Are telcos in Africa really making a profit?

The profitability, or otherwise, of telecoms operators in Africa was a topic of hot debate earlier this week at Mobile World Congress as a couple of the industry's biggest players shared their concerns over the impact of regulatory interference and high taxes.

Real mobile penetration in Africa is still probably below 50% so therefore the continent still offers strong growth potential, but ″there are also certain challenges,″ such as aggressive price competition and unclear regulatory goals, said Sifiso Dabengwa, CEO of pan-African mobile operator MTN Group.

″Whatever we do in Africa we have to avoid what is happening in Europe,″ he said, referring to regulatory intervention and falling market caps. ″[We need to make sure] we don't stifle the industry,″ like in Europe.

″I'm not sure how many operators in Africa today are actually profitable,″ Dabengwa said, noting that some markets have five or six competing operators, and some operators are seeking to gain market share by significantly lowering prices. ″We have a bit of a problem″ when some are selling at lower than cost, he said, profitability being necessary for investment. ″This quest for subscribers has led to some tactics that are not sustainable.″

The regulators are also playing their part, pushing down termination rates in a bid to reduce retail rates for consumers, for example. ″But what are you doing to the industry?″ Dabengwa asked.

″It could be a strategy to force some sort of consolidation,″ he speculated. If that's the case, ″tell us,″ he said. ″One or two are going bankrupt,″ he warned.

″Definitely a very small number of African operators are making money,″ agreed Manoj Kohli, Bharti Airtel's international CEO and joint managing director.

″Operators are losing money at the [customer] acquisition stage. It's wrong,″ he said, also noting that there are some smaller countries in Africa with populations of under 25 million and up to five operators. ″This should change,″ he said. ″Operators and governments should jointly build this agenda of consolidation,″ so that investments in 2G, 3G and fibre networks are paid back, he said. Otherwise people will not invest in Africa.

Operators also face a tough tax regime in many African