African internet market poised for growth

African internet market poised for growth

Growth levels in double digits but penetration still low

The market for internet access and services in Africa is growing fast, but a number of hurdles still remain, according to research from Frost and Sullivan.

Growth rates for internet use in Africa are in the double digits but have been predicated on a narrow base, and the overall number of internet users remains limited.

However, the low penetration rates indicate a huge potential market for internet services.

ISPs and governments are gradually designing new strategies, but are having to cope with restrictive licensing regimes, poor telecoms infrastructure and low affordability of services.

However, governments and private telecoms operators are making significant investments in infrastructure in an attempt to exploit the potential of the African internet market.

"The African internet services market is growing," said Spiwe Chireka, research analyst at Frost & Sullivan.

"Most governments have embarked on ICT-led development strategies aimed at developing e-governance and, subsequently, internet penetration."

Chireka predicts that markets such as Kenya, Tanzania, Uganda, Senegal, Angola and Mozambique are set to enjoy high growth levels.

These countries enjoy technology-neutral licensing regimes, independent regulators, high levels of foreign investment and highly liberalised markets.

On the other hand, Ghana and Nigeria have high growth potential, but this is hindered by poor economic performance and prohibitive licensing regimes which have limited foreign investment into these markets.

The main factors dampening uptake are widespread poverty that makes internet services unaffordable, low literacy levels that limit demand and high operating costs that continue to keep service prices high.

Furthermore, poor telecoms infrastructure is hindering penetration rates even as the restrictive regulatory frameworks contain market growth.

"ISPs will need to consolidate their efforts and create strategic relationships with cellular operators," said Chireka.

"The further development and increasing penetration of cellular networks would allow ISPs to offer mobile internet access and boost penetration of their services, thus reducing the high initial investment costs."

At the same time, mobile handset operators need to partner with ISPs to provide affordable tools for mobile internet access.

Developing a sound market share in the limited market base characteristic of Africa needs product differentiation to increase consumers' switching costs.

"In addition, ISPs need to target markets outside the major urban areas which are saturated in terms of operators," added Chireka.

"Partnerships with cellular operators would go a long way to address this challenge. Low cost and high speed access will also be crucial to ensuring market growth."