Telecom operators in the continent should embrace the cloud, as it enables
exciting value added services to become available on feature phones, at significantly lower costs and with fast go-to-market results, say Viktor Kovács, and Sophie Papasavva
AN estimated 1.2 billion of the world’s 5.8 billion mobile subscribers are active mobile broadband users. The business opportunity for telecom operators to sell data services to smartphone-users is clear, with e-mail, collaboration and storage type applications as the most obvious. What many market analysts consistently fail to recognise is the opportunity that lies with the 4.6 billion mobile users worldwide who do not have access to latest technology devices.
While telcos elsewhere may benefit from post-paid, high-ARPU, data-focused subscribers, many telcos across the African continent have an entirely different subscriber base profile. It is for this very reason than Africa’s telcos should look to what the cloud has on offer to help them capitalise on a young, dynamic and social media hungry population, albeit with great diversity and disparity across the continent.
Africa’s telcos are best placed to capitalise on cloud service providers’ expertise in cloud enabling, helping to specifically target feature phone-users. Strategic partnerships with players that can assist the telco in quickly monetising the cloud for low ARPU, pre-paid subscribers are key. The benefits of partnership are clear: faster conversion from feature phone to (even the lowest cost) smartphone and all the benefits of higher ARPU that comes as a consequence.
Despite just 20 per cent worldwide penetration, the smartphone has received significant focus in mature telecom markets where latest technology devices are driving data growth and recovering ARPU trends. Indeed, some telecom operators in emerging markets are looking to their own 3G roll-outs and GDP growth in great anticipation. The opportunity to penetrate with a low-cost smart device that will stem voice ARPU decline and lead back to revenue growth is certainly worth aiming towards. As a consequence, certain market analysts point towards the eventual demise of the feature phone and the proliferation of smartphones.
Figure 1: Africa Handset Sale Forecasts – by Technology Figure 2: Africa Handset Sale Forecasts – by Device
Source: “Mobile Devices Forecast 2008-2015” Gartner, June 2011
Yet forecasts on the sale of mobile handsets by Gartner, imply that whereas 3G phones are by far the most widely bought device worldwide from 2012 onwards, their forecasts also point to 2.5G devices continuing to remain very relevant in the regions of Eastern Europe, the Middle East and Africa, for at least another three years.
The question must be therefore, how to best capitalise on the opportunity of today’s growing disposable incomes and today’s young, dynamic and social media hungry subscribers in the continent. Telecom operators cannot wait, nor should they wait for smartphones. Instead they should embrace the cloud, as it enables exciting value added services to become available on feature phones, at significantly lower costs and with fast go-to-market results.
A recent survey by Analysys Mason reported that 31 per cent of mobile content and apps users regularly consume such on feature phones. Their devices are not user-friendly, due to screen size and lack of QWERTY keyboard. Yet younger subscribers regularly access mobile content regardless. This points to a clear opportunity for telecom operators to use the cloud as a facilitator of popular mobile content, with games and social networking being the most obvious.
Today, Nigeria reports 5.1 million Facebook users (16 per cent growth in the past six months), equating to just three per cent population penetration. Egypt reports 11.34 million Facebook users, with 21 per cent growth in the past six months. Both markets are characterised by low fixed-line internet penetration to the home, a majority of pre-paid mobile subscriptions, average monthly ARPU levels of below $5 and $10 respectively and a very young and dynamic population, anticipated to lead the growth for data.
Informa Telecoms & Media estimates the mobile value added services (“VAS”) market in Africa would be worth over $11.5 billion by 2014. Currently South Africa is by far the largest, representing a third of the continent’s VAS revenues with $3.87 billion in VAS revenues expected by 2014. Nigeria’s VAS market is forecast to grow to $2.01 billion, representing 17.4 per cent of the total African market by 2014 and Egypt is expected to grow to $1.76 billion in VAS revenues, or 15.3 per cent of the market.
However, according to Booz & Co, Africa is not only below the world digitisation average but it is also growing at a slower pace. The challenge is to provide broadband access to people that cannot afford the cost of a digital access line and a PC at home. While telecom operators await innovation to help reduce prohibitive capex and opex costs that might facilitate a universal service provision, the cloud has been able to achieve exactly this for some time now. It is clear therefore, that the opportunity lies in maximising VAS revenues from feature phones while these are still relevant, at the same time encouraging the faster adoption of smartphones as they become more affordable.
The cloud has the ability to help telecom operators further capitalise on their investments in broadband. The cloud offers flexibility, scalability and limited infrastructure costs. But more importantly, this is where the experience and know-how of cloud experts cannot only help make the above a reality, but also achieve very fast results. Cloud enablers such as CE On-Demand help telecom operators and system integrators deploy their cloud strategies effectively, with fast commercial launch and immediate results. Telecoms research firm Ovum states that telecoms operators “should look to take advantage of vendors’ expertise by utilising their cloud enabling services or establishing go-to-market partnerships in order to quickly establish themselves in the market”.
The cost and time it takes to deploy a bespoke technology platform to accommodate any new value added service is a significant challenge and impediment, faced by all telecom operators. Further challenges lie in the nine-to-18 months of internal preparation for commercial launch that is typically required; Africa’s telecom operators are no exception, irrespective of country of operation. As many may not have the resources or internal know-how to pursue the cloud for its obvious benefits of time and cost, so technology partners have a key role to play.
While it may be admirable (but costly) for telecom operators to prefer to build their own platform from scratch, partnership with cloud enablers offers the advantage of tried-and-tested solutions with fast deployment, even with bespoke branding and white-labelling. An expert cloud enabler has both the data integration solutions and the expertise to bundle and market white-labelled cloud solutions. By utilising the enormous capabilities of the cloud, coupled with their specialised expertise, cloud enablers offer their telecom partners a variety of solutions with which to improve data ARPU from their 2.5G subscribers, with just two examples being the availability of social networking feeds and e-mail on the move. Because mobile broadband is not just about web browsing. Mobile broadband is also about messaging, collaboration, social networking and generally enhancing the communication experience for the individual, be it personally or for their business.
Viktor Kovács is co-founder and CCO of CE On-Demand and Sophie Papasavva is a Partner at EM Finance Consulting.