Dumb pipes: Africa’s data-only LTE operators satisfying pent-up demand

Author: Ricardo Tavares
Published: 2014-12-27

A new business paradigm is being driven by the voracious demand for data in Africa – the data-only LTE operator.

The business model as such is not entirely new as data-only early WiMAX deployments were competing with, or being developed due to the lack of, DSL providers. Now that WiMAX is gone, a new batch of data-centric operators with no history of providing voice services is deploying LTE networks in much of sub-Saharan Africa.

Unlike the mobile operators who still rely on voice for the bulk of their revenues in the developing world, the data-only LTE operators in Africa have been positioning themselves as dumb pipes. They make their money from the volume of data. As with early WiMAX deployments DSL substitution in areas where there are few (or very expensive) fixed lines is the name of the game.

The early adopters have been Smile, originally a Tanzanian WiMAX provider, which has launched FD-LTE in Tanzania, Uganda, Nigeria and the DRC using 800 MHz spectrum; Swiss-based Cameroonian ex-WiMAX provider Yoomee which has launched TD-LTE in Cameroon and the Ivory Coast; and Surfline in Ghana which uses the 2.6 GHz band for FD-LTE. The companies offer routers for the home and office and dongles for mobile LTE, but the focus of the business is on DSL substitution.

Subscribers to the data-only services might make use of VoIP and Internet messaging services, but voice and messages are not offered directly by the operators, and probably will not be in future unless more spectrum permits LTE-Advanced and with it Carrier Aggregation (CA) and Voice over LTE (VoLTE). The value proposition of these players is full access to Internet content: “The Smile 4G LTE network is perfect for streaming YouTube videos, movies from Netflix, playing online games or using Viber or Skype,” offers the web site of Smile in Tanzania.

The experience of Surfline in Ghana illustrates the pent-up demand and market potential for data-centric LTE services. When it launched in August 2014, there were huge lines outside its stores and it was in danger of running out of devices. It anticipated maximum data usage per customer of 6 GB per month, but the average is 18 GB – high by any standards. The company has accelerated its countrywide rollout plans and has recently been awarded $30 million in investment funding by Vantage Capital to help with this. It has been shortlisted for the Breakthrough LTE Development Category by the Africa Communications Awards.

Next off the rank is expected to be the Netherlands-headquartered Afrimax Group which has licenses to provide TD-LTE services in 14 African markets with a total population of 222 million people. Afrimax is believed to be deploying networks in Uganda, Rwanda, the DRC, Malawi, Ghana, Mali, Guinea, Namibia, Sierra Leone, Cameroon, Central African Republic, Togo and Burundi using 2.3 GHz and unpaired 2.6 GHz spectrum. It is hoping to complete rollout within two years and to become the largest LTE operator on the African Continent.

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