African Telecom Space in Review: The Gains, Challenges and what the Future Holds

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For African telecom operators, the year 2020 was anything but “business as usual”. This is because the regular workflow was heavily disrupted by the COVID-19 pandemic which affected businesses globally.

Following the widespread outbreak which led to prolonged lockdowns in several African countries, telecom operators including MTN and Safaricom had to review certain policies ranging from slashing data tariffs to enabling zero-rated mobile money transfers.

However, despite the far-reaching inimical economic impact of COVID-19 on network providers across Africa, there were notable advancements in areas such as 5G deployment and broadband penetration.

In this article, I review the African telecom space over the course of 2020, pointing out the gains, challenges and what to expect going forward.

The Gains

5G Deployment

Despite COVID-19 related controversies, the latest generation of cellular networks, 5G was deployed in Africa by MTN and Vodacom in 2020 to provide subscribers with superfast wireless mobile connectivity.

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In May, Vodacom launched Africa’s first live 5G mobile network in three South African cities. Later in June, telco giant MTN unveiled its 5G network across 100 tower sites in major South African cities including Johannesburg, Cape Town, and Port Elizabeth.

5G trials have also been conducted by MTN in Nigeria and Uganda as well as Safaricom and Airtel in Kenya.

However, aided by the temporary additional spectrum assigned by the government post-COVID-19, South Africa remains the only African country where 5G has been commercially deployed.

Increased Broadband Penetration

During the year, there was significant expansion in broadband penetration across the world’s second largest continent.

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Mobile broadband coverage grew to 77% in 2020, 18% more than the 70% achieved in 2019, according to data from the International Telecommunication Union ITU and World Bank.

According to internetworldstats, internet penetration in Africa reached 39.3% in 2020, 19.5% closer to the world’s average of 58.8%.

In Nigeria, the government approved a N126.7 billion credit facility to increase internet access in the Northern region as part of its National Broadband Plan targeting 65% penetration by 2024. Also, with $20 million aid from the World Bank, MainOne led the second phase of Burkina Faso’s mass broadband delivery project.

With over half a billion (530 million) internet users, Africa’s broadband penetration is poised to continue on an upward trajectory.

Rollout of e-SIMs

Vodacom and MTN again led the way with e-SIM in Africa after introducing them into South Africa last year. MTN Nigeria followed suit by debuting its e-SIM cards in July.

Together with 9mobile, MTN then gained NCC approval in November to conduct a one-year e-SIM trial in Nigeria. Embedded SIMs (e-SIMs) are built into smart devices such as mobile phones and enable multiple registrations, making it easier for subscribers to switch between operators without the need to get physical SIM cards.

The global eSIM market is estimated to grow from nearly $300 million in 2018 to over $1 billion by 2023, according to industry experts.

Privatisation (Ethiopia)

Another big win for the African telecom space this year was the opening up of Ethiopia’s telecom sector to two new operators.

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While Ethiopia’s telecom privatisation plan has been rather back and forth for political and regulatory reasons, the plan progressed into its final stages in 2020 and should be concluded early next year.

The multibillion-dollar privatisation deal would mark an end to the world’s longest telecom monopoly which has lasted for over a decade.

The Challenges

Regulatory Constraints

This year, telecom giants MTN Ghana and Safaricom were on the receiving end of stringent policy reviews by regulators.

MTN Ghana filed a lawsuit against Ghana’s National Communications Authority after the regulator declared the telco a Significant Market Power in the country. In an almost similar occurrence, legislators in Kenya pushed for the Communications Authority to declare Safaricom a Dominant Market Operator and have it split from M-Pesa.

The downside for telcos declared a dominant operator is that competitors are effectively strengthened to cut down the operator’s market share, leading to revenue losses.

Hacks and Frauds

Africa experienced millions of cyberattacks in 2020, and mobile network operators and users were some of the major targets.

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MTN emerged the biggest casualty, with its mobile money service MoMo becoming a prime target for fraudsters. There were several cases of MoMo scams in Ghana, Zambia and Rwanda, prompting users to question MTN’s network security.

In Uganda, both MTN and Airtel suffered a massive hack which forced a temporary shutdown of their mobile money services in the country. Apart from this, there were also a number of offences relating to the sale and fraudulent use of unregistered SIMs in Nigeria.

Suggested read: FG Extends Deadline for Telcos to Block Sim Cards Without NIN to February 9

High Operating Costs

During the year, operating costs skyrocketed for certain network operators, notably Econet in Zimbabwe.

Not helped by the devaluation of the Zimbabwean Dollar (ZW$), Econet suffered huge foreign exchange losses of about $75 million in FY 2020. This led to the telco expending finance costs 1400% higher than that of FY 2019, culminating in a $16.6 million loss.

In Ghana, Airtel faced the issue of high cost-to-income ratio, as rising expenses were not matched by requisite revenue growth. Airtel exited its Ghana market after posting consecutive losses in all four quarters for FY 2020.

Civil Unrest

Repeated outages, network disruptions and internet shutdowns occurred in 2020 due to civil unrest in some African countries.

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In October, MTN reported that it faced service failures due to the loss of power supply at a site during the #LekkiMassacre which took place in the wake of #EndSARS protests against police brutality in Nigeria.

Suggested read: NCC Report: MTN, Airtel, Others Suffered 9,077 Service Outages Caused by Vandalism and Theft in Q2 2020

Also, political tensions in Ethiopia led to a complete internet shutdown in the country’s Tigray region, raising security concerns among prospective incoming operators.

Going Forward

From the turnout of events for African telecom operators in 2020, there are pointers to what could result in 2021.

5G seems primed to be deployed on a commercial scale in African countries such as Nigeria and Kenya, provided that regulators allow operators to acquire needed broadband spectrum.

Also, just as nano sims have almost completely replaced micro sims, the rollout of e-SIMS by MNOs on the continent would most likely gain traction and gradually phase out physical SIM cards.

However, much may not change in terms of regulations.

On mobile money fraud, the likes of MTN could beef up their systems security by working with cyber intelligence firms to combat scams.

Lastly, free mobile roaming within the CEMAC region is set to be enforced in January 2021, and the policy might also be implemented among ECOWAS member countries including Nigeria and Ghana.

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