The African market for mobile telephones has since 2002 shown the ?fastest growth rate in the world,? according to a survey conducted by business consultancy Ernst Young and published on Monday. ?Since 2002, the African market has seen a growth rate of 49.3%, where the French market has only seen 7.5% a year, compared with 28% in Brazil and 27.4% in Asia, said the report released in Abidjan.

Vodafone Group, France Telecom SA and Bharti Airtel, which spent at least $18 billion on deals in Africa and the Middle East in the last two years, may face lower margins in the world?s fastest-growing phone markets.

Countries with as many as 11 operators, falling tariffs, a shrinking pool of new customers who can pay the bills and unpredictable government regulation are weighing on profit for companies operating in Africa. European companies haven?t been deterred because revenue gains in Africa are still faster than stagnant or slowing growth at home.

Still Growing

Vodafone is targeting sub-Saharan Africa as one of three ?priority areas? for expansion, and Vivendi SA has built up its Maroc Telecom unit with deals in Mali and Burkina Faso.

Services revenue in Africa, which grew 3.4% to $48.7 billion last year, will rise 2.9% this year and 7.9% next year, according to market researcher Gartner. Bharti paid $9 billion, or about 10 times annual earnings before interest, taxes, depreciation and amortisation, for Zain?s African assets. The assets had also had been considered by Vivendi before it balked at the price.

?Gold Rush?

?Except in a truly special case, we wouldn?t be prepared to pay 10 times Ebitda for a target,? France Telecom CEO Richard said on July 5.

Vodacom had also been in talks with Zain ?long before Bharti,? said Pieter Uys, Vodacom?s CEO. Vodacom would pay as much as six or seven times earnings for the right assets, CEO Rob Shuter said.

Shortage of Assets

Africa has ?a serious shortage of available assets,? with multinational companies already controlling many operators, said David Lerche, an analyst at Avior Research in Cape Town.

Millicom CEO Mikael Grahne said in an interview in May that Africa has too many licenses and that the Luxembourg-based company may sell units that can?t be among the top two operators in their countries. With multiple companies in markets, profit margins have been sliding.

Growth Needed

?We do not want to deteriorate our Ebitda ratio, but we need growth,? France Telecom?s Rennard said. Margins in Africa are higher than those in Europe, according to CEO Richard. Bharti will invest about $600 million over three years in Nigeria, the company?s Africa CEO Manoj Kohli told reporters in Lagos on Tuesday.

Governments, Regulations

Tanzania last month told Bharti it needs to hold a second round of talks with the government over its purchase of Zain?s unit in the country. Countries from South Africa to Nigeria are also pushing for registration of mobile users and slashing interconnection rates, both weighing on profit margins.

At the same time operators are rarely able to build a loyal customer base. To lower churn, operators could try to sell African consumers long-term data plans, analysts say. Doing so will mean selling higher-end phones and subscriptions to consumers accustomed to cheap, pre-paid voice and text service.