Airtel Could Use Wi-Fi As Stepping Stone
Airtel Africa is reportedly planning to deploy a large-scale Wi-Fi network in the 17 African countries that it is operating in . This would serve as a stepping stone towards 3G and next generation LTE technology by helping customers to cultivate the habit of using mobile data.
According GigaOM citing sources familiar to the deal, Airtel Africa has engaged Ruckus Wireless and Alcatel-Lucent to help deploy 'tens of thousands of carrier-grade access points in high-traffic areas throughout its pan-continental network'. Ruckus Wireless will reportedly supply its indoor and outdoor high-capacity access points while Alcatel-Lucent, which has been contracted by Bharti Airtel to build a new IP network backbone in Africa, will provide its service and aggregation router, and act as the system integrator for the project. Airtel Africa has reportedly started deployment in Niger and will expand to the remaining 16 countries - Nige ria, Burkina Faso, Chad, Republic of Congo , Democratic Republic of Congo, Gabon, Madagascar, Ghana, Kenya, Malawi, Seychelles, Sierra Leone, Tanzania, Uganda, Zambia and Rwanda - depending on the performance and response.
While Airtel Africa operates in 17 countries, it offers 3G services only in 11 countries - Ghana, Kenya, Nigeria, Tanzania, Zambia, Republic of Congo, Sierra Leone, Malawi, Uganda, Rwanda and Madagascar. At the end of 2012, it reported 14.1mn data users, representing 22.9% of its total mobile subscriber base of 61.7mn. While impressive, we believe that majority of data users are not using 3G services, instead relying on technologies such as GPRS judging from the amount of data usage per customer and number of 3G sites (see table).
|na = not available; o/w = of which. Source: BMI, Bharti Airtel|
|Mobile subscribers ('000)||50,949||53,140||55,855||58,667||61,687|
|Voice usage per customer (minutes)||125||122||120||138||144|
|Non-voice as % of mobile revenues||9.4||10.6||12.9||13.0||15.1|
|o/w Messaging and VAS as % of mobile revenues||5.3||5.6||7.0||6.9||7.8|
|o/w Data as % of mobile revenues||2.5||3.2||3.4||3.6||3.9|
|o/w Others as % of mobile revenues||1.6||1.8||2.5||2.5||3.3|
|Data customer base||na||na||na||13,935||14,107|
|As % of customer base||na||na||na||23.8||22.9|
|Total MBs on the network (mn)||na||na||na||2,145||2,450|
|Data ARPU (US$)||na||na||na||1.0||1.1|
|Data usage per customer (MB)||na||na||na||56||58|
|Data realisation per MB (USc)||na||na||na||1.7||1.9|
|Sites on Network||14,112||14,831||15,439||15,979||16,371|
|o/w 3G sites||na||3,205||4,787||5,347||5,527|
Deploying a Wi-Fi network has the benefit of not requiring a potentially costly 3G licence, thereby reducing rollout expenses. Additionally, there could be a high degree of uncertainty in terms of spectrum auction, particularly in emerging markets. Having a Wi-Fi network in place would also complement Airtel Africa's 3G network, especially in areas where there is poor coverage or high traffic. However, we still see this purported implementation as a stepping towards 3G/4G as it is unlikely for Airtel Africa to provide the same level of Wi-Fi coverage as its mobile network. Having customers get used to using Wi-Fi services in key areas such as shopping malls and airports lowers the switching barrier to a nationwide 3G/4G network. Once customers cultivate the habit and fully experience the advantages of using mobile data services, they would be more inclined to subscribe to 3G/4G services.
BMI believes that there is some credibility to the reported news given that Bharti Airtel has adopted a similar strategy in India. Bharti Airtel announced in February 2013 that it has launched its Wi-Fi hotspot service in City Centre Mall, the first mall in Managalore to be completely covered by the mobile technology. However, 3G is still struggling to take off in India.