Communications cost rising again in Africa

By Michael Malakata

Mobile phones (cellphones) are now a common phenomenon in all types of lives in Africa where landlines are nearly non-existent.

The cost of communication in Africa is once again going up as competition coupled with rising inflation rates dig into mobile operators’ profit margins. Africa’s major operators including Bharti Airtel, Warid, Orange and MTN have all increased their calling rates due to rising inflation and the cost of doing business in the region. A price war in eastern and southern Africa led to more investment by international operators. But while low prices allowed operators to grow subscriber numbers, they did little to boost the operators’ revenue and tax contribution to governments.

The competition has resulted in a decline in the quality of service by operators, including congestion, more dropped calls, connection failures and slow message delivery. Some operators charge consumers for calls that do not go through. The Competition and Consumer Protection Commission (CCPC), a commission that protect consumers in Zambia from exploitation by operators, has warned that it would punish such operators. “Mobile operators are charging for calls that do not go through on both intra and across networks. We are warning them that this will attract a penalty,” warned Vaida Bunda, CCPC public relations officer in a statement this week.

Operators are, however, hoping that the rate increases will help them make enough profits to expand their networks and invest in new technologies. Most African countries including Zambia, Malawi, Uganda and Kenya had the cheapest calling rates due to stiff competition. But these countries are now facing increasing inflation rates, which operators claim have forced them to charge more for calling rates. Over the past year, the time that people in Africa spent talking on the phone increased from an average 70 minutes per person per month to over 100 minutes, due to the drop in calling rates. But with the increase in tariffs, the situation is expected to change as many people, especially in rural areas, will not be able to afford long phone calls.

In Zambia, the government has suspended all taxes imposed on communication equipment imported in the country by mobile operators in a bid to quicken network roll out in remote rural areas that have no mobile communication. The Zambian operators claimed they were not making enough from the voice market to enable them to expand their services to rural areas. “The Zambian government would continue to engage the private sector and to come up with policies that make it easier to promote the proliferation of ICT at all levels and to all parts of the country,” said Dominic Sichinga, permanent secretary in the Zambian ministry of Communications and Transport in a phone interview this week.

The Zambian government has already refused to license a fourth operator until 2015 in order to slow down competition by operators and allow them to improve and expand their networks. The latest Wires Intelligent Report titled, “How pricing dynamics affect mobile usage,” found that the effective price per minute of mobile voice calls has fallen from a global average of $0.32 in 2001 to just $0.09 last year. The whole of western and central Africa are now looking to see whether the move by operators in eastern and southern Africa to increase tariffs will help operators increase their revenue enough to rapidly expand their networks.

In the meantime, despite mounting allegations of corruption and criticism of illegally bringing Chinese foreign nationals to work on its telecom projects in Africa, China’s ZTE has been awarded contracts to build nationwide fibre networks in South Africa and Burundi. In South Africa, Africa’s second largest telecom market by investment and subscription after Nigeria, ZTE will build a 12,000 kilometre (7,458 miles) fibre network by FibreCo Telecommunications, a joint venture between mobile operators Cell C, Convergence Partners and Internet Solutions. In Burundi, ZTE has been retained by Burundi Backbone Systems Company (BBS) to roll out a national backbone.

In Zambia, Uganda and Kenya, Chinese telecom companies are facing similar allegations of illegal entry of Chinese nationals and corruption in the acquisition of supply contracts. “Chinese investors should limit the number of Chinese coming into Zambia,” said Zambia President Michael Sata Tuesday after meeting with the Chinese ambassador to Zambia. But despite allegations, Chinese companies have continued to be awarded telecom projects by operators and governments in the region. As in South Africa, the Burundi project is a joint venture between five telecom operators and the World Bank that has invested in the backbone.

The 13,000 km Burundi network will cover most of the country and will also link Burundi with Central and East African countries including Tanzania, Rwanda and the Democratic Republic of Congo (DRC). The network will further be connected to the East African Submarine Cable System (EASSY) under the Indian Ocean. Competition in Africa’s broadband market has been rife since last year, following the arrival of several undersea cables now servicing the region. The cable companies are competing for a share of Africa’s lucrative broadband market, which has resulted in cheaper bandwidth.

African governments are, however, still pushing for further reductions in connectivity prices as a result of cheaper bandwidth in order to allow more people Internet access. Burundi is among the African countries that have benefited from the World Bank’s over $424 million in loans for the rolling out of broadband projects so that African governments can implement e-governance systems. ZTE offices have twice been raided by South Africa’s ministry of Home Affairs, which have led to several arrests of illegal Chinese workers using forged documents. As in many countries in Africa including Zambia, Namibia and Malawi, South Africa is grappling with Chinese nationals illegally entering the country for telecom jobs. “Economically, it’s not viable for the companies to use many Chinese workers,” said Chinese Ambassador to Zambia Zhou Yuxiao.

The South Africa project will be rolled out in phases at a total cost of R5 billion (about $608 million) with the first link expected to be ready for use by 2013. The project is expected to provide affordable, reliable and fast Internet access to South Africans through the open access principle, ensuring non-discriminatory access to the fibre network by operators. The open access principle is also expected to quickly down the high cost of internet connectivity.

Michael Malakata writes for ComputerWorld in Zambia

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