While the shift towards offering digital services such as mobile payments and online video streaming by telecoms operators is well under way, a new report by research firm Africa Analysis shows that mobile providers are not only fighting for new streams of revenue but also their place as consumer-facing brands in the coming decade.
Over the past three decades, the introduction and mainstream adoption of the mobile phone has fundamentally changed the way people communicate and do business. This force of change has been magnified over the past decade through the rise of the smartphone and, in turn, greater access to the internet.
Against the backdrop of these trends, the new study — which gathered data from top telecoms executives and their companies — focused on the changing roles of players across the sector.
Threat of tech companies
In an interview, Andre Wills, MD of Africa Analysis and one of the report’s principle researchers, said the coming decade will change the relationship between operators and consumers, as the latter consume more digital services. The threat for mobile operators is losing relevance to the likes of fast-growing tech companies such as Facebook, Amazon, Apple, Google and Netflix.
“We see the interest by consumers more and more to look at digital services. From a value-chain perspective, we aimed to understand how the role players are readjusting their positions to better add value and to make their business work,” Wills says.
For a number of years, mobile operators — particularly those in Africa — have been looking for ways to diversify their revenues beyond the traditional voice and data businesses, whose margins are increasingly squeezed. While the search for new areas of business — mainly centred on financial services — makes sense, this new report reveals that network operators are also likely to be looking for ways to keep their relationships with consumers.
“The relationship between the traditional network operators and the customer, which was very strong when there was just one player, has now changed to a three-way one,” Wills says.
Where consumers previously only paid the likes of MTN, Vodacom, Cell C and Telkom for voice and data, they now spend increasing amounts on services such as Facebook and Netflix. These large internet players have grown around the world without having to invest the billions in capital expenditure on towers and fibre that network operators have had to.
“The OTT [over-the-top] players generate a lot of brand equity by offering services to customers but they’re not required to make the large investments that traditional telecommunications operators need to make to scale their networks to cope with carrying the traffic, from a voice call, all the way to a video call,” Wills says.
Cutting out the middle man
To illustrate, with a $10 (R143) monthly subscription, users of Amazon’s Kindle, an electronic reading device, can travel and connect to Amazon’s online book service in a number of countries without having service plans with mobile operators in each country. Access to the internet is taken care of by Amazon. Operators get their money, but this arrangement means those mobile providers are cut out of the direct relationship with the consumer.
Vumatel, part of Remgro’s CIVH group, is one of the best known fibre operators in SA, particularly in the Gauteng region, however, the company usually does not have a direct relationship with consumers. This is usually done with internet service providers such as Cool Ideas or WebAfrica.
The emerging trend is that there will be those telecoms players that provide only connectivity, and those which also create digital services, Wills says.
For now network operators seem to be in favour of keeping and growing their direct relationship with consumers, having come up with various offerings, working to make what they can stick.
In fact, all four of SA’s largest mobile operators were part of Brand Finance Africa’s latest report, which ranked the top 50 brands in the country.
On the ground, MTN and Vodacom are now focused on financial services with mobile payments and insurances, while Telkom has worked to turn its decades old Yellow Pages into an e-commerce platform. Cell C, Vodacom and Telkom have all tried their hand at video streaming with varying levels of success, while MTN is now pushing a music service and messaging app.
Both Vodacom and MTN — two of the continent’s largest players — have made their intentions clear, with both communicating in the past year a shift in strategy to being considered technology companies and not just telecoms operators.
But the odds are in their favour, Wills says, given the gaps in financial services, entertainment, cloud computing and other sectors in Africa. These are gaps that mobile operators, with millions of existing customers, can exploit.
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