COMMUNICATION SERVICES IN SUB-SAHARAN AFRICA: TRENDS AND FORECASTS

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1 RESEARCH FORECAST REPORT COMMUNICATION SERVICES IN SUB-SAHARAN AFRICA: TRENDS AND FORECASTS STEPHEN SALE AND KARIM YAICI analysysmason.com

2 About this report This report provides an outlook on the mobile communication services market in the Sub-Saharan Africa (SSA) region. It provides forecasts for voice and messaging services provided by both mobile network operators and OTT 1 providers. A complete set of forecast results is provided in the accompanying Excel data annex. The forecast is based on several sources: Analysys Mason s internal research, including our regional forecasts, Connected Consumer surveys and various trackers in the Future Comms and Media research programme interviews with stakeholders in the communications market around the world. WHO SHOULD READ THIS REPORT Strategy and planning executives who are responsible for mobile operators communication services strategies and partnerships with OTT players. Executives in mobile operators technology and innovations teams who are responsible for developing communication services. Marketing executives at vendors of communication services equipment and software, as it will help them understand the needs of their operator customers and size the addressable market for their products. 1 The term over-the-top is used throughout this report to refer to services that are made available to the general public via the public Internet. The term is defined from the perspective of network operators and is somewhat controversial for this reason, but is nevertheless widely understood. GEOGRAPHICAL COVERAGE Regions covered in this report: Worldwide SSA region Ghana Kenya Nigeria South Africa Forecast results provided in the data annex: Worldwide SSA region Ghana Kenya Nigeria South Africa Rest of SSA region KEY METRICS Non-operator/OTT services Voice and messaging Active users by device type Outgoing traffic by device type Operator traditional services Handsets Circuit-switched (CS) voice and SMS Outgoing traffic Operator IP-based services Active users by service type VoLTE, Wi-Fi calling, IP messaging Outgoing traffic by service type VoLTE, Wi-Fi calling, IP messaging Retail revenue Voice and messaging Average spend per user 2

3 Contents 5. Executive summary 6. Executive summary 7. Worldwide trends 8. Worldwide: Messaging apps have overtaken SMS in traffic over 11 trillion messages were sent through apps in Worldwide: OTT messaging services will be used by over 60% of the population by Worldwide: The platform proposition advanced by LINE and WeChat is spreading beyond core Asian markets 11. Worldwide: Smartphones will continue to be the dominant communication device 12. Worldwide: Strategic responses from operators vary markedly in different regions 13. Worldwide: Operators are migrating smartphone users to VoLTE services nearly 2.4 billion subscribers are expected by Worldwide: Many operators are rolling out Wi-Fi calling, principally to improve indoor coverage 15. Worldwide: Google s involvement may boost Rich Communications Services, but usage is likely to remain low 16. Regional trends 17. Sub-Saharan Africa: Social and messaging services will continue to be an important driver of growth for operators 18. Sub-Saharan Africa: Operators will continue to benefit from strong growth in mobile voice 19. Country-level trends 20. Ghana: SMS is still growing, but will be substituted by OTT messaging as smartphone penetration increases 21. Kenya: Airtel is second in terms of subscribers and is offering social media bundles to drive mobile data adoption 22. Nigeria: Most operators are pushing social media bundles; LTE is still at the trial stage, so IP transformation is distant 23. South Africa: Cell C has been vigorously pursuing the youth market with a WhatsApp promotion 24. Forecast methodology and assumptions 25. Forecast outputs and definitions 26. Forecast methodology 27. About the authors and Analysys Mason 28. About the authors 29. Analysys Mason s consulting and research are uniquely positioned 3

4 List of figures Figure 1: Messaging traffic, Sub-Saharan Africa, Figure 2: Mobile voice traffic, Sub-Saharan Africa, Figure 3: Messages sent by message type worldwide, Figure 4: Messages sent by message type and number of OTT messaging active users worldwide, Figure 5: Percentage of OTT messaging users by device worldwide, Figure 6: Percentage of OTT voice users by device worldwide, Figure 7: Retail revenue for operator mobile voice services worldwide, Figure 8: Retail revenue for SMS services worldwide, Figure 9: Active users of VoLTE services by region, Figure 10: Wi-Fi calling service users and traffic worldwide, Figure 11: Traffic for all mobile operator messaging services and number of operator-provided IP messaging service users worldwide, Figure 12: Messaging traffic, Sub-Saharan Africa, Figure 13: Mobile voice traffic, Sub-Saharan Africa, Figure 14: Messaging traffic by message type, Ghana, Figure 15: Messaging traffic by message type, Kenya, Figure 16: Messaging traffic by message type, Nigeria, Figure 17: Messaging traffic by message type, South Africa, Figure 18: Overview of the main forecast outputs Figure 19: Overview of the forecast methodology used in this report 4

5 Messages sent (billion) Communication services in Sub-Saharan Africa: trends and forecasts Worldwide: Messaging apps have overtaken SMS in traffic over 11 trillion messages were sent through apps in 2015 Several messaging apps have user bases in the hundreds of millions. High usage levels have resulted in these apps rapidly overtaking SMS in volume of messages sent. WhatsApp is the largest messaging service in the world it reached a billion active users in February Several other services have huge user bases: for example, Facebook Messenger had 900 million active users at the end of April 2016 and WeChat had 597 million at the end of Figure 3: Messages sent by message type worldwide, User base in billion individual app users billion handsets billion Users very often have multiple apps. We estimate a global average of 1.9 apps per person in There were around 2.3 billion individual users of messaging services worldwide at the end of 2015, with nearly 2 billion of them on smartphones. These applications have driven high levels of usage by offering a strong user experience, typically with no charge. WhatsApp reported a peak of 42 billion messages sent over a 24-hour period in February We estimate average app usage to be much lower, but still over 500 messages per month. 1 Traditional operator services benefit from a larger addressable market, but have a relatively poor user experience and much lower average usage levels. The average smartphone user sent 132 SMS messages per month in billion There are several factors that prevent us from simply extrapolating from WhatsApp s usage (which would imply average usage of >1000 messages per month). First, WhatsApp reports peak, not average, volumes. Second, usage levels of other popular apps are typically much lower than those of WhatsApp. Finally, some traffic will be caused by spambots and application-to-person services. SMS OTT/Non-operator IP Source: Analysys Mason 8

6 Messages sent (billion) Communication services in Sub-Saharan Africa: trends and forecasts Ghana: SMS is still growing, but will be substituted by OTT messaging as smartphone penetration increases Usage of SMS services is still increasing in Ghana, similarly to many other countries in SSA. This is supported by a growing mobile subscriber base, keen to use basic mobile communication services, as well as by continued use of SMS/USSD applications, such as Airtel s DOTGO SMS browsing service and Wikipedia SMS. We expect average SMS usage to continue increasing until 2018 and then to decline as mobile data services begin to substitute usage. Ghanaian operators have embraced partnerships with app providers, such as Facebook and WhatsApp. Examples include: Airtel s FLEX bundle includes a dedicated allowance for social media, including Facebook, Hangouts and WhatsApp Vodafone s Lifestyle bundles include zero-rated access to Facebook, Instagram, Twitter, WhatsApp and Wikipedia. There has been discussion of potential restrictions on OTT players in Ghana, but regulatory action appears unlikely at the time of writing. VoLTE is not a priority for operators, as LTE services were only launched in 2014 and coverage remains very limited. Services may be launched toward the end of the forecast period. Operators are unlikely to pursue their own app-based services. 74% FORECAST METRICS 2021 Figure 14: Messaging traffic by message type, Ghana, % 35 BILLION 56% <0.5 MILLION SMS OTT/Non-operator IP Operator IP messaging Source: Analysys Mason 20

7 CONTENTS EXECUTIVE SUMMARY WORLDWIDE TRENDS REGIONAL TRENDS COUNTRY-LEVEL TRENDS GHANA KENYA NIGERIA SOUTH AFRICA FORECAST METHODOLOGY AND ASSUMPTIONS ABOUT THE AUTHORS AND ANALYSYS MASON 27

8 About the authors Stephen Sale (Research Director) oversees Analysys Mason's consumer research and is also the lead analyst for the Future Comms and Media research programme. His primary areas of specialisation include next-generation communication services, OTT player strategies and mobile pricing. He also has extensive experience in analysing operator strategies and forecasting fixed and mobile service markets. Before joining Analysys Mason in 2004, Stephen worked in the industry on areas that include VoIP, next-generation service architecture and broadband access. He has a degree in economics and an interdisciplinary MRes from the University of London. Karim Yaici (Senior Analyst) leads Analysys Mason s The Middle East and Africa regional research programme. His primary areas of specialisation include operators' digital strategies, new telecoms opportunities and challenges, and consumer trends in growth markets. Prior to joining Analysys Mason, Karim was an associate analyst at Ovum, where he authored reports on mobile accessories and mobile applications. Prior to that, he worked as a research engineer in the Institute for Communication Systems and Vodafone. Karim holds an MSc in Information Systems Management from the University of Southampton and a PhD in human computer interaction from the University of Surrey. 28

9 Analysys Mason s consulting and research are uniquely positioned Analysys Mason s consulting services and research portfolio Digital economy Regional markets Consumer and SME services Telecoms software and networks Regulation and policy Transaction support Strategy and planning CONSULTING We deliver tangible benefits to clients across the telecoms industry: communications and digital service providers, vendors, financial and strategic investors, private equity and infrastructure funds, governments, regulators, broadcasters, and service and content providers. Our sector specialists understand the distinct local challenges facing clients, in addition to the wider effects of global forces. We are future-focused and help clients understand the challenges and opportunities that new technology brings. RESEARCH Our dedicated team of analysts track and forecast the different services accessed by consumers and enterprises. We offer detailed insight into the software, infrastructure and technology delivering those services. Clients benefit from regular and timely intelligence, and direct access to analysts. 29

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