This post is the first in a two-part series about 1) the African mobile marketplace and how Africans utilize their mobile phones; and 2) how organizations are using social marketing to reach this highly mobile population for social change.
The series is based on a conversation I had with Gustav Praekelt, a mobile entrepreneur located in South Africa. Part 2 is here.
Africa: An Emerging Market?
Running Through the Numbers:
Africa is a continent which is inhabited by roughly 1 billion people. Astoundingly, the "Dark Continent" has been a fertile market for the mobile industry, with 300 million Africans currently carrying an active mobile account. This is an adoption rate of around 30% on a continent that is not known for having an affluent population.
In some African countries, mobile adoption nears 80-90%. Specifically in South Africa, which has a population of 47 million people, 42 million carry and use mobile networks.
Like the rest of the world, excluding North America, most African mobile customers opt for pre-paid mobile phone accounts. In South Africa, only 10% choose to have a service agreement with a specific mobile network operator. In some African countries, pre-paid customers account for 95-96% of the mobile customer base.
Going High Speed
More people in South Africa have 3G high speed-capable handsets than traditional wireline broadband. Praekelt says "traditional broadband is just not going to happen here." He also added that South Africa was the second place in the world to receive an HSDPA network following only Germany. Because a strong traditional broadband infrastructure doesn't exist in South Africa, there aren't many Wi-Fi hotspots to accommodate wireless consumer needs. HSDPA gives customers high speed capable networks that are highly practical and portable at the same time.
Only a few countries on the African continent have 3G including Nigeria, Tanzania, Ghana, Mauritius, South Africa, and Swaziland. In the next year however, many new countries will come on board with 3G data service. However, not all customers will be able to afford 3G handsets right away.
With adoption numbers around 30%, how many of these mobile customers are using the mobile Internet? According to Praekelt, only 1-2%. However, some mobile websites based in Nigeria are attracting up to 200,000 users. Praekelt noted that when he was recently in Lagos, he saw people with 3G handsets even though such a network has yet to be built.
Finally, I asked Praekelt how many African's have smartphones. He replied by saying adoption is very low at around 5% at best. In some demographics, as much as 10% of mobile handset sales are smartphones. For example. his company built a mobile advertising platform that required a smartphone. The campaign, featured on a local radio show as a trial, drew 10% of 18-24 year olds.
Even though smartphone adoption may be low, 50% of African mobile customers use WAP services. Even though smartphones feature rich internet applications, most modern cell phones have browsers in them that enable users to download ringtones and use WAP sites.
Africa as An Inviting Mobile Market
Almost every African country has at least three major mobile network operators. However, initially in the 1990's, none of the major international carriers thought Africa was worthwhile to explore as a potential market. A few key mobile network operators including Vodafone, Celltell (now called Zain), and MTN explored certain African geographies, selected markets and, as a result, cleaned up in terms of market share. In Africa, Vodafone network has 7 territories, Celltell has 10-15 territories and MTN has 21 territories. Local companies understood the emerging environment and the challenges ahead and built out wireless networks. Now they are benefiting from these early bets.
It is astounding how these mobile network operators are able to thrive in markets where average revenue per user (ARPU) is relatively low. For example, in the North American market, normal ARPU is around $60-$70 per month. But in markets such as Africa and India it is much less. AirTel in India has the world's lowest ARPU, however, they area able to turn a respectable profit by making it up in volume with massive subscriber counts.
According to Praekelt, an inviting regulatory environment makes it possible for mobile network operators to come in and do business in Africa. Also, traditional copper phone lines take so long to get that wireless is a no-brainer to most customers who need communications solutions. The long wait for a traditional phone line, combined with firece wireless competition caused wireless phone service prices to go down, leading to success for mobile network operators.
Regarding Open Source and Mobile Handset Adoption, and the iPhone
I asked Praekelt what impact the open source on mobile movement would have in Africa. With developments such as the LiMo Foundation pushing Linux on Mobile, Nokia buying and open sourcing Symbian, and Google's Android now on the market, how will this impact emerging markets? Prawkelt replied, "In a word: nothing".
He expanded by illustrating that Finnish handset maker Nokia has gained such a solid footing in the mobile handset market, "almost everyone is on Nokia."
Nokia is successful in markets such as Africa because they make such a wide array of handsets with a plethora of feature sets and price points. Nokia has a huge market share because they market cell phones that are cheap, expensive, and everywhere in between. Nokia has been able to be successful on both the high and low end of the price spectrum. Plus, Africans like Nokia handsets because they find them easy to use. Oddly enough, the Nokia E90 communicator is quite popular in Africa because it is the one phone that can do almost anything, as Praekelt points out. A very practical device, the E90 features 3G connectivity, a full QWERTY keyboard, and a large screen, adding to it's popularity.
Additionally, application developers are attracted to the Nokia/Symbian platform because of its "openness". For example, a programmer working on Symbian can release mobile applications and services in a non-walled garden environment, unlike Apple iPhone developers. Many African mobile users depend on functionality that is locked out by the iPhone, such as full access to the Bluetooth stack and MMS capabilities.
In Praekelt's opinion, no one will be able to afford an Android handset. An entry-level Android handset might appeal to some Africans, but only if it's offered at a low price but only time will tell, as Praekelt stated.
Also, looking at the iPhone, Praekelt doesn't anticipate these devices taking off in South Africa as purchasing the Apple mobile phone requires a contract with a specific mobile carrier. Plus, at present, South Africans are unable to access the iTunes store for purchasing music and media. The iPhone will likely appeal only to extremely rich persons who are willing to pay $500 for a mobile phone.
This mentality regarding the iPhone carries over to other emerging markets as well. In areas such as Africa, India, and China, iPhone sales are not strong. This means you have 3 billion people who are overlooking Apple's iPhone. The iPhone has been effective in advancing usability in the mobile phone industry through competitiveness, however, the platform is too closed off for many customers in emerging markets.
How Africans Use Their Mobiles: Making Easy Mobile Payments
Africa is home to the largest mobile-based payment network in the world, M-Pesa is a mobile payment system that allows users to exchange money via SMS. A cross between PayPal and Western Union, M-Pesa works with pre-paid mobile calling credit. If you wish to pay a friend or colleague, you can simply use SMS to transfer money his M-Pesa account, resulting in a credit to his calling balance. You can even go to an M-Pesa agent and get cash payments from your M-Pesa balance.
What makes Africa a great environment for a mobile payment system? It's a matter of their economic and societal make up. Most of the one billion people in Africa do not have bank accounts. For example in South Africa, only 13 million out of 47 million people have bank accounts. Of these, only 2 or 3 million have traditional internet access that would allow them to log in to their bank account online to transfer money. For a population who deals mostly in cash, being able to transfer money via a mobile phone payment system presents a huge opportunity to them.
Leapfrogging PC's and Going Mobile
If you look at South Africa's mobile adoption, virtually 100% of the population has a mobile phone (actual adoption is at roughly 91%, but excluding children, it's close to 100%). This drastic adoption has occurred just 10-15 years after the first GSM network was launched in South Africa.
Western based companies who are building their website and web presence tend to think of their mobile internet site as an afterthought. What is often forgot is formating and structuring the site to appeal to mobile internet users in addition to 'traditional' PC-based Internet users. Mobile websites, in Praekelt's experience, are referred to as "the same thing" when in reality the requirements for mobile are quite different. This mentality is not relevant in mobile-heavy populations such as Africa. In a society where virtually everyone is reachable by SMS, new marketing opportunities present themselves.
Mobile customers in Africa are leapfrogging the "traditional" web and going straight for massive WAP and mobile web adoption. 3G phones are available in countries such as Ghana, Tanzania, and South Africa. Combine this capability with inexpensive 3G data rates and a fully-capable 3G phone such as the Nokia E90 Communicator, and you have a population of mobile consumers that sees the online world through an entirely new lens. As Praekelt stated, "with these capabilities, who needs a PC with web access?"
In the markets described above, traditional DSL or cable-modem based internet adoption is relatively flat and growth is linear. However, the mobile adoption is exponential year after year.
The adoption numbers and usage models found in Africa point to a population who has quickly taken an enabling technology and woven it into their daily lives. The next part of this series will illustrate how the Praekelt Foundation has teamed up with social organizations and NGOs to deliver mobile-based social marketing solutions for social good.
About the Author
Jason Harris is a technology and mobile enthusiast based in Portland, Oregon. To connect with Jason or read more of his posts, check out his blog at Techcraver.com.
Photo: Paul Watson