Getting Connected: Competition and Diffusion in African Mobile Telecommunications Markets

Abstract

The author studies the determinants of the diffusion of mobile telecommunications in Africa in a fixed effects model. He uses data from 1987-2000 on 41 African countries that have adopted cellular telecommunications technologies. He finds that competition is the driving force behind the mobile telecommunications explosion in Africa. Duopoly and triopoly markets grow significantly faster than monopoly markets, although growth does not appear to differ between the first two markets. Evidence of preemptive behavior is found in competitive sequential entries into the market, but the major effect of competition on diffusion occurs after the actual year of entry. The introduction of digital technology has a positive and significant effect on the diffusion of mobile phones. The presence of an incumbent-owned cellular operator has a negative effect on the diffusion of mobiles, suggesting an abuse of a dominant position by the incumbent fixed-line operator. However, privatization of the incumbent fixed-line cellular operator accelerates mobile growth and mitigates that negative effect.