Mobile communication

Mobile communication services have from the mid-90’s developed from being a supplement to fixed telephony reserved for a selected few to become an industry in its own right, and partly independent of the fixed telecom operators. In 1994 the revenue from mobile services constituted less than 10% of the global telecom service market, and the number of subscribers was around 50 million, compared to more than 600 million fixed-line subscribers. In 2002 the number of mobile subscribers exceeded the number of fixed-line subscribers, although the revenue was still somewhat lower than that coming from fixed services.

Particularly in Africa, mobile communication has led to a significant improvement in access to telecom services, as the penetration of mobile phones is almost three times as high as the penetration of fixed telephony. This is compared to the rest of the world, where the number of mobile subscribers is only 50% higher. Mobile has also played a remarkable role in improving access to telecom facilities in low income countries in Asia.

Density of fixed and mobile services in African Region

The rapid take-up of mobile communication services, particularly in developing countries, is due to two different factors:

1. Establishing mobile communication networks is less costly and the necessary investments in infrastructure are lower than for fixed networks.
2. Mobile markets have from the beginning been more competitive and less regulated than markets for fixed services.

As discussed further in the section on network innovations, mobile networks can be established at much lower costs than fixed networks. This relates to the fact that a substantial part of the infrastructure investments in a fixed network lies in the local loop.

The combination of lower costs and the fact that mobile communication in many countries has been introduced after liberalization of the telecom sector, has led to a more competitive market structure right from the beginning.

It follows from the figure that in particular in the African region, mobile markets are far more competitive than fixed-line markets. In many countries, mobile services were first introduced by a new entrant, often with international backing. The national interests in maintaining a monopoly market for mobile services have therefore been smaller than for fixed services. Although tariffs are still higher than for PSTN, mobile communication provides an alternative to fixed lines and contributes therefore to a more competitive environment in the entire telecom sector.

Another positive impact relates to a high degree of internationalization among mobile operators. A number of mobile operators, first of all Vodafone and Orange, are established in several countries. International mobile operators with access to international capital markets account for a substantial part of mobile network investments in developing countries. In Africa, 26 out of 52 million mobile subscribers in Africa are served by foreign operators[1].

Finally, the introduction of the prepaid business model seems to have been a key for stimulating the demand in the least developed countries[2]. Prepaid services are more affordable for low volume costumers, and the service can be provided without rating of consumers’ creditworthiness.

Status of competition for fixed lines and mobile by region