According to a report by GSM Mobile, in 2010 there were only 5 million smartphone connections in the ECOWAS region, today (2016) the number has grown to 97 million and will be at 227 million in just 4 years by 2020.
We have seen many great companies picking up based on the rapid internet penetration rates seen in Africa and there’s potential for a new wave of startups with 130 million new smartphone connections in the next 4 years. That’s 32 million new smartphones every year in the ECOWAS region alone.
These 130 million new connections are not unique users as people carry multiple handsets. The other thing to note is that the 3G penetration rate to properly use these devices is at just 10% and will be at a relatively low 40% by 2020, as estimated by GSMAMobile.
New users – a threat and an opportunity
For the existing and established startups that require a user base, all the new users adopting smartphone technology or coming online for the first time provides a threat. Social networks, instant messengers and mobile money type of businesses are great examples.
The threat is in new companies getting to the recent adapters first and becoming competitors. These new companies also usually come with better functionality and are more appealing to the mass-market.
For the established companies, this is not a matter of passively acquiring the new users as the number of them is simply increasing too quickly. If they don’t acquire the users, someone else will.
To secure themselves, companies qualified for this threat have few options: continue aggressively acquiring users or invest heavily in brand awareness. Another option is creating entry barriers to limit the number of new entrants, which might be a viable option given the partnerships some social networks have with telecoms for data deals.
Effects of 2G transformation to 3G to the African landscape
The West African transformation from 2G to 3G will allow many more of the Africa issues and problems to be addressed by technology. With 50,000 bit per second data transmission capacity, smartphones simply don’t function too well on 2G networks. For comparison – 3G is at more than 4 million bits per second.
For many organizations, the 3G coverage will provide an opportunity to add on top of their existing services. For some there again is a threat of being left behind – old text-message based solutions might die out or see segments of their users adapt to newer solutions. Innovation is the key for new-comers and existing players in mobile solutions.
The West African mobile landscape in 2020 will see a mixture of complex elements – user segments with low technology literacy, continued in-flow of new mobile internet users, 50% smartphones with the rest being feature phones, mix of 2G and 3G access, people holding multiple devices, different data costs, users in populated urban areas and equal amounts of users scattered around rural areas.
All of this is leading to a highly segmented mobile internet user-base. The segmentation will provide challenges to the players in the technology fields – higher technological entry barriers as startups have to account for many operating systems and data transmission speeds, as well as unclear number of users for a given solution.
Impact on startups, entrepreneurs and investors
Successful startups have to take measures to protect themselves and new entrants need to look for ways to provide new solutions or replace existing companies based on innovation and savvy market share grabbing.
Investors and entrepreneurs should also be looking at applications and ideas that provide non-location based services, are Pan-African or have a big enough segment in one region. Some apps from the West or the more developed regions of Africa can look for new users in West Africa as the 3G and smartphone adaptation picks up.
By Bertrams Lukstins