Competition leads to plunging mobile, bandwidth prices in Africa

The growing use of Internet-enabled smartphones is whetting consumers' appetites for broadband products and forcing telecom companies to compete for users by coming up with innovative price and feature packages suited to the needs of various market segments.

In a recent Consumer Barometer report, for example, Google reported that smartphones are becoming a vital part of online shopping in Nigeria. Eighty-five percent of online shoppers in the country use smartphones for product research while 30 percent use PCs and 6 percent use tablets, Google said.

Several telecom companies are deploying LTE technology in order to offer VoIP (voice-over-IP) services, integrate voice and video and offer more stable connections than they could on older networks. In April, Benin Telecom started rolling out LTE, making the country the fourth nation in West Africa to have a network based on the 4G technology, after Nigeria, Ghana and Ivory Coast.

Traditionally, most telecom companies in Africa countries charged high rates for interconnecting calls between networks and for international calls. This forced many users to either stick to cultivating callers within their own networks or to carry different devices for calling over different networks. But with the new, lower data rates, users are now at liberty to make VoIP calls and send messages, irrespective of networks or distance, using apps such as Skype, Whatsapp and Facebook Messenger.

For example, in Nigeria, Glo subscribers can now get 15MB of data free for every recharge of 200 naira (US$40) and above; MTN dropped the price for its 30-day 250MB package from N1,300 to N1,000 and Etisalat has doubled what users get for its 30-day, N2000 plan, to 2GB from 1GB.

"Voice is moving to Skype and similar services," said Dov Ger-Bara, the CEO of YooMee Africa, a 4G operator that has challenged traditional telecom companies. "YooMee and other 4G operators bring the revolution into the pocket of the telco customers."

Alcatel-Lucent Vice President Daniel Jaeger agrees that the traditional telecom companies are being challenged. "With regard to cheap or even free calls -- definitely this is a trend, and definitely this is a challenge for the operators' revenues," he said.

There is a correlation between smartphones flooding the market, higher bandwidth demand and more services from broadband networks, including LTE, Jaeger said.

"We see operators also push strongly smartphones into the market, not just for 4G networks, but also for 3G. In many cases operators subsidize the phones to some extent," Jaeger said. "The push of smartphones into the market of course has the effect of getting people accustomed to the phones, the bandwidth and the services, which as a result drives the 'demand for more.' "

The net effect, then, is that as users move to consume more data, there are also opportunities for operators to offset potential declines in voice revenue, Jaeger said.