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COVID-19: Consumer spending on telecoms may decline

As the effect of the coronavirus (COVID- 19) pandemic bites harder on the economy, telecoms consumers are likely to spend less on telecommunications service this year, the GSMA has said. The global body of all mobile operators in its latest Mobile Economy sub-Saharan Africa report noted that the pandemic had drastically affected the purchasing power of consumers in the region, thus many may cut spending on telecoms services.

In Nigeria, inflation hit a three-year high as it rose to 15.75 per cent in December 2020. This has reduced the purchasing power of Nigerians significantly. According to the GSMA, “the pandemic has sparked sub-Saharan Africa’s first recession in 25 years, with economic growth projected to decline from 2.4 per cent in 2019 to between –2.1 per cent and –5.1 per cent, according to the World Bank.

“The International Growth Centre estimates that containment measures in the region may have pushed an additional 9.1 per cent of the population into extreme poverty. “These developments have significant implications for overall consumer spending and telecoms spending in particular. GSMA noted that based on the economic realities, telecom consumers would likely adjust their spending in line with their financial capacity.

“Prepaid connections account for more than 95 per cent of mobile connections in sub-Saharan Africa, meaning users have the flexibility to vary telecoms spend when their financial situation changes,” it added. The body, however, projected further growth for the telecommunications industry in the next five years. According to the report,at the end of 2019, 477 million people in sub-Saharan Africa subscribed to mobile services, accounting for 45 per cent of the population.

“The mobile market in the region will reach several important milestones over the next five years: half a billion mobile subscribers in 2021, one billion mobile connections in 2024, and 50 per cent subscriber penetration by 2025. These achievements will be underpinned by operators’ continued investment in network infrastructure,” it said. The telecoms body added that despite the economic uncertainty brought about by the Covid-19 crisis, operators in the region would invest $52 billion in infrastructure rollouts between 2019 and 2025. “Smartphone adoption continues to rise rapidly in the region, reaching 50 per cent of total connections in 2020, as cheaper devices have become available.

“Smartphone financing models are gaining traction, demonstrated by the recent partnership between Safaricom and Google, allowing low-income consumers to pay for 4G devices in daily instalments. “Over the next five years, the number of smartphone connections in sub-Saharan Africa will almost double to reach 678 million by the end of 2025 – an adoption rate of 65 per cent,” it projected.

On the impacts of the sector on economies, GSMA said mobile technologies and services generated nine per cent of GDP in Sub-Saharan Africa in 2019 – a contribution that amounted to more than $155 billion of economic value added.

It said the mobile ecosystem also supported almost 3.8 million jobs (directly and indirectly) and made a substantial contribution to the funding of the public sector, with $17 billion raised through taxation.

“By 2024, mobile’s contribution will reach around $184 billion as countries increasingly benefit from the improvements in productivity and efficiency brought about by the increased takeup of mobile services,” it added.

Acknowledging the roles of mobile operators in the fight against COVID-19, the body noted that beyond connectivity, the mobile industry had engaged with businesses and governments on initiatives to alleviate the impact of Covid-19 on citizens. “From mobile money transaction-fee waivers and discounts on data tariffs for educational and health sites to cash and equipment donations, mobile operators and other industry players have supported the most vulnerable in society during the pandemic while also contributing to economic recovery efforts,” it said.

 

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