room for future growth in the sector.
On the face of it, the statistics for individual countries give some support to these optimistic prognostications. Taking the overall population as the potential target market, the penetration rate of mobile telephony in Uganda is now only 35%, while in Liberia, it was around 31% in 2009.
In Cameroon, where MTN and Orange have a duopoly, the penetration rate was around 38% in June 2010. In Kenya, it just passed the magic 50% level at around this time, while in Rwanda, it was about 25% in early 2010.
It is nonetheless worth asking whether it is realistic to infer vigorous future growth on the back of calculations that see the whole population as a vast untapped market.
Isabelle Gross cautions that for the foreseeable future, other factors, such as demographics and related economic aspects will keep penetration rates in sub-Saharan Africa lower than those in developed countries. This in turn implies both opportunities and challenges for African telcos.
In Liberia, which has a population of about 3.5 million and a mobile phone penetration rate of around 31%, the Johnson Sirleaf-led Government organised a census in 2008: the first after two decades of civil war.
This exercise revealed a striking "youth bulge" in the population structure: 42% of the total population, or around 1,458,072 people, were less than 15 years old; 54% were aged between 15 et 64; while less than 4% (118,111 people) were in the 64+ age group.
In Kenya, where a 2009 census put the overall population at 38,610,097, the age structure is almost identical. Almost 43% of the total population, or around 16.5 million inhabitants, were less than 15 years old; a little more than 55%, or around 20.6 million fell into the 15-64 bracket, while less than 4% (1.3 million) were older than 65.
The situation in Senegal is not very different. The last census, carried out in 2002, showed that 55% of the population were less than 19 years old, while 43% were aged between 20 and 69.
These few examples demonstrate the preponderance of youth in the demographic make-up of African countries: a position which is in marked contrast to that in developed nations, where populations are clearly ageing.
In France, where I was born, the population stood at 62.8 million in 2010. Detailed statistics provided by INSEE reveal that only 19% of this total, or 11.5 million, were less than 15 years of age. In the country where I live -- the UK -- the position is similar: in 2009, the total population was 61.8 million, of which only 18.6% were less than 15 years old. As a percentage of the overall population, in Sub-Saharan Africa there are more than twice as many under-15s as there are in developed countries.
This contrast means that it is not realistic to expect the progress of mobile telephony in Africa to follow an identical path to that in the developed world. In particular, the fact that many African families do not have the money to send their children to school, let alone buy them phones, puts a major question mark over the conventional model for mobile telephony penetration.
In interview in December 2010 with local newspaper New Vision, Themba Khumalo, the CEO of MTN Uganda said "these statistics (mobile penetration rate) should be read with the knowledge that about 50% of the population are below 15 years and have no spending power. In terms of addressable market, we have gone way above 70% of penetration, we have done well as a country".
If one looks again at the statistics described above in the light of the addressable market - in other words, the 15-64 age bracket - it becomes obvious that "true" penetration levels are not as low as many market commentators would have us believe.
In Kenya, there were a little more than 20 million mobile phone subscribers in June 2010. Comparing this to the total number of 15-64 year olds (20,685,000 according to the 2009 census), one arrives at a true penetration rate of around 100%. In Liberia, there were around one million mobile phone subscribers in 2009, making a mobile penetration rate as a percentage of the overall population of 31%. However, if one re-calculates this rate as a percentage of the addressable market, the figure climbs to 60%.
According to the telecoms regulator in Ghana, the NCA, the number of mobile subscribers reached nearly 17 million in October 2010, out of a total population of 24 million. Although there are no detailed demographic data available from 2010, the last census from 2000 found that the 15-64 age bracket made up about 54% of the total population. While the population may have aged somewhat, it seems likely that there were around 13-14 million 15-64 year-olds in 2010. On this basis, it would appear that the mobile penetration rate in Ghana in 2010 has reached the heady heights of 130%.
One can therefore conclude that penetration levels are higher than would appear at first glance, and that this will present both opportunities and challenges for African telcos. In terms of opportunities, African operators are more or less certain to be able to count on a regular and substantial stream of new young customers, who will be eager to buy a phone and some call credits as soon as they have made a little money.
In the meantime, however, the fact that the under-15s make up such a large percentage of the overall population limits the size of the addressable market. And as we have seen, a hard look at the statistics shows that the addressable market in some countries such as Ghana may already be approaching saturation. It will be interesting to see what commercial and marketing strategies the telcos can adopt to attract children to the world of mobile telephony when their parents have barely enough money to pay for basic schooling.