SA’s mobile operators are bolting on services to increase revenue opportunities, but there is concern that operators are stifling innovation in the market.
Outgoing MTN Group CEO Rob Shuter says the mobile operator is increasing its additional services such MTN MusicTime, by moving away from the subscription model services such as Spotify and Apple Music and opting to “sell music like they sell airtime”. For R5 a consumer can listen to 120 minutes of music, which, he says, will increase their market share of consumers who would like access to music but do not wish to be bound by a monthly subscription.
This week, Telkom announced its foray into the financial services by launching its financial services division, which will start selling funeral insurance to its subscriber base, especially for the 11-million South Africans who don’t have bank accounts, the company said.
Vodacom also offers funeral policies from R56 a month and a video-on-demand service called Video Play on its premium package that allows its subscribers to watch Hollywood and Nollywood movies, as well as the latest series.
Christopher Geerdts, senior analyst for broadband at BMIT, says MTN and Vodacom are the strongest infrastructure players in the market and while services that are bolted on to data offerings do provide revenue growth, the additional income is not as significant as that derived from pure data services
Shuter says he is expecting revenue streams from additional services, such as MoMo (a mobile money payment system for merchants) and its MusicTime offering, to increase as the penetration of smartphones, which sits at 45%, grows to an expected 60%-70%.
Geerdts says that 45% is still significant, even though it does need to be more widespread. “It’s not about smartphone penetration, even though that will help,” he says, but rather that the potential of over-the-top (OTT) media services is not being realised due to operators not allowing open access to their networks.
Open access is an agreement between an independent service provider and a mobile operator that allows a service provider to offer its services on its network.
Nuanced market
Geerdts says it will be challenging to compete with the social media channels that dominate the market.
According to Statista.com, there are 22.9-million Facebook users in SA, the Facebook messenger service is used by 30% of SA’s mobile phone owners. WhatsApp exceeds this as the most popular communication service with 58% of mobile phone owners preferring this method of communication
Another failing, says Geerdts, is trying to “cut and paste” successful services from other countries with the assumption that it will work in the SA market. He refers to the failings of M-Pesa, a successful payment system from Kenya that failed in SA; and how operator MTN pulled back on its video service in SA, as well as, unsuccessfully, tried to develop a virtual pre-paid service in the Philippines.
To create successful services, third parties that understand the nuances of a market and what its consumers require is an ecosystem that needs to be developed. “Operators need to open the market and build key partnerships,” Geerdts says. “There are so many entrepreneurs who are eager to develop and offer services and understand their own markets.”
MTN’s interim financial results for the six months ending on June 30 2020 released earlier this week showed a V-shape recovery in its digital revenue, which increased by 24.6%, and its fintech revenue by 18%. MoMo grew by 3.6-million to 38.3-million active users, the company said in a statement.
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