Africa grappling with climbing IOT rates
The success of mobile communication within the African continent is a given - penetration has grown from just over 20% to over 60% in less than five years, but the region suffers some of the highest IOT rates in the world. These rates are now beginning to rise as European operators suffering under EU regulation pass on the pain of price capping and cuts hiking IOT rates for international partners.
This is not a feature unique to Africa, Malaysian operator Celcom states IOT agreements are the main cause of high data roaming costs in its region, but Africa is less able to absorb high IOT rates or negotiate from a favourable position against some of the larger telecom players.
There are great opportunities for development in Africa as a rapidly evolving region with access to substantial natural resources. These resources are of great interest to the manufacturing powerhouse of China which provides its manufactured goods to the rest of the world. International business is enabled by communication as such any obstacle to international communication is ultimately an obstacle to the entire global process of manufacture and consumption.
African roaming rates remain very high. In analysis undertaken for Informa’s latest roaming forecasts Africa was found to be approaching an average of $3 (€2.39) per minute for all types of voice call and as high as $5 for specific destinations and call types (calls back to home).
Vodacom has stated that they are forced to pay up to $11 per MB wholesale when dealing with European operators IOT rates. This results in very high data roaming costs which doubly impact Vodacom as they must pay international partners but face a high incidence of customers unable to pay their bills leading to costs that must be written off.
The favoured approach for customers is to avoid roaming altogether and acquire a local SIM but this is not ideal as customer’s numbers must be changed and contacts cannot be easily migrated over.
It is Informa’s contention that high IOT rates are strangling the growth opportunities for international roaming in this region. While operators do not identify international roaming as a major opportunity coming from Africa the region has the potential to become one. Africa’s strong legacy of mobile usage and growing position in relation to its resources which countries like China and India desire positions it at a lucrative crossroad - and one which foreign operators should consider placing themselves providing the means to facilitate the communication between African and Asian business travellers who in turn provide goods to the Western consumer. This manufacturing chain is facilitated by the ease with which business can be conducted. High international roaming rates, a feature of high IOT rates, are a clear obstacle to this process.
Paul Merry is a senior analyst in operator strategies at Informa Telecoms and Media. For more information, visit www.informatandm.com/