GSMA flags device cost as bar to 5G usage in Africa
Many consumers are still unable to afford the one-off upfront cost of purchasing a cellphone, industry body report reads
25 October 2022 - 21:04
by Mudiwa Gavaza
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As SA continues to look forward to the promise of a 5G future, GSMA Africa says the potential economic benefits are now held back by smart devices being largely out of reach for most people.
Making devices more accessible is good for consumers, and it can increase the number of customers that mobile providers can have as well as the volume of data services that flow through their networks, ultimately adding to their collective profit. And as operators build their portfolios of digital messaging, streaming, financial and gaming services, having more devices with consumers gives these platforms more room to grow.
GSMA, an industry body, says mobile operators in Africa have over the past five years invested nearly $45bn (R830bn) in capital expenditure — mostly on deploying and expanding 4G networks. In SA, this has translated in Vodacom and MTN each spending about R10bn on such network expansion annually in recent years. However, adoption of the technology offered by the networks continues to be hampered by low device penetration, mainly due to cost.
“The greatest potential obstacle to consumer 5G adoption and usage in Africa is device cost and availability,” GSMA says in a new report.
Before countries can focus on the fifth generation of communication technologies, 5G, telecom operators need to get more people to use more established 4G, the world’s fastest and most mainstream form of mobile internet access.
According to the report, which examines the economic benefits of 5G technology on the continent, SA’s 4G penetration is at about 42%. This means less than half of South Africans are using this technology, while the global average is 60%. SA and a handful of Africans countries such as Algeria, Seychelles, Morocco, Namibia and Tunisia are still doing better than the continent’s average of 25% penetration.
Reduced significantly
Key to pushing up this number is making smart devices more accessible.
It is stated in the report that the average selling price of smartphones “has reduced significantly in recent years due to the influx of sub-$100 devices”, mainly from Chinese brands such as Tecno and Infinix. However, “many consumers are still unable to afford the one-off upfront cost of purchasing a device”.
The focus now appears to be on offering more flexible financing terms for devices. “Given the impact of device affordability on 4G adoption, device financing schemes will likely be necessary to improve affordability,” says GSMA.
In the local market telecom operators, one of the main suppliers of devices to retail outlets, have been working on this issue for a number of years.
In its annual report for 2022, SA’s largest mobile operator, Vodacom, states this is a priority. “To support data adoption, we will leverage our strategic partnerships and implement innovative financing options to provide affordable devices to our customers.”
Bradwin Roper — CEO of FNB Connect, a young player in SA’s telecom scene — says the bank is using its lending prowess to help lower prices.
“It’s all good and well to say ‘data has fallen’ or fixate on the price of data but 50% of South Africans today don’t have access to devices, let alone a smartphone,” he recently said.
Many consumers are still unable to afford the one-off upfront cost of purchasing a device
Offers terms
Roper said Connect had made R90m in net operating income selling 59,000 devices in its 2022 financial year. As part of that pie, there was a 126% jump year on year in the value of smartphones sold.
Like most retailers, FNB offers terms of up to 24 months to pay for devices. However, in some cases, this works out cheaper than the outright cash price of a particular phone or tablet, hinting at subsidies by FNB or deals with suppliers to achieve the lower prices.
SA’s second-largest mobile operator, MTN, has taken a somewhat different approach. In addition to financing terms for smartphones and tablets at its stores, the company launched its own set of devices in 2019 as a way to increase the use of its growing set of digital services such as music streaming and instant messaging. The group has a stated goal of making and selling entry-level smartphones at $20.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
GSMA flags device cost as bar to 5G usage in Africa
Many consumers are still unable to afford the one-off upfront cost of purchasing a cellphone, industry body report reads
As SA continues to look forward to the promise of a 5G future, GSMA Africa says the potential economic benefits are now held back by smart devices being largely out of reach for most people.
Making devices more accessible is good for consumers, and it can increase the number of customers that mobile providers can have as well as the volume of data services that flow through their networks, ultimately adding to their collective profit. And as operators build their portfolios of digital messaging, streaming, financial and gaming services, having more devices with consumers gives these platforms more room to grow.
GSMA, an industry body, says mobile operators in Africa have over the past five years invested nearly $45bn (R830bn) in capital expenditure — mostly on deploying and expanding 4G networks. In SA, this has translated in Vodacom and MTN each spending about R10bn on such network expansion annually in recent years. However, adoption of the technology offered by the networks continues to be hampered by low device penetration, mainly due to cost.
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“The greatest potential obstacle to consumer 5G adoption and usage in Africa is device cost and availability,” GSMA says in a new report.
Before countries can focus on the fifth generation of communication technologies, 5G, telecom operators need to get more people to use more established 4G, the world’s fastest and most mainstream form of mobile internet access.
According to the report, which examines the economic benefits of 5G technology on the continent, SA’s 4G penetration is at about 42%. This means less than half of South Africans are using this technology, while the global average is 60%. SA and a handful of Africans countries such as Algeria, Seychelles, Morocco, Namibia and Tunisia are still doing better than the continent’s average of 25% penetration.
Reduced significantly
Key to pushing up this number is making smart devices more accessible.
It is stated in the report that the average selling price of smartphones “has reduced significantly in recent years due to the influx of sub-$100 devices”, mainly from Chinese brands such as Tecno and Infinix. However, “many consumers are still unable to afford the one-off upfront cost of purchasing a device”.
The focus now appears to be on offering more flexible financing terms for devices. “Given the impact of device affordability on 4G adoption, device financing schemes will likely be necessary to improve affordability,” says GSMA.
In the local market telecom operators, one of the main suppliers of devices to retail outlets, have been working on this issue for a number of years.
In its annual report for 2022, SA’s largest mobile operator, Vodacom, states this is a priority. “To support data adoption, we will leverage our strategic partnerships and implement innovative financing options to provide affordable devices to our customers.”
Bradwin Roper — CEO of FNB Connect, a young player in SA’s telecom scene — says the bank is using its lending prowess to help lower prices.
“It’s all good and well to say ‘data has fallen’ or fixate on the price of data but 50% of South Africans today don’t have access to devices, let alone a smartphone,” he recently said.
Offers terms
Roper said Connect had made R90m in net operating income selling 59,000 devices in its 2022 financial year. As part of that pie, there was a 126% jump year on year in the value of smartphones sold.
Like most retailers, FNB offers terms of up to 24 months to pay for devices. However, in some cases, this works out cheaper than the outright cash price of a particular phone or tablet, hinting at subsidies by FNB or deals with suppliers to achieve the lower prices.
SA’s second-largest mobile operator, MTN, has taken a somewhat different approach. In addition to financing terms for smartphones and tablets at its stores, the company launched its own set of devices in 2019 as a way to increase the use of its growing set of digital services such as music streaming and instant messaging. The group has a stated goal of making and selling entry-level smartphones at $20.
gavazam@businesslive.co.za
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