4 August 2012

Uganda: Phones to Overtake People

Increased adaptation of mobile applications is driving unprecedented growth in mobile phone acquisition

Shailendra Naidu, the chief commercial officer of Warid Telecom, carries a Samsung Galaxy S2 mobile phone he bought many years ago at US$800 (about Shs 2 million).

Naidu says as long he has his phone, he no longer needs to be in his office or at his computer to work.

"I can just sit anywhere and send or receive e-mails, read documents, pay bills, transfer money, hold meetings, chat with friends and family, and many other things," Naidu told The Independent on July 25.

Said to be one of Samsung's most popular smart phones, the Samsung Galaxy is like a mini-computer with high performance audio and video, music, internet, library, organiser functions, etc.

Being an executive of the mobile phone industry, some might say he is obliged to sound self-congratulatory, but Naidu is only one of many that testify to the dramatic transformations the mobile phone has caused in the way people live, work and earn.

James Hybyene says with the Samsung Galaxy Note he bought in Dubai last year at US$1,200 (about Shs 2.9 million), he no longer carries a notebook, even to meetings or conferences, but takes notes on his phone.

Hybyene says with its high-speed internet, his smart phone also accesses newspapers from around the world, television, Google maps and different voice solutions, among other functions.

"I find it very comfortable to use," Hybyene said.

Mobile applications are the new engine powering the growth of mobile phone subscriptions, especially in developing countries like Uganda, and manufacturers are in a race to come up with newer and more functional solutions to address the needs of users.

The Orange Uganda website advertises different types of mobile phones with prices ranging from Shs 34,000 to Shs 3 million. Amuza Muwonge, a mobile phone dealer along Kampala Road says most customers today are looking for mobile phones with applications that go beyond making a phone call or sending a text.

"Every day I get over 10 customers asking about phones that have internet, radio, camera, memory card, and other such features," the dealer told The Independent on July 24.

More than 30 billion mobile applications were downloaded in 2011 to extend the capabilities of phones, for instance to become mobile wallets, navigational aids or price comparison tools, according to a recent World Bank/ infodev report.

The report argues however that this is only the start of the mobile data revolution that is predicted to expand more than twenty-fold over the next four years.

More phones than people

According to the report titled Maximising Mobile, released on July 17, the fast adaptation to daily life of mobile phone applications like broadband internet, mobile money, agro-market applications, health packages, election monitoring tools, and others, has spurred renewed growth in mobile phone ownership.

In developing countries especially, the mobile phone is no longer just a tool to communicate, but a means to create jobs and livelihoods, enhance lifestyles, access business information and open markets. For governments, they are a means to enhance service delivery and citizen feedback.

The report predicts that by 2015, the number of mobile phone subscriptions will have overtaken the human population. The world population will be about 7.5 billion in three years. Mobile subscriptions will be creeping close to 9 billion, driven partly by increasingly common phenomenon of multiple subscriptions.

Currently there are 6 billion mobile phones in use worldwide - equal to 75% of the global population - with nearly 5 billion in developing countries like Uganda. In 2000, there were only 1 billion.

Uganda has 16.45 million mobile phone subscribers [shared among the major five telecom operators including MTN, Airtel, UTL, Warid and Orange Uganda, according to UCC. 52% of Ugandan households are reported to have access to mobile phone, equal to the Sub-Saharan Africa average.

However the international consultancy firm PricewaterhouseCoopers (PWC) predicts that this number could rise to 25 million, 70% of Uganda's population, by 2015. With penetration rates still below 40%, PWC argues that there is huge potential for growth.

UCC's Manager for Communications and Consumer Affairs Fred Otunnu, says that may be an over-estimate, but not by much. "Maybe 20 million in three years," Otunnu told The Independent on July 25.

Telecoms respond

An official of Orange Uganda agrees that data is the key, but cautions that subscription growth will also depend on the pace of the economy.

"If the economy is doing well and many people have access to money, we will get many subscribers," Orange Uganda Chief Technical Officer Godfrey Kiseka told The Independent recently. This would enable telecom companies to increase revenue, strengthen operations and pay more taxes.

None-the-less, Orange is concentrating on improving the quality of data services to ensure it remains ahead of competitors in order to attract new subscribers through data who may end up using the voice services as well. The company currently has about 1 million subscribers.

"People today are looking at smart phones and ipads, that means data services have potential," Kisekka said.

He added that as numbers grow, competition is likely to increase, but insisted that quality of service will decide the winners.

By contrast, Warid's Naidu urges a careful balance between service quality and prices.

"A cheaper network will attract more subscribers and in the end earn profits," he told The Independent.

Some companies could second these arguments. For instance MTN Uganda increased its subscriber base by 1.2% from 7,629,000 to 7,725,000 as the market slowed due to SIM registration, according to the group's Q1 report ending March 2012.

Over the same period, MTN Uganda's monthly weighted Average Revenue per User (ARPU) rose 14% from US$3.5 to US$3.99, which was the second highest rise in the group after Guinea-Conakry.

Infrastructure, not advertising

Experts urge increased investments to upgrade infrastructure, arguing that as more people get access to mobile phones, it will become increasingly difficult for telecom companies to maintain stable networks.

This phenomenon is already evident in the industry. Service quality had become so bad with dropped calls and overcharging, that the Uganda Communications Commission, the sector's regulator, set a 10% penalty on operator's gross income if their services are proved to be inefficient and unreliable.

An IT official at MTN Uganda says infrastructure upgrade may mean reduction in marketing spending, for which the competitive telecom industry is notorious.

For instance 2011 advertising figures from Ipsos-Synovate show that MTN spent Shs 31.8 billion in advertising that year. Airtel spent about Shs 24 billion, Orange Shs19 billion and Warid Shs16.9 billion.

James Saaka, executive director of the National Information Technology Authority Uganda [NITA-U], argues that this is the gap the US$106 million (about Shs 250 billion) National Backbone Infrastructure (NBI) is intended to cover.

"The NBI will ensure that government agencies and members of the public can access internet on mobile phones and other gadgets," Saaka told The Independent on July 26.

With governments and telecom operators investing in infrastructure, the World Bank's Vice President for Sustainable Development Rachel Kyte argues that the challenge now is to enable people, businesses, and governments in developing countries to develop their own locally-relevant mobile applications.

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