African telecoms bet big on next-generation LTE

* Africa-based operators already running LTE trials

* Six African markets could have LTE in 2012

* African Internet penetration at 11 pct

By Helen Nyambura-Mwaura

JOHANNESBURG, Dec 5 (Reuters) - Africa-focused telecom companies are betting that next generation long-term evolution (LTE) technology will drive broadband penetration in the world's least developed and fastest growing internet market.

LTE, also known as 4G, allows download speeds more than double those of current 3G technology, better reception in urban areas and coverage of previously hard-to-reach remote areas.

While Africa's mobile infrastructure lags well behind more developed markets -- some African operators have yet to upgrade to even 3G yet -- the continent's biggest players are already testing 4G.

The technological advances will be critical in Africa, where personal computers are still rare and most Internet access is via mobile phones.

Telecoms research firm Informa sees at least six African markets migrating to LTE for the first time in 2012, along with 39 other countries globally. There are 28 LTE live networks across 17 markets worldwide.

"As far as telecoms technologies are concerned, Africa has been moving very fast over the past five years, catching up very rapidly with the latest mobile technologies," said Thecla Mbongue, an analyst at Informa.

Pan-African operators MTN and Vodacom are piloting the technology in South Africa, and Kenya's biggest player, Safaricom, is also testing in its market.

Both Vodacom and Safaricom are units of Britain's Vodafone Plc.

According to a survey by industry body GSMA, Africa is the fastest-growing mobile phone market and will be home to 738 million handsets by the end of 2012.

The rise of 3G has given millions of Africans internet access for the first time. The World Bank estimates that in Africa a 10 percent rise in broadband penetration is linked to a 1.3 percent increase in economic growth.

With some basic smartphones now selling for as little as $50, operators see fast connections as the main edge in the race to tap increasingly tech-savvy users.

Even small operators will have to adopt LTE or risk being left behind, said Dobek Pater, a telecoms analyst at consultancy Africa Analysis.

"You don't really have a choice. You have to think about deploying the strategy as well and hope that in time it will generate revenues to realise a return on investment."

MASSIVE INVESTMENT

Ericsson's head for sub-Saharan Africa says the company is in talks with MTN, Vodacom, and Bharti Airtel on commercial networks that could go live in 2012.

"It's a very hot topic on the agenda. The question is who will be the first one out and in what market?" Lars Linden told Reuters last month at a trade show.

"Sooner or later everyone will jump on the train and it will become part of the telecommunications landscape," Linden said.

Internet user penetration was just 10.8 percent in Africa at the end of 2010, according to the International Telecommunication Union. That was a huge leap from 0.5 percent a decade earlier.

Initially, operators will deploy LTE in areas where it can generate the quickest profit. That will be small and medium-sized enterprises, according to Pater.

But some industry players think it will take several more years before Africa sees widespread 4G, saying there is not yet a pressing reason for operators to make the huge investment, and as some governments have yet to allocate spectrum for LTE.

A migration to 4G from existing 2G and 3G means a complete network overhaul, a huge expense before the cost of spectrum is factored in, said Simon Lee, managing director at telecoms industry consultancy firm Farwell.

"Convincing shareholders to make the plunge, upgrade the network to be LTE compliant when the 3G network still has not reached its potential will be a difficult task. There is no real compelling reason to move to LTE, as there is no killer application that can only work on 4G networks alone," he said.

For Vodacom, launching 4G in South Africa is a matter of flicking a switch when government gives the go-ahead, but it will take a while longer for the rest of its African operations.

"First we have to get 3G in all our markets, then we have to leverage our 3G investment; that is a natural step to LTE sooner or later," said Johan Dennelind, Vodacom's Chief of International Business.