Untapped Internet Market in Africa Offers Exciting Growth Potential

In some cases, Internet service providers (ISPs), with the help of governments, are gradually designing coping strategies around restrictive licensing regimes, poor telecoms infrastructure and low affordability of services. Promisingly, both governments and private telecoms operators are making significant investments in infrastructure. Such initiatives are setting the stage to leverage the exciting growth potential of the African Internet market.

"The African Internet services market is growing," notes Frost & Sullivan research analyst Spiwe Chireka. "Most governments have embarked on ICT-led development strategies, aimed at developing e-governance and, subsequently, Internet penetration."

Markets such as Kenya, Tanzania, Uganda, Senegal, Angola and Mozambique are set to enjoy high growth levels, given their technology neutral licensing regimes, independent regulators, high levels of FDI and highly liberalised markets. Ghana and Nigeria have high growth potential but this is hindered by poor economic performance and poor licensing regimes, which have limited foreign investment into these markets.

Currently, the main factors dampening uptake are the widespread poverty that makes Internet services unaffordable, the low literacy levels that are limiting demand and the high operating costs that continue to keep Internet service prices high. Moreover, poor telecoms infrastructure is hindering penetration rates even as the restrictive regulatory frameworks contain market growth.

"Moving forward, ISPs will need to consolidate their efforts and create strategic relationships with cellular operators," advises 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 involved."

At the same time, mobile handset operators need to partner with ISPs to provide affordable tools for mobile Internet access. To develop a sound market share in the limited market base characteristic of Africa, there is a need for product differentiation to increase consumer's switching costs.

"In addition, ISPs need to target markets outside the major urban areas, since these areas are currently saturated in terms of operators," concludes Chireka. "Accordingly, partnerships with cellular operators would go a long way to address this challenge. Besides, low cost and high speed access will also be crucial to ensuring market growth."

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Photo Bicycle taxi (aka "Bodaboda") in Uganda by Hannes Schindler. GNU Free Documentation License, Version 1.2