Consolidation in AME's mobile market will continue for next several years

CAMBRIDGE, USA: In-country consolidation in the mobile market has already begun in Africa and the Middle East and will become a more important trend over the next few years, pushing incumbents to find new ways to protect their customer base, according to a new report from Pyramid Research.

Three Is Company, Four Is a Crowd: Mobile Players Proliferate in AME examines the factors that we expect will drive consolidation over the coming years. We start by recapping the dynamics behind the increasing numbers of licenses and operators.

The 17-page report then examines the degree of success of third, fourth, and fifth entrants in terms of subscription market share. A look at some of the successful strategies which incumbent operators are adopting to protect their customer base follows. Finally we examine the first case of in-country consolidation - and its likely implications for African mobile operators.

Competition in mobile markets across Africa and the Middle East will intensify as new licenses continue to be made available in Africa, even though many late entrants struggle to establish a sustainable business where three or more networks are already in operation, notes Dearbhla McHenry, analyst at Pyramid Research and author of the report.

"Although third entrants in Africa and the Middle East have gained as much as 37 percent of their markets within three years, the picture for fourth and fifth operators is gloomier: our analysis suggests that market shares of 8.7 percent and 4.7 percent, respectively, are more realistic targets," she adds.

"Several factors determine whether a late entrant to a mobile market in Africa and the Middle East will overcome the odds and gain significant market share, as explained in this report," says McHenry. "It is often the case that operators entering a market where another operator has recently launched will tend to find it difficult to establish an additional brand," she explains.

The region's leading operators, however, are getting better at reducing churn and increasing loyalty.

"International and regional operators, in particular, have an advantage in being able to implement best practices learned overseas -- MTN, for instance, has experienced growing competition in many of its markets, has maintained a strong position, for instance in Cote d'Ivoire, Ghana, and Nigeria," says McHenry.

At the end of July 2009, one of the first in-country mergers in the region took place in Sierra Leone. Market leader Africell agreed to buy Millicom-owned operator Tigo for an undisclosed sum. "We believe that this event may signal the start of a new trend, since several other operators look similarly vulnerable to acquisition," says McHenry. "As a result, we believe in-country consolidation, as well as operators exiting markets, will be an increasingly common event over the coming five years," she adds.