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Africa: Fertile and Fallow Ground for Mobile Carriers

There's a story about two salesmen scouting Africa for rival shoemakers.

"There is no market here, no one wears shoes," the first salesman tells his home office. His rival, however, sizing up the same situation, calls to report: "There's tremendous market potential here, no one wears shoes."

While apocryphal, the anecdote illustrates the conflicting views of doing business on the continent.

Advocates of bringing mobile communications services to the region point to large populations and pockets of education as elements needed for market growth. Skeptics contend Africa is too scarred by colonialism, corruption, war, disease and debt to be an attractive consumer market any time soon.

Historically, oil companies, mining and agriculture exporters have managed well enough, and there have been some manufacturing successes. Now, technology companies -- especially mobile telecommunications carriers and suppliers -- are taking a hard look at the continent, especially as markets in the United States and Europe mature.

By the end of 2002, only three countries -- Comoros, Eritrea, and Guinea-Bissau -- did not have access to mobile phone services, according to Paul Budde Communications, an international telecom research and consulting firm. In 30 countries, the number of mobile phones outnumber fixed lines.

The mobile sector is open to competition in 66 percent of the countries with between two and five operators, Budde Communications reported.

No Infrastructure? No Problem

It's a mistake to lump all African telecom markets together. South Africa is as mature and sophisticated as any in the United States or Europe. Therefore, products and services there represent the latest technologies, such as high-speed data transfers, imaging and messaging.

Elsewhere, however, landlines are rare, creating openings for carriers to use satellites or bases stations to transmit signals -- far cheaper and simpler than laying copper or fiber-optic cable. For handsets, they resell older models that were turned in by previous customers and reconditioned, although some industry watchers say handsets need to drop in price further in Africa to be affordable for most people.

LogicaCMG, a British firm that handles back-end billing for mobile telecom operators, is committed to Africa, where its roster of wireless telecom companies has reached 35.

"Nigeria and the Republic of Congo both have huge populations, 170 million and 60 million (respectively)," said Andrew Harper, LogicaCMG's director of product marketing."They have wireless networks with penetration around five percent -- but it's growing, and growing rapidly."

Some governments without the resources to build landline networks, are embracing the technology to play catch-up.

For example, the Nigerian government recently awarded six contracts totaling $156 million to expand GSM network of the state's phone company. In the private sector, Gilat Satellite Networks will enter the Kenyan market this year with its satellite service. IP Direct, a startup in South Africa, this week announced plans to offer broadband satellite services, initially to West Africa and eventually the whole continent.

"It's an interesting market and there are different challenges," Harper says, noting that in rural areas where illiteracy is a problem, there is obviously no call for texting services.

Obstacles

While lack of education and tech savvy is certainly a problem in some countries, it's by no means the most urgent barrier to widespread wireless adoption throughout Africa.

Political and military unrest in several countries slows progress and dissuades investment by technology companies. Just today, the United Nations said 65,000 Sudanese refugees were fleeing fighting in Africa's largest country. Meanwhile, international peacekeepers are working to quell violent outbursts in Liberia and bring order to the Congo. Add to this drought and an AIDS epidemic and the continent is "facing the worst humanitarian crisis in history," the UN says.

"The potential is enormous, the reality is it's a disaster," says Harry Lane, a Northeastern University business professor, who once ran executive management programs in Kenya.

LogicaCMG's Harper says that danger shouldn't be overblown. "We won't operate in a war zone," Harper says. "There is a misconception about these countries and how safe they are."

Even in relatively stable countries, there are problems including lack of leadership and corruption. In addition, an entrepreneurial spirit needs to be developed. Lane and his colleagues that ran the management course tried to get Kenyans to take over the program, even going so far as to look into grants to fund it.

"They'd never do it. They developed a dependant colonial mentality and would never accept responsibility for things on their own," Lane says. "We walked away from it."

Though clearly discouraged that Africa hasn't lived up to its potential, Lane concedes that some companies will probably succeed there, but only if they consider a host of social, cultural issues.

"There's a hell of a lot more to understand than markets and technology," he says.