Northern markets remain ahead of the pack in Africa

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New Wireless Intelligence data reveals that North Africa remained the largest and most technologically advanced sub-region in Africa in the fourth quarter of 2009. The six countries that make up the region accounted for around one fifth of the estimated 1 billion total African population but almost a third (32 percent) of the continent’s mobile connections. Mobile penetration in North Africa passed the 80 percent mark in the quarter, making it the second most penetrated sub-region (after Southern Africa) and well above the African average of 48.6 percent. In three of the North African markets (Algeria, Libya and Tunisia) penetration is above 90 percent. Year-on-year connections growth is running at 21 percent, suggesting that – unlike the Southern African region – North Africa is not yet showing signs of market saturation. However, the fast-growing Western African region is on track to overtake North Africa as the continent’s largest mobile market (by connections) in the first half of 2010.

North Africa is significantly more advanced in the rollout of high-speed WCDMA (3G) networks than most other African sub-regions. North Africa had 5.2 million WCDMA connections in the quarter, accounting for just under 4 percent of the region’s total connections and more than double than a year earlier. This means that North Africa now accounts for around 35 percent of total African WCDMA connections – a figure that is considerably higher if the advanced South Africa market is excluded. After South Africa, the next three largest WCDMA African markets are all in the North region: Egypt (1.9 million), Libya (1.9 million) and Morocco (1 million).

Egypt is the second-largest mobile market in Africa (after Nigeria) and the largest in North Africa, adding around 2.4 million new connections per quarter and currently growing by about 30 percent a year. The Egyptian mobile market was a duopoly between Mobinil (France Telecom/Orascom) and Vodafone for many years prior to the launch of a third-player – the UAE’s Etisalat – in April 2007. The new operator based its launch strategy on its advanced HSPA network, describing itself as “the first 3.5G operator” in Egypt. According to our data, Etisalat had only a 12 percent share of the overall Egyptian market in 4Q09 but commanded a 46 percent share of the country’s HSPA connections. Etisalat has been linked recently with further expansion in the region, reportedly studying mobile opportunities in Algeria, Libya, Morocco and the Sudan.

However, the Egyptian mobile market continues to be dominated by the row over ownership of market-leader Mobinil. France Telecom and Egypt-based Orascom have been locked in a legal dispute for several years regarding control of the firm. In the most recent development, Orascom has stated that it will not exit its home market until it gets what it deems is fair compensation for its stake in the operator.   

Orascom is also facing problems in neighbouring Algeria where its local unit – branded ‘Djezzy’ – was recently hit by a US$596.6 million tax bill from the Algerian tax authorities, a factor partly responsible for the parent firm reporting a surprise net loss for the fourth quarter. Nevertheless, Djezzy continues to be a strong market leader in the country, commanding a 46 percent market share in 4Q09. The business has also been tipped as a possible acquisition target for the likes of Etisalat and France’s Vivendi (the latter a market-leader in neighbouring Morocco via its stake in Maroc Telecom), though Orascom has denied that it is for sale. Algeria is one of the two markets in North Africa (alongside Tunisia) yet to launch commercial WCDMA. While the Algerian authorities have held numerous consultations on the matter – the latest in 2008 – the process for issuing licenses appears to have stalled.

Elsewhere in the region, the situation in Sudan is more in line with most other markets on the African continent, and was the fastest-growing and least penetrated mobile market in North Africa in 4Q09. The market is led by Kuwait’s Zain, which enjoys close to a 50 percent market share. The Sudanese unit is one of only two of Zain’s African mobile businesses (along with its interest in Morocco) not included in the US$10.7 billion sale of its African operations to India’s Bharti, evidence that  Zain Sudan has avoided many of the problems afflicting the group elsewhere in the region. Indeed, Sudan represented 10 percent of Zain’s total connections and 12 percent of group revenue in 3Q09. The other main players in the Sudanese mobile market are state-controlled Sudatel (the only major CDMA-based operator in North Africa) and MTN, which is the only operator to have launched 3G services in the country to date.

Joss Gillet, Senior Analyst, Wireless Intelligence

Mobile growth in North Africa is fuelled mainly by the phenomenon of multiple SIMs per user. But as most markets mature and move closer to saturation, mobile operators will rapidly have to focus on value share rather than customer share. Mobile broadband penetration is still very low in North Africa despite potentially high demand. In Morocco, for instance, Maroc Telecom and Medi Telecom reported 480 percent and 179 percent annual growth in mobile broadband connections respectively in 2009. However, the key challenge for mobile operators in the region remains network coverage – for both 2G and 3G. As we discussed in previous reports, emerging markets have been badly hit by the global financial crisis and are recovering slowly, delaying mobile operators’ plans to invest in network expansion. But North African operators are well-placed to lead data revenue growth in the region, which will help maintain ARPUs at around US$10. However, consolidation is likely to increase price pressure on local operators, and will subsequently impact capital expenditure. New developments to look out for include Morocco’s Wana (ONA) launch of its GSM network later this year, and the Libyan government’s move to sell-off its stakes in the country’s two state-owned operators, Libyana and Al-Madar.

Northern Africa mobile market, 4Q09
Source: Wireless Intelligence

Africa mobile connections by sub-region, 4Q09
Source: Wireless Intelligence