African GSM firms rethink strategies

After recording reduced profits and lower average revenue per user (ARPU), Africa’s mobile-phone companies have been forced to offer converged solutions to attract users.

The dramatic growth of mobile services will lead to 100 per cent geographical penetration in 2013, but a third of the operators are not profitable and are unlikely to achieve net profit in the next two or three years, said a report by AfricaNext, a telecom research firm.

Aggressive competition in the form of price discounts and promotions and the addition of lower-value air time denominations has reduced ARPU as well as profits.

Market Research, another research firm, estimated that overall mobile ARPU levels declined by 4 per cent last year, particularly affected by tariff cuts and the trend away from voice and toward emphasizing data services.

Safaricom, Kenya’s leading mobile-phone company, realized that its market share would be slashed by a rejuvenated Zain and the entry of Orange and Econet Wireless to the market, and thus bought One Communication, a data services provider.

The move by Safaricom proved to be complicated because it was forced to merge One Comm with Safaricom Business and parted company with One Comm CEO Geoffrey Shimanyula.

Last week, Telkom Kenya fired the first shot in the battle for converged solutions with a promise to overtake Safaricom as Kenya’s leading provider.

Orange Business Services will provide Virtual Private Network using the Multi-Protocol Label Switching (MPLS) platform, enabling users to converge voice, data and video.

“Orange was the third mobile-phone company in Kenya but we are going to be the number-one provider of telecoms solutions,” said Peter Reinartz, Telkom Kenya deputy CEO.

Orange Business Services will leverage on other services offered by Telkom such as GSM and fixed telephony, network systems, video services and data solutions.

“Many companies are often limited by communication challenges which are difficult to manage, inefficient multiple systems and lack of high-performing, secure IT and telephony solutions that are critical to businesses today,” said Reinartz.

AfricaNext projects that converged services will provide the next avenue for competition as companies seek to improve profit margins. Voice profits have been reduced by users holding more than one SIM card to take advantage of the vario

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