Home > Africa

Feb 22 2006

GSMA study shows better regulation would boost mobile subscribers in Sub-Saharan Africa by up to 30%

Up to 30% more people (25 million) in Sub-Saharan Africa would have mobile phones if it weren’t for the unpredictable and short-term approach to regulation in many countries in the region, according to a study published by the GSM Association (GSMA).

Based on a series of interviews with operators and governments, the study by PriceWaterhouse Coopers concluded that consistent and transparent regulation could significantly reduce mobile operators’ investment risks, allowing them to expand the coverage and capacity of their networks, while reducing the total cost of owning a mobile phone for Africans. The resulting increase in coverage and fall in retail prices could boost the number of mobile phone users in Sub-Saharan Africa to 108 million from 83 million today, PWC estimates.

“Uncertainty around regulation has a substantial knock-on effect on investment levels and retail prices in the mobile phone sector,” said Tom Phillips, Chief Government and Regulatory Affairs Officer. “Removing that uncertainty would significantly boost the affordability of mobile phones in the region and have a profound impact on social and economic development; mobiles offer the only cost effective way of reaching the hundreds of millions who are still without a telecommunications connection.”

Previous studies have found a significant link between mobile phone penetration and economic growth in developing countries, where fixed-line networks are sparse. The GSMA estimates that an increase of 25 million mobile phone users would boost the gross domestic product of the Sub-Sahara region by around $ 900 million per annum.

The study found that inconsistent regulation in Sub-Saharan Africa manifests itself in many ways, such as governments suddenly calling for the renegotiation of license or large fluctuations in key parameters set by the authorities, such as the rates mobile operators pay to connect calls to the national fixed network.

PWC found that regulation is one of the main risk factors that raises their cost of capital*. A high cost of capital limits operators’ scope to invest in their networks and forces them to recover costs quickly. PWC estimates that mobile investments would have been 25% higher in Sub-Saharan Africa (the equivalent of almost $5 billion) if countries across the region had applied optimum regulation to telecommunications.

Moreover, PWC found the total cost of owning and using a mobile phone would fall by up to 10% if governments were to create transparent and consistent regulatory environments that promote fair competition, reflect long-term policy goals and ensure independent procedures for resolving disputes.

Telecommunications investment horizons often extend well beyond the typical time frame for political decision-making. For that reason, the report strongly reinforces the need for governments to establish and communicate clear long-term policy goals, which can be enforced by an independent and well-resourced regulator, immune to short-term political pressure.

Among the report’s other key recommendations:

There is a need to bridge the resource and skills gap often found within regulatory bodies. PWC found a critical lack of economic expertise, often leading to key regulatory decisions being taken without an analysis of their commercial impact. In turn, this creates an environment where dispute resolution often ends up in the courts.

Promote a stable and predictable environment particularly on spectrum management by committing to maintaining alignment with the ITU’s globally harmonised spectrum and therefore ensure global interpretability.

Endorse mobile as the solution for Universal Service provisions. Since 2000, eight times as many mobile connections have been made than any other access technology. Yet Universal Service contributions (paid by mobile operators) still typically go to the stagnating and costly fixed line operators. Regulators should recognise mobile as the most efficient and effective solution to providing Universal Service. A GSM line costs about one tenth of a fixed.

Notes to editors:

* Investment opportunities can typically be financed by a combination of debt and equity. The required return to both types of investor, including interest payable to creditors and compensation for equity investors taking on systematic risk, is known as the ‘weighted average cost of capital’.