The East Africa PC market – comprising Kenya, Ethiopia, Tanzania, and Uganda – declined -8.6% year on year in Q4 2016, according to the latest figures compiled by International Data Corporation (IDC).

The global technology research and consulting services firm says shipments for the quarter fell to 113,303 units as a combination of political, monetary, and economic factors inhibited the PC market's performance.

"East Africa's biggest PC market, Kenya, continues to be hampered by political uncertainty in the build up to general elections scheduled for August 2017, while the government's introduction of monetary policy changes has tightened access to credit," says Kirui Andrew, a research analyst for systems and infrastructure solutions at IDC East Africa. "The region is also coming under mounting pressure from the influx of gray imports from the UAE.

These imported PCs often evade VAT, particularly in Kenya and Tanzania, making them a cheaper alternative that local channel partners simply cannot compete with."

IDC's data shows that commercial PC shipments in East Africa fell -9.1% year on year in Q4 2016, due mainly to reduced investments by small and medium-sized businesses (SMBs). Meanwhile, the consumer segment saw shipments fall -7.5% over the same period, in part due to the aforementioned competition from gray imports.

In terms of the overall PC vendor landscape, Dell overtook HP Inc. in Q4 2016 to become the region's leading PC supplier with 30.1% unit share. Second-placed HP Inc. saw its share fall to 22.3%, while Lenovo remained in third position with 19.6% share of the market.

Looking at Kenya in isolation, PC shipments declined -16.6% year on year in Q4 2016, primarily due to weaker consumer spending and a reduction in commercial sector investments. Monetary policy changes implemented by the Kenyan government have made it more difficult for SMBs to access financial services, leading to a more cautious approach to investing in PC hardware.
Conversely, the Kenyan tablet market saw explosive year-on-year growth of 230.5% in Q4 2016 to total 149,906 units, although much of this growth stems from purchases for the government's Digital Literacy Program, which is scheduled to end in H1 2017.

Excluding the education sector initiative, consumer spending on tablets in Kenya fell -11.3% year on year in Q4 2016, primarily due to high inflation. Positivo BGH and JP SA Couto, the main vendors for the Digital Literacy Program, led Kenya's overall tablet market in Q4 2016 with shares of 37.4% and 36.7%, respectively. Samsung placed third with 6.1%.
In Ethiopia, there was encouraging PC growth of 18.0% year on year in Q4 2016, despite ongoing political instability. One driver of this growth was a major commercial deal secured by Lenovo. Ethiopia continues to see double-digit annual economic growth, propelling increased investment in the commercial space. Dell, Ethiopia's leading PC vendor, has boosted its marketing, leading to impressive results in the consumer segment.

Elsewhere, the Tanzanian PC market suffered the region's biggest year-on-year decline in Q4 2016, with shipments falling -29.0% following the introduction of strict government public spending cuts. There was better news in Uganda, however, as a recovering economy and improved political stability saw PC shipments increase 12.5% year on year.
Looking ahead, IDC expects the East Africa PC market to see marginal growth in 2017, with a year-on-year increase in shipments of 2.0% forecast for the year as a whole.

Telcos across Africa are increasingly focusing on effectively maximizing their return on investment from data and on monetizing emerging opportunities such as the Internet of Things (IoT) to remain competitive and afloat, according to George Kalebaila, research director for telecommunications, media, and IoT at International Data Corporation (IDC).

This is due to increasing levels of competition that is forcing them to seek new methods to stem the steady decline of traditional voice services.

"We expect to see greater market consolidation as telcos increase their efforts to acquire smaller ISPs in response to the challenging marketing conditions," says Kalebaila. "Particularly in West Africa, this is being driven by heightened market saturation, declining average revenues per user (ARPUs), increasing operating expenditure, and diminishing profit margins on services.

As such, IDC expects some consolidation within the market, especially between local ISPs that possess 4G LTE frequencies and fibre-to-the-x (FTTX) infrastructure and multinational telcos with solid financial support."

In markets where 4G adoption is already gaining traction, discussions around fifth-generation network technology (5G) will take center stage, creating awareness and bringing the possibilities and expectations of future data networks to the forefront. "IDC expects vendors to focus on the higher bandwidth 5G offers and the technology's potential ability to support emerging services such as IoT, seamless video on demand or IPTV, drone video recording, smart city solutions, and virtual reality applications," says Kalebaila. "We also expect 5G to deliver gigabit connections that enable the seamless delivery of rich multimedia services and applications."

As competition continues to increase in Africa's more mature telecom and IT markets, the need to attract and retain customers through differentiation has become imperative. This means that telcos must move beyond traditional connectivity offerings and provide IT services such as unified communications and collaboration, cloud, and datacenter services.

"In the medium to long term, telcos will be forced to re-evaluate their business models to efficiently design, develop, and deliver cost-effective solutions and services," says Kalebaila. "This may compel telcos to migrate from operating legacy networks to deploying agile systems that are capable of increasing operational efficiency while speeding up the time to market of new solutions. Those telcos that prioritize technologies such as network functions virtualization (NFV) and software-defined networking (SDN) for the delivery of connectivity, cloud, and datacenter services will be well placed to maximize cost savings, achieve greater efficiency, and increase productivity."

In 2017, telcos are also expected to focus more on 4G monetization strategies such as enhanced data offerings, service bundling, and partnerships with digital media companies from a content perspective. While the deployment of 4G networks is already gaining traction across Africa, spectrum availability, low customer awareness, low coverage, high tariffs, and the cost of 4G smartphone devices remain key challenges.

"The availability of affordable 4G smartphones is expected to increase 4G penetration, and those telcos that are creative in their offerings and allow customers to trade in their existing 3G devices will differentiate themselves from the competition," says Kalebaila. "Rather than focus on extolling the features of 4G, telcos could further drive adoption by introducing innovative data bundles and transparent prices, particularly as 4G provides an opportunity to start transitioning to a data-centric model and begin preparations for a voiceless future."

Open application programming interfaces (APIs) is expected to become more commonplace, enabling the developer ecosystem to drive innovation and for telcos to improve partner management. "Historically, open APIs were used in traditional telco services such as USSD and SMS," says Kalebaila."Going forward, we expect to see remarkable growth in financial services platforms like mobile money and breakthrough emerging technologies like IoT, in a bid to drive the release of APIs by telcos to the developer ecosystem. This will allow telcos to harness innovative and localized solutions."

Kalebaila says that telcos that take concrete steps to transform themselves internally will be best positioned to survive digital disruption. "The key focus areas in 2017 will include business model transformation and network efficiency improvements using so-called '3rd Platform' technologies, namely cloud, big data, mobility and social business," he says.

Before they can become digital transformation partners to their clients, telcos will first need to harmonize their internal IT environments with external-facing IT systems and become digital providers to their own internal business functions. "By streamlining, optimizing, and modernizing their own IT environments, telcos can leverage the lessons learnt internally to optimize customer service and experience to their external clients," says Kalebaila.

He adds that telcos need to identify their key challenges, prioritize the development of unique digital transformation strategies, and implement a phased approach to digital transformation. "For example, Telcos can use big data technologies to upsell and cross-sell services, design new products and services, or create new revenue generation streams from existing customer data assets," says Kalebaila. "Understanding and tracking customer behavior will also help telcos provide personalized and optimized offerings to their subscribers, and therefore help enhance customer loyalty."

 

The announcement that Emirates Integrated Telecom Company (EITC) intends to introduce Virgin Mobile services on its infrastructure caused quite a stir in the market last week, but International Data Corporation (IDC) believes it ultimately represents a positive development for consumers in the UAE.

Indeed, the global technology research and consulting services firm expects the move to help open up the country's telecommunications market and stimulate some much-needed competition.

"EITC first launched mobile services under the du brand name in 2007 to break the stranglehold Etisalat had on the UAE telecom space," says Paul Black, director of telecommunications, media, and IoT at IDC Middle East, Africa, and Turkey. "The company's unexpected announcement that it will introduce Virgin Mobile as an additional brand to run alongside du has therefore caused intense speculation about the possible ramifications – not only for du, but also for the wider market."

Much of this speculation has centered on the precise form that this new partnership will take, and whether Virgin Mobile will essentially serve the market as a mobile virtual network operator (MVNO). It is important to note that EITC's announcement stressed that Virgin Mobile will operate only as a brand alongside du; however, Virgin Mobile operates as an MVNO in all other countries in which it has a presence, so it is easy to see where the confusion stems from.

"Within the UAE, frequent discussions have taken place about the need for the Telecoms Regulatory Authority (TRA) to either license a third mobile operator or outline regulations that would allow for the establishment of an MVNO," says Black.

"In fact, Virgin Mobile, which already has offices in the UAE, had previously made it clear that it would be interested in operating in the local market if the existing telecom framework was changed to accommodate MVNOs. However, no such changes have been forthcoming."

Given that there has been no published change to the regulatory landscape, IDC believes that EITC must have sought guidance from the regulator prior to launching Virgin Mobile services. This is because the unexpected launch of a new brand can be successfully challenged by other telecom players, as happened in Qatar in 2010 when Vodafone objected to the introduction of the Virgin Mobile brand under Qtel (now Ooredoo) and successful lobbied for the new service to be shut down.

IDC expects the launch of Virgin Mobile to help EITC address the issue of declining profits caused by intensifying competition and growing customer expectations. Virgin Mobile has made it clear in the past that its interest lies exclusively in the youth segment, and the brand is viewed positively in this space. However, du also has a strong reputation among the youth of the UAE and frequently sponsors sporting and music events that specifically target the country's tech-savvy young population.

"The entrance of a new player in the UAE telecom market is long overdue," says Black. "Given the country's large youth population and Virgin Mobile's international experience in actively targeting this segment, the potential for the company's success is high. However, EITC must ensure that the du brand does not become diluted as a result of direct competition from within its own stable. One option would be for du to leave the youth segment to Virgin Mobile, allowing it to focus more intently on attracting customers with a higher average spend."

With Etisalat likely to react by improving its own digital services offerings for the youth segment, IDC expects Virgin Mobile's arrival on the scene to be a positive development all round. "In the absence of any objections from a licensing standpoint, IDC believes this added layer of competition will have a positive impact on the provision of services to the UAE's brand-conscious young population," says Black. "And as long as the growing digital service needs of this population are met, the telecom consumers of the UAE stand to benefit greatly going forward."

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