April 2, 2003 2:09 PM PST

Is Africa ready for 3G?

Next-generation cell phone networks are arriving in Africa, a region some carriers view as an enormous business opportunity, despite widespread poverty.

Two weeks ago, carrier Multi-Links Telecommunications flipped the switch on a new cell phone network in Lagos, Nigeria, that's capable of handling hundreds of thousands of more calls at a time than existing cell networks and of downloading e-mails or Web pages at dial-up modem speeds.

And in about three months, Nigerian carrier Rel-Tel will introduce a similar next-generation cell phone service not just to Lagos, but to other parts of the country. Starcomms, another Nigerian carrier, plans to have a similar network in place by year's end.

Network-equipment seller Nortel Networks, which is supplying Multi-Links with network gear, and Ericsson, which won the Rel-Tel contract, see huge potential in Africa. Less than 10 percent of the population of even the most technologically developed countries has telephone service of any kind. In Nigeria, the figure is less than half of 1 percent.

That translates into hundreds of millions of potential customers. And although trying to sell mobile phones to people who don't even have old-fashioned landline models might seem like folly, business and infrastructure concerns may give cellular the edge.

Of the two kinds of telephones--traditional landline and cell phones--the wireless variety appears to be a bigger business in Africa, according to Ericsson spokesman Per Altan. The Swedish telephone equipment giant supplies network gear and cell phones to carriers in 30 African nations, and landline phone equipment to carriers in only 20 nations, he said.

The reasons are both economic and regulatory. It's cheaper for a carrier to lay down a few miles of cable to a base station filled with cellular antennas than to string traditional phone lines to every house and business. Also, the landline phone business in Africa is a near monopoly, with each country having usually just one carrier. Although governments aren't letting rival landline phone companies in to do business, they are giving licenses to cell phone providers, said Stephan Beckert, research director for market analysis firm TeleGeography.

That means cell phones may indeed win out in the long run. In Morocco, for example, there are already 4.8 million cell phone users among a population of 29 million--four times the number of fixed-line phone users, according to statistics provided by TeleGeography.

But just as in China, a huge untapped population doesn't necessarily mean instant jackpot-size revenue for phone sellers, Beckert said. Poverty is certainly one of the biggest obstacles keeping phones out of Africa's hands.

"Look at how many (customers) are in China, then look at the average income," Beckert said. "You're seeing factory workers making 60 cents per day. They aren't going to buy cell phones anytime soon."

 

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