Taxes Endanger Future Growth

The Sub-Saharan Africa telecoms sector has reached a point where, in order to continue growing, operators must invest heavily in network upgrades and expansion. The initial boom of SSA's mobile market is largely in the past, with high levels of saturation in the mobile voice market in urban areas. In order to maintain growth, operators must extend their networks to underserved rural areas, and develop advanced mobile and fixed broadband services. Both of these areas of growth require enormous amounts of investment in network upgrades but operators have only just recovered from dramatic declines in profit margins during fierce price wars in 2011 and 2012. A greater risk is posed by some SSA governments, which are now targeting the telecoms sector with higher taxes to offset increasing budget deficits.

BMI argues that increased taxes on the telecoms sector will restrict operators from investing in their networks and have a negative impact on industry growth over the short- and long term. Moreover, we are not convinced that the decision to increase taxes will result in higher government revenues. Operators have made clear they will pass taxes onto consumers rather than absorb them, and consumers are unlikely to increase their budgets for communications enough to ensure continued growth of the telecoms sector.

Operator Financials

Falling ARPUs
ARPU By Country, 2007-2013

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This article is tagged to:
Sector: Telecommunications
Geography: Africa, Global, Brazil, Spain, United Kingdom, United States

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