What are the barriers to smartphone expansion across Africa?
Back in 1999, only 10 percent of the African population had mobile phone coverage. By 2008, 60 percent of the continent’s population – 477 million people – were able to get a signal, with an area of 11.2 million square kilometres having mobile phone coverage.
Skip forward to 2012, and most villages in Africa had coverage, with only a handful of nations remaining relatively unconnected. Indeed, in the same year, Elsie Kanza, Head of Africa for the World Economic Forum, declared that: ‘even in remote villages, mobile phones [had] replaced the bicycle or radio as prized assets’.
Today, most consumers in Africa have the potential to be covered by smartphone coverage. This brings the continent in line with the 94 percent of the globe that now has access to a 4G signal, according to the United Nations.
For mobile network operators [MNOs] operating in the region, wider smartphone coverage is a positive step forward. This is because 2G feature phone subscribers use much less data, and far fewer apps, than 4G users, which significantly brings down the average revenue per user [ARPU] for MNOs. In addition, having to keep 2G networks operational to support users who still rely on them increases costs for mobile operators.
While it is fair to say that Africa no longer suffers from a coverage gap it does still struggle with a significant gap in smartphone utilisation. This not only creates a considerable challenge for the many consumers wanting to upgrade their devices, but also for MNOs eager to switch users from 2G networks to more lucrative 4G and 5G networks.
Barriers to smartphone usage in Africa
In certain regions of Africa where economies are stronger than others, smartphone penetration is higher. For example, Nigeria tops the list of African countries with the largest number of smartphone users, perhaps unsurprising given it has the strongest economy of all nations on the continent.
However, 43 percent of the entire African population is still without smartphone access.
This is largely because, on average, a smartphone could cost anywhere upwards of 30 per cent of a person’s take-home pay. Considering that the average monthly salary for a worker in Africa is approximately 758 USD, upgrading from a basic, 2G feature phone to a 4G smartphone is often unaffordable.
It is not only the cost of the device itself that precludes many consumers from smartphone usage, however. Unlike 2G feature phones, smartphones use large amounts of data to provide enhanced services. Paying for this data is an added expense for smartphone users, and those on lower incomes often struggle to cover the cost.
These barriers to smartphone usage present a significant problem for MNOs, many of whom are investing increasingly in 4G and 5G networks. Indeed, total investment in network infrastructure between 2018 and 2025 is set to reach 250 USD. However, if operators are unable to move users onto 4G and 5G technology, their investment may not pay back as quickly as anticipated.
In some regions of Africa, regulators are encouraging users to move onto 4G and 5G networks. For example, South Africa recently announced plans to ban all 2G devices from March 2023. In theory, this should be good for operators. However, with so many people who are unable to afford a smartphone, it serves to preclude millions of users from accessing a phone altogether.
This not only deepens the digital divide across Africa, but it also means that operators lose out on the profits from 2G subscribers because many cannot afford to upgrade their devices. As such, considerable efforts are being made to address the digital divide and make 4G and 5G technology more affordable for users.
Tackling the digital divide and the challenges involved in doing so
Google, for example, is driving up base memory variants within its hardware stack, in a bid to create a stronger user experience for Africans. Meanwhile, operators are pushing to ensure that data pricing comes down substantially, having recognised the unaffordability of data for many consumers.
This is vital to addressing the digital divide, not least because roughly 700 million people in Africa have never made a phone call on any type of device, let alone a 4G one. By making smartphone usage more affordable, MNOs have the opportunity to get more devices into the hands of those who have never had one before, as well as those who are still using 2G.
While this is certainly positive, the efforts being made to drive data pricing down are somewhat undermined by the fact that the base cost of hardware is continuing to go up. MNOs often consider device financing to be a straightforward solution to this problem, but there are various ecosystem elements that are needed to bring customers on board.
Operators need the correct tools to make decisions for providing smartphones where non-traditional credit vetting processes are in place. Some are now using call-data records or mobile money environments to decide whether a customer is able to pay back their smartphone loan.
However, in some cases, mobile operators are doing so without an understanding of how cash is moving in the non-traditional banking environment within the space.
Furthermore, there are loan management systems that operators may need to implement if device financing is to be effective. All in all, the device financing process can be a complex one for mobile operators to navigate alone, which is why we at Trustonic stand ready to support them.
How Trustonic can help
The Trustonic mobile device solution offers mobile operators and retailers a new, secure way to grow their revenues across Africa while simultaneously helping to tackle the continent’s digital divide.
This is achieved by extending more credit to more customers to support them in migrating from 2G to 4G phones.
Unlike conventional tools and processes, our solution delivers control and flexibility on a per-smartphone basis. This means that operators are able to remind their customers to pay their bills and remotely lock their smartphone if they fail to settle their bill to increase telecom revenue assurance.
Our approach is proven to ‘nudge’ postpay customers into paying outstanding bills, with around 70% improvements in bill payments to clients within other markets. Operators and retailers have the flexibility to change the way that they communicate with customers depending on their individual needs.
Operators and retailers can control their customer’s experience by managing the smartphone lifecycle, regardless of country or device type, with our fully branded, easy-to-customise device financing cloud solution.
Essentially, our aim is to help clients rewrite the rule book on credit by enabling them to offer new smartphones and services to a larger client base, without increasing the commercial risks associated with financing underbanked or unbanked users.
4G migration can benefit all in Africa
Migrating as many people in Africa from 2G to 4G is in the best interest of mobile operators, but it is also in the best interest of users too.
Of course, owning a smartphone means subscribers are more connected. But it also provides them with a wide range of learning materials, such as YouTube, that can prove invaluable in enhancing the education that people across Africa have access to.
Furthermore, there is a direct correlation between smartphone penetration and higher GDP. When we see a 10% incremental penetration within a given community or market, there is virtually always an uplift in GDP, with this being at almost three percent in Africa.
In short, the more smartphones that get into people’s hands, the happier and more prosperous a community generally is as a result.
With the help of Trustonic’s device financing solution, mobile operators have a workable, cost-effective method for removing the usage gap for smartphones across Africa, and finally bringing the use of these devices in line with the continent’s ever-expanding 4G and 5G networks.