How Soon Before Africa Clouds Over?

by Viktor Kovács, Founder of CE On-Demand and Sophie Papasavva, Partner at EMFC Loan Syndications
August 2012

An estimated 1.2 billion of the world’s 5.8 billion mobile subscribers are active mobile broadband users. The business opportunity for telecom operators to sell data services to smartphone users is clear, with e-mail, collaboration and storage type applications as the most obvious. What many market analysts consistently fail to recognise is the opportunity that lies with the 4.6 billion mobile users worldwide who do not have access to latest technology devices. While telcos elsewhere may benefit from postpaid, high-ARPU, data-focused subscribers, many telcos across the African continent have an entirely different subscriber base profile. It is for this very reason than Africa’s telcos should look to what the cloud has on offer to help them capitalise on a young, dynamic and social media hungry population, albeit with great diversity and disparity across the Continent. Africa’s telcos are best placed to capitalise on cloud service providers’ expertise in cloud enablement, helping to specifically target feature phone users. Strategic partnerships with players that can assist the telco in quickly monetising the cloud for low ARPU, pre-paid subscribers are key. The benefits of partnership are clear: faster conversion from feature phone to (even the lowest cost) smartphone and all the benefits of higher ARPU that comes as a consequence.

Feature Phones Are Here to Stay (for a while longer...)

Despite just 20% worldwide penetration, the smartphone has received significant focus in mature telecom markets where latest technology devices are driving data growth and recovering ARPU trends. Indeed, some telecom operators in emerging markets are looking to their own 3G roll-outs and GDP growth in great anticipation. The opportunity to penetrate with a low-cost smart device that will stem voice ARPU decline and lead back to revenue growth is certainly worth aiming towards. As a consequence, certain market analysts point towards the eventual demise of the feature phone and the proliferation of smartphones.


Figure 2: Africa Handset Sale Forecasts - by Technology

Figure 2: Africa Handset Sale Forecasts - by Device

Africa Handset Sale Forecasts - by Technology

Africa Handset Sale Forecasts - by Device

Source: “Mobile Devices Forecast 2008-2015” Gartner, June 2011

Yet forecasts on the sale of mobile handsets by Gartner, imply that whereas 3G phones are by far the most widely bought device worldwide from 2012 onwards, their forecasts also point to 2.5G devices continuing to remain very relevant in the regions of Eastern Europe, the Middle East and Africa, for at least another three years.

The question must be therefore, how to best capitalise on the opportunity of today’s growing disposable incomes and today’s young, dynamic and social media hungry subscribers in the Continent. Telecom operators cannot wait, nor should they wait for smartphones. Instead they should embrace the cloud, as it enables exciting value added services to become available on feature phones, at significantly lower costs and with fast go-to-market results.

A ‘Cloudy’ Africa That Monetises Data (no Smartphones need apply...)

A recent survey by Analysys Mason reported that 31% of mobile content and apps users, regularly consume such on feature phones.[1] Their devices are not user-friendly, due to screen size and lack of qwerty keyboard, yet younger subscribers regularly access mobile content regardless. This points to a clear opportunity for telecom operators to use the cloud as a facilitator of popular mobile content, with games and social networking being the most obvious.

Today, Nigeria reports 5.1 million Facebook users (16% growth in the past six months), equating to just 3% population penetration. Egypt reports 11.34 million Facebook users, with 21% growth in the past six months.[2] Both markets are characterised by low fixed-line internet penetration to the home, a majority of pre-paid mobile subscriptions, average monthly ARPU levels of below US$5 and US$10 respectively and a very young and dynamic population, anticipated to lead the growth for data. Informa Telecoms & Media estimates the mobile value added services (“VAS”) market in Africa to be worth over US$11.5 billion by 2014. Currently South Africa is by far the largest, representing a third of the continent’s VAS revenues with US$3.87 billion in VAS revenues expected by 2014. Nigeria’s VAS market is forecast to grow to US$2.01 billion representing 17.4% of the total African market by 2014 and Egypt is expected to grow to US$1.76 billion in VAS revenues, or 15.3% of the market.

However, according to Booz & Co, Africa is not only below the world digitization average but it is also growing at a slower pace.[3] The challenge is to provide broadband access to people that cannot afford the cost of a digital access line and a PC at home. While telecom operators await innovation to help reduce prohibitive capex and opex costs that might facilitate a universal service provision, the cloud has been able to achieve exactly this for some time now. It is clear therefore, that the opportunity lies in maximising VAS revenues from feature phones while these are still relevant, at the same time encouraging the faster adoption of smartphones as they become more affordable.

And Why Telcos Should Engage an Expert Cloud Partner

The cloud has the ability to help telecom operators further capitalise on their investments in broadband. The cloud offers flexibility, scalability and limited infrastructure costs. But more importantly, this is where the experience and know-how of cloud experts can not only help make the above a reality, but also achieve very fast results. Cloud enablers such as CE On-Demand help telecom operators and system integrators deploy their cloud strategies effectively, with fast commercial launch and immediate results. Telecoms research firm Ovum states that telecoms operators “should look to take advantage of vendors’ expertise by utilizing their cloud enablement services or establishing go-to-market partnerships in order to quickly establish themselves in the market.”[4]

The cost and time it takes to deploy a bespoke technology platform to accommodate any new value added service is a significant challenge and impediment, faced by all telecom operators. Further challenges lie in the 9-18 months of internal preparation for commercial launch that is typically required; Africa’s telecom operators are no exception, irrespective of country of operation. As many may not have the resources or internal know-how to pursue the cloud for its obvious benefits of time and cost, so technology partners have a key role to play.

While it may be admirable (but costly) for telecom operators to prefer to build their own platform from scratch, partnership with cloud enablers offers the advantage of tried-and-tested solutions with fast deployment, even with bespoke branding and white-labelling. An expert cloud enabler has both the data integration solutions and the expertise to bundle and market white-labelled cloud solutions. By utilising the enormous capabilities of the cloud, coupled with their specialised expertise, cloud enablers offer their telecom partners a variety of solutions with which to improve data ARPU from their 2.5G subscribers, with just two examples being the availability of social networking feeds and e-mail on the move. Because mobile broadband is not just about web browsing. Mobile broadband is also about messaging, collaboration, social networking and generally enhancing the communication experience for the individual, be it personally or for their business.


About Viktor Kovács

Viktor is co-founder and CCO of CE On-Demand (, a company active in cloud services enablement since 2008. CE On-Demand creates cloud providers by assisting white-label partners and direct end-users to realise and implement their cloud strategies. Since inception, CE On-Demand has supported 17 partner telcos in deploying their cloud strategy. Viktor’s expertise in the cloud is unprecedented, especially in emerging markets, where the sector has been slower to penetrate and few innovative cloud companies have emerged. Prior to CE On-Demand, Viktor held executive roles with global communications corporations such as EDS, Octel (Lucent), Portal (Oracle) and Cisco, and thus benefits from more than 20 years of experience in the ICT sector. Viktor may be contacted directly on vkovacs@ceondemand and followed on Twitter at @VKovacs_CEOD.

[1]Connected Consumer Survey” Analysys Mason, Feb 2012

[3] Telecom Advisory Services, Booz & Company analysis

[4]Straight Talk Cloud” Ovum, April 2012

Sophie Papasavva

Sophie Papasavva

Sophie Papasavva is the Founding Partner of EMFC Loan Syndications (“EMFC”), a boutique firm assisting companies seeking to raise bank debt. EMFC offers Loan Execution Support, acting as an additional ‘in-house’ resource to time-constrained finance teams. Prior to establishing EMFC, Sophie was a loans banker for 12 years, first as telecoms, media & technology relationship manager and later in loan syndications and sales, where she gained experience in multiple sectors such as oil & gas, mining, infrastructure, agribusiness and others. Sophie has originated, structured, executed, sold, restructured and syndicated loan financings ranging from simple bespoke bilaterals to complex multi-billion dollar, multi-currency syndicated transactions. Her expertise lies in arranging structured, bespoke financings for corporate borrowers operating in the emerging markets. To contact Sophie, please e-mail her directly at or follow her on Twitter at @Sophie_EMFC.