Innovation and investment help unlock the smartphone opportunity in Africa
The number of smartphone connections in Africa has doubled over the past two years, and by mid-2017 will account for a third of total connections. However, varying levels of affordability and network coverage between countries have resulted in uneven rates of smartphone adoption across the region. While smartphone adoption and mobile internet penetration are increasing across all markets, some operators are pushing ahead by implementing innovative data tariffs and investing strongly in infrastructure to drive 3G/4G usage and thus data revenues.
A region characterised by uneven smartphone adoption rates
By 2020, Africa will be the only region in the world not to have reached smartphone market maturity (defined as adoption above 60%). The sub-regions of Northern and Southern Africa, which have the highest adoption rates at 41% and 45% respectively as of mid-2017, will become mature markets by 2020. However, Eastern Africa, which has the lowest adoption level at 25% as of Q2 2017, will only have reached 50% by 2020.
Our modelling of smartphone adoption assumes a correlation with mobile broadband coverage, but this is not always the case. In South Africa, Vodacom reported smartphone adoption of 45.6% in Q4 2016, more than 50% above the regional average, supported by nationwide 3G coverage (at 99.2%). However, MTN Côte d’Ivoire, which also has strong 3G coverage, reported smartphone adoption of less than half that (22.7%) for the same period. Meanwhile, 3G coverage is much lower in Sudan but the higher-than-average median income per capita helped drive smartphone adoption for MTN Sudan to 44.1% at the end of 2016.
By 2020 we expect only 18 countries in Africa to reach maturity in terms of smartphone adoption. The majority of these currently have estimated mobile broadband coverage levels at above 80% or a median income per capita higher than the regional average, according to the Center for Global Development.
Figure 1: Smartphone adoption (percentage of connections) versus 3G population coverage, Q2 2017
Source: GSMA Intelligence
Innovative data tariffing and network quality can drive smartphone and mobile broadband adoption
According to our Mobile Economy Africa 2016 report, the average smartphone price in Africa fell from $230 in 2012 to $160 in 2015, but overall adoption in Africa in 2015 was still only around half the global average. Operators are mindful that continuing price declines will boost adoption but for this to translate to higher data usage, innovative tariffing and sufficient network infrastructure will also be required.
For example, in Western Africa, MTN Nigeria introduced a handset financing scheme to boost smartphones among customers and saw a data revenue increase of 11% in 2016, with data contributing 21% of total revenues. According to MTN Group’s 2016 annual report, “data revenue increase was supported by competitive customised data offering, the quality of the LTE network and the introduction of a new data bundle plan, which allows eligible customers to borrow data on credit and pay it back at their next recharge”.
Meanwhile, smartphone adoption for MTN Ghana increased from 21% in Q2 2016 to 28% at the end of the year, with data revenues increasing by 66% during 2016 to account for 42% of total revenues. The group’s 2016 annual report states that “growth in revenue was driven by expansion of network quality and coverage, increased distribution and marketing of low-cost smartphones, the introduction of higher spectrum technology and falling tariffs”.
Unlocking the data revenue opportunity across all of Africa’s markets clearly requires efforts to address not just coverage but also affordability and quality of experience.