The future of Telecoms in Africa The "blueprint for the brave" - Deloitte
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The future of Telecoms in Africa The “blueprint for the brave” 2014
Contents Foreword
Foreword 1 While the future shape is still far from clear, we see
Fast rewind on some key trends
African growth and the rising of the African middle class
2
3
“…what surprises me is the four potential scenarios:
Subscriber growth remains strong but is maturing – rural may be the next frontier
Mobile markets are slowly moving towards lower revenue growth levels
4
5
interest from global advertising 1. Winner takes all – as the markets consolidate
quicker than most operators can respond;
Telecoms services (voice mostly) continue to be commoditised
Most telcos have embarked on a journey of cost consolidation and diversification “The Blueprint”
6
7
giants in telco acquisitions in 2. Turf wars continue as new and existing operators
A transformation towards new operating models through operational innovation
Voice: differentiating and keeping an edge on tariffs whilst maintaining profitability
8
9
the race to secure access to the battle it out for the profitable market and are
joined by banks trying to protect their core business
Data: banking on the (still oncoming) data tsunami?
Data demand:
10 growing African middle class” against mobile payments;
3. New entrants come into the market from
What are the use cases for the new African middle class? 11 Mark Casey, TMT Industry Leader – Africa adjacent sectors with greater added value than
What are the use cases for African Businesses? 12 the traditional carriers – foreign media and even
Data supply: advertising groups are viewing telcos as a ready-
Unleashing international connectivity to fuel growth 13 Africa can no longer be considered the Dark made channel to market; and
Domestic infrastructure sharing, acting as a catalyst 14 Continent. Given the rate at which mobile connectivity
Data access networks are ramping up, but slowly (a costly process) 15 is growing, it seems only natural that the way business 4. Owning the hearts, minds, and wallets of
IT services: a rapidly changing competitive landscape in a rapidly growing market 16 is done will change. But how will Telco’s embrace this consumers is the end goal. Will telcos, who have
Mobile money: getting on to the next phase (maturity) 17 change and are they even ready for it? laid the foundation for connectivity and access, be
Media: how to make middle classes enter a mobile digital age? 18 the winners; or will it be global technology groups,
Mobile advertising: set to grow 19 Deloitte has recently completed an in-depth analysis the banks, media, advertisers or retailer giants?
of the market, its trends, and the drivers of it. We
Key drivers for telecoms M&A and current opportunities 20
are convinced that there will be consolidation in The impact in not just on the industry incumbents,
Key drivers for telecoms M&A: not necessarily about hype 21
the telecommunications sector and inevitably more but on all players in their respective value chains
1. Integrating telecoms operations: cross border and in-country mergers 22
inbound investment as the market opens up and the (hardware, software, services and people provisioning)
2. Reassessing core and non-core 23
economic returns improve. as they reposition their offerings to keep in step with
3. Diversifying the telecoms services portfolio and beyond 24
an unchartered end-state.
Current opportunities:
Indigenous companies, foreign investors, and global
General themes 25
players have all made significant investment into the
Fixed and Mobile Telecommunications providers 26
continent or certainly parts of it. Even governments
Other private sector opportunities (Media, ISPs, Mobile tech) 27
are waking up to the opportunity to regulate and to
Licences 28
auction spectrum and licences.
Our credentials 29
Deloitte global M&A presence 30
Deloitte African footprint 32
Deloitte TMT – our global presence
Contacts
34
36
“…industry
boundaries are
dismantling, and
owning the consumer
experience space is
the prize”
Arun Babu, TMT Southern Africa
The future of Telecoms in Africa The “blueprint for the brave” 1
African growth and the The worlds second fastest growing region and
its growing middle class
rising of the African African contribution to global forecast real GDP growth
2011 GDP distribution (x-axis); GDP growth 2010-17 (y-axis)
middle class China: c.12%
Africa: is forecast to grow
at 5.5% CAGR between
2010 and 2017, beaten
only by emerging Asia, of
of global GDP
which China represents
the large majority of the
Emerging
growth
Asia
6.7% Africa
5.5%
Fast rewind on Africa is one of the fastest growing regions in the world, with a forecast
real GDP annual growth rate to 2017 of 5.5%. Over the next decade
c.100m more people are expected to join the African middle class
Middle
East
4.5%
Latin
America
some key trends A decade of rapid GDP growth ...
• Africa has grown at 8.7% CAGR in real GDP terms between 2000 and 2010,
C&E
Europe
5.1%
making it the second fastest growing continent in the world, only behind china- 3.4% North America,
Western Europe and
developed Asian
propelled emerging Asia. Third party forecasts suggest Africa will continue to counties
grow very rapidly at c.5.5% CAGR to 2017 1.8%
• Part of this rapid GDP growth relates to improved international trade and an Concentration of the middle class
A wide disparity between countries
accelerated pace of foreign direct investment, in particular from emerging super-
powers such as China and Brazil. Many major multinational corporations invest in
Africa, both in natural resources, infrastructure, goods and services. Large brands
such as Unilever, Diageo and Parmalat have entered Africa’s consumer market
• There surely remain impediments to growth – road, rail infrastructure and power
can be scarce, political instability and corruption are still widespread, regional
integration is progressing only slowly but all these elements are improving and
making long-lasting impacts
... has created a growing African middle class
• Africa’s contribution to global GDP remains small at 2.7% but growth experienced
to 2010 has put total consumer spending in Africa ahead of Russia and equal to Middle class
India, albeit fragmented across many countries concentration
High
Medium
• Whilst there is a wide disparity among income levels across the continent, GDP Low
growth is positively impacting individual earnings and private consumption,
migrating an accelerating number of people into the African middle class – those
A growing African middle class
spending between $2- and $20 a day
Proportion of population by group
100
Average daily
• Between 2000 and 2010 the number of people in Africa’s middle class grew by
consumption:
130m, forecasts from the African Development Bank suggest that at least 100m 90 > $20
more people may become middle class by 2020 $4-$20
80 $2-$4
“…those companies who are 70
Subscriber growth remains strong but is Mobile markets are slowly High potential markets
Mobile subscriptions growth
maturing – rural may be the next frontier moving towards lower 2010-12
revenue growth levels
Maturing subscriber growth in the African Fuelled by improved economic conditions, the last five years have seen The combination of slowing subscriber growth rates and rapidly reducing
region Africa experience the fastest telecoms growth worldwide, which has ARPU levels is making revenue growth challenging in an increasing
transformed fundamental aspects of social and business life number of African markets
Regional subscriptions 2013-14
Mobile subscriptions, annual growth
50 Mobile subscriber growth remains fastest in the world, positively impacting Large countries with high subscription growth or comparatively higher ARPU
Africa is still the telecoms markets as well as African economies at large levels continue to be seen as high growth markets
fastest growing, but is
40
progressively maturing • African mobile telecoms have witnessed massive growth over the last decade; • Subscriber growth remains fastest in central African countries such as in Nigeria
subscriptions CAGR reached 42% during 2006-08 and 21% 2009-11. This rapid or Sudan and is expected to continue being concentrated in regions where
30 uptake has been mainly driven by: penetration is comparatively low
- mobile services being a core life enabler to all user segments • Whilst subscriber growth is slower in more mature markets such as Egypt or South
20 - favourable macroeconomic factors flowing to higher consumption Africa, these markets continue to concentrate the largest net revenue potential
- licensing opportunities and improved regulatory environment due to higher income levels, large and growing populations and sustained
Subscription
10 • Telecommunications growth Africa has positively impacted incomes across economic growth growth
the continent: in Sub-Saharan Africa, mobile revenues reached $35bn in 2011 < 15%
0 15-20%
representing GDP contribution of approximately 3% The drivers of future subscriber growth
2006
2011
20-30%
• Recent Deloitte and GSMA research states that a 10% increase in mobile • Further subscriber growth is likely to continue being driven by > 30%
Africa Arab States Asia & Pacific penetration in developing economies is likely to increase productivity by 4.2% - lower call prices and lower overall cost of ownership for handsets, allowing
CIS Europe The Americas penetration of lower income segments
Mobile subscriber growth is maturing and could well saturate in the medium - better network coverage in rural areas and operating models adapted to serving Mobile market net revenue potential
term in some markets if rural coverage does not increase such remote connectivity needs
African subscriber growth and penetration 2010-12
• On average, mobile subscription penetration has reached 72% across Africa - mobile data connectivity (as well as M2M), which has already proved successful
Mobile subscriptions and population penetration (2000-15)
(3Q12) but country penetration rates vary in a number of African countries (e.g. SA)
1000 • Multi-SIM ownership is widespread and actual penetration of individuals could - multi-SIM ownership in countries where it is still increasing
Subscriptions (million)
Mobile penetration be closer to 40% to 50% in some countries, potentially leaving room for further
900
growth. For instance this is the case in Nigeria where mobile penetration is above The challenge: revenue-dilutive incremental subscribers
800 60% but human penetration just above 26% with multi-SIM ownership at c.2.4 • As mobile operators continue to add subscribers to their network they typically
per user reach out to harder to reach areas or segments and often either poorer
700
• Further growth in subscriber levels is likely to be driven by; (1) Lower call prices subscribers or multi-SIM owners
600 and overall cost of ownership of handsets to gain access to lower income - incremental subscribers often spend much less than more affluent early adopters
500
segments; (2) better network coverage in rural areas and operating models of mobile services
adapted to serving such remote connectivity needs; (3) mobile data connectivity - reaching to specific niche segments or to remote areas, where competition may
400 (as well as M2M), which has already proved very successful in a number of be less strong can be costly, diluting margins
300 countries
2013-14
200
Large African markets with
100
comparatively high ARPU
0 or high subs growth are
likely to remain Africa’s key
2000
2015
telecoms growth drivers
Forecast
Net mobile
market revenue
potential ($m)
< 100
100-200
> 200
Source: WCIS, ITU, GSMA and Deloitte analysis
Note: Penetration rates are based on active SIMs Source: Deloitte analysis, Telegeography, ITU data, IMF
4 The future of Telecoms in Africa The “blueprint for the brave” 5
Telecoms services (voice mostly) continue to Most telcos have embarked on a journey of
be commoditised cost consolidation and diversification
“The Blueprint”
Voice ARPU dilution through aggressive pricing Voice is still the major revenue earner for most telecommunications Whilst operators are seeking to contain costs, A conundrum of differentiation options
and low income segments operators. Tough competition has meant rapid declines in revenue per they also seek revenue growth through service
Typical Telcos’ revenue composition1
minute in key markets and accelerated decline of voice ARPUs diversification: banking on data, business Differentiation
potential
Differentiation
ICT services, mobile applications and mobile strategy
Percentage
Mobile
Voice still represents the majority of revenues by a large margin. A number advertising
Media
Advertising
2009 2010 2011 of countries are seeing an acceleration of voice ARPU decline through Advertising
Money
Acquisitions mergers
4% 6% 7%
Data/IT
10%
11% 10%
competition Operators are diversifying: seeking out growth Premium agency
• Voice still represents the majority of revenues for operators. In the case of this levers and incremental margins in data, IT, V. high speed Savings, content
regulated Own ad
Telcos’ key markets, voice represented over 80% of revenue in 20111 banking, and VAS Data centre services Apps factory platform
• ARPUs have been declining as a natural result of lower price levels, lower income • Commoditisation of voice has pushed a dual-
86% 83% 83%
segments being penetrated and customers spreading usage across multiple SIMs pronged agenda for telcos, of both cost reduction Mobile Mobile apps
partnerships
Prepaid cards, Joint ad
Strategic
VOICE broadband
to maximise value from various mobile tariffs and diversification non regulated booking
services platform
• In some countries, competition has heightened price pressure, resulting in faster • Operators are seeking out higher returns in MVNO Facebook DSTV
declines, such as in Kenya in 2008-09, in Ghana in 2010, or more recently in immediate adjacent markets as well as higher
extensions
Tariff SMS, basic Google SMS Bulk, targeted
Service
Niche markets
Nigeria (1H 2012). In such cases traffic does not compensate for lower revenue segment focus, typically through strategic alliances Transfers
Mass market
Data SMS and Other Voice differentiation Internet search SMS & VAS
Voice: still the
major top line and
per minute, i.e. volume-price elasticity is lower than 1 and/or acquisitions, e.g.
profit contributor • The acquisition of Zain by Bharti (2010) triggered several such cases across Africa in developed markets, launch of sub-brands Roaming Fibre Payment PoS Intermediaries
and resulted in a number of price wars during 2011 or MVNOs in case they can achieve further facilitators
Outsourcing PoS Online media Mobile
differentiation and better capture niche segments
Voice price reductions (2009/10 and 2011) Software Advertising
Regulation also puts pressure on average revenue per minute acquisition of fixed internet and data providers Support IP core Media
% price reductions, lowest tariff
functions Money
• Special taxation on telecoms services has increased in some cases (e.g. Tanzania) to complement mobile voice/data and retain the Data/IT
South Africa
or is being put in place (e.g. Egypt) lucrative higher income segments, to differentiate Retailers PoS
Namibia
Senegal
Nigeria
Ghana
• Mandated declines in mobile termination rates have become steeper with businesses and achieve infrastructure
Kenya
Niger
Infrastructure
synergies
0
Whilst ARPU is pressurised, voice traffic levels continue to increase, pressuring deploying mobile banking services, as operators
VOICE
Synergy potential/
cost benefit
2009-10
10 6 5 5 4 In achieving differentiation, there is a fine line to
Cost
In 1H12 Nigeria also
the networks and calling for capacity investments see themselves increasingly as service enablers for consolidation consider between what is eligible for partnerships
20 18 17
• Aggressive discount policies and lower prices have led to significantly higher traffic all aspects of usual day life, reaching agreements strategy and what is more relevant for M&A
22 experienced almost
30
30% reductions on levels through volume-price elasticity with international remittance organisations as Source: Deloitte analysis
avg.price per minute
• Operators have been challenged to maintain minimum service levels and number well as in-country banking groups, with utility
of them, such as in Ghana, Nigeria or Kenya have breached acceptable congestion providers and with leading retail distribution
levels, sometimes leading to being temporarily barred from selling new SIMs networks
Zimbabwe
extending services to convergent media offerings,
Namibia
Ethiopia
Gabon
Congo
Libya
Togo
and partnering with content owners such as
Mali
0 DSTV or local media, with content providers (eg.
13 9
30 26
17 15 Facebook), news and search (eg. Google), social
2011
35
60 57
networking (e.g. MTN Pulse), gaming (MTN Play)
61 Price catch -up advertising partnerships to potentially subsidize
90
low income segments and tap into international
markets
Identifying the appropriate execution path is
challenging
• In most cases, there is only a small divide between
what is eligible for partnerships and what is more
relevant for M&A, often a result of the availability of
opportunities
Source: MTN Annual reports, GSMA / Wireless Intelligence, CTO 2012, Deloitte analysis
Note: 1. Voice (Airtime and interconnect), SMS & Other (SMS, handset revenues, accessories and other), Data (all non-SMS data), The Telcos’ markets includes South Africa,
Nigeria and Ghana
6 The future of Telecoms in Africa The “blueprint for the brave” 7
A transformation towards new operating Voice: differentiating and keeping an edge on
models through operational innovation tariffs whilst maintaining profitability
Operations and towers outsourcing With higher traffic levels, extended network Tariff innovation is tactical, always in focus and A never-ending downward trend on prices through tariff ‘innovation’
reach and targeted investments in new services, geared towards maintaining share, stimulating
Operations outsourcing ARPU evolution 2007-11 MVNO economics (illustrative)
the need for operational efficiency has become demand and migrating towards data – it is
Examples of recent outsourcing activities amongst African telcos Average market ARPU ($/month) (CAGR) A lean model to lead on cost? ($/user)
even greater. Sharing and outsourcing have also disruptive and has weighed dearly on
-8%
‘Lean’ model
taken centre stage profitability in recent periods. Algeria 9 12 -5%
Cameroon 8 14 -30%
$ per user
-8%
Tower site management Managed radio network Finance Service centre Increased focus on cost control, re-assessment Tariff innovation is still a core differentiation Sudan 8 19
of core areas of service value add and cost element for African telcos as they compete to Ghana 7 16
Network site security Managed services & VAS Customer Service centre
differentiation vs. non core capture niches and the low end market Kenya 5 9
-8%
Technical field maintenance Network IT Billing • In the last two years African telcos turned their focus • African ARPU levels have not just reduced because Egypt
Wholesale
call costs
‘Lean; opex
Infrastructure
MVNO ASPU
MNO ASPU
5 12
towards cost control and operational efficiency, a of reaching low usage segments but also because of Rwanda 4 13
Prepaid distribution Cash collection Branding
result of market maturity possibly accelerated by genuinely stiff price competition Uganda 4 10
acquisition of Zain by Bharti in 2010 • Differentiating on price is a core element of African
• Downsizing operations is difficult as it requires an operators tactics as markets mature and as they Selected examples of tariff innovation, Africa
reach to niches and the low end market Balancing tariff innovation and profitability
Infrastructure carve outs: Tower transactions acute sense of what can be a differentiation element
A plethora of examples today or in the future, and what can be best • Because voice remains the #1 profit contributor and
Tariff concept Benefits
achieved outside the organisation because elasticity is critically high, such tactics have
Country Owner Outsourcer Value Towers Date Flat tariffs - weekly/daily booster, unlimited • smaller package top-ups
• Typical areas where operators have focused their to be managed very carefully
tariffs pass a daily/hourly spend • stimulates usage
Ghana Tigo Helios 33 752 Jan 10
efforts have been in setting up ABC controls, • higher flexibility, loyalty
Tanzania Tigo Helios 80 1020 Sep 10 How to be both innovative and profitable?
outsourcing managed networks, site maintenance Yield benefits - Dynamic discounting based on • Yield, geographic price deaveraging/ rural
Ghana Vodafone Eaton na 750 Oct 10 • Tariff innovation aims at achieving core benefits cell usage discounts
and security, and back office functions in SSCs1
South Africa Cell-C American 430 3200 Nov 10
such as usage stimulation, securing fixed spend,
Usage stimulation: get benefits pass a level, free • hybrid approaches rather than contractual
leveraging yield on under-used assets, service call/hour/day commit.
Nigeria Starcomms Swap tech 81 407 Dec 10 Sharing has been commonplace for African telcos
bundling or securing segment niches and • ‘talk for X long, get Y free’
DRC Tigo Helios 45 729 Dec 10 but with tight margins and investments calls,
communities. Service bundling: extend beyond ‘telco’ • lifestyles, digital media
Ghana MTN American 218 1876 Dec 10 releasing value through tower deals has become • total connectivity (fix/mob)
• Whilst pricing tools vary with objectives, most tariffs
Uganda MTN American 175 1000 Dec 11 more attractive and has gathered pace Secure niches - targeted discounts • achieve attractive tariffs for targeted segment
compete on the best set of ‘freebies’ to offer (e.g.
Uganda Warid/Orange Eaton 153 694 Mar 12 • There may be c.170 000 towers in Africa, and a only
free usage, cinema ticket, wifi ticket)
Rwanda Rwandatel Airtel 16 na Apr 12
good share of them are already shared between
• Experience shows that new tariffs often have a
market players, whether through regulatory pressure Differentiating MVNO elements
Uganda Warid Eaton 60 400 Oct 12 disruptive adverse impact on markets, whether on Western Europe vs. Africa
(increasingly so) or not
Cameroon MTN IHS 143 827 Oct 12 operators’ top line or on competitors’ reaction to
• Releasing value through towers is attractive and
Ivory Coast MTN IHS 141 931 Oct 12 new pricing structures. Typical pitfalls include: Core conditions WE Afr African context
many operators have gone down this route, albeit
Egypt na Mobiserve na na Oct 12 – making tariffs available and attractive to too many Existing MVNO regulation few markets eg. SA, EG,MA
under different types of models (JV, asset sale,
Cameroon & Ivory Coast Orange IHS na 2000 Apr 13 users at once Willing MNO host network few markets eg. SA, EG,MA
operate and maintenance, co-location rights)
– not anticipating the reaction of competition as a
Kenya Telkom Eaton na 1000 Jun 13 • Four main outsource partners have emerged, High ARPU & price stability few markets eg. SA, EG,MA
war game
Tanzania Vodacom Helios 75 1149 Jul 13 Eaton, Helios, IHS and American Towers and are Differentiating distribution loose distribution structure
– overlooking the road-testing of tariffs during pilots
Rwanda MTN IHS na 524 Dec 13 consolidating tower portfolios Leaner operating model African opcos fairly lean
– overlooking side-effects, which analytics can help
Zambia MTN IHS na 704 Dec 13 Segment-specific value-add e.g. Set’ Mobile Cameroon
understand, such as socially linked consumer
Finding appropriate operating models to break the Segment-specific tariffs e.g. Econet Wireless SA
groups, implied churn etc.
rural frontier
Retail brands to leverage e.g. Virgin SA, Red Bull SA
• Reaching rural areas is a necessity for many Do MVNOs and sub-brands have a right to play? Existing MVNE infrastructure no regional MVNOs
operators willing to expand. This is no small feat as • African MVNOs make c.0.5% of MVNOs globally.
costs rapidly spiral up – for instance energy or site For many, Africa would have too low ARPUs and Apart from more mature countries such as
maintenance – whilst income levels reduce lack price stability, lack licensing or the ability to Morocco, Egypt or South Africa, Africa is a
• Super low cost models are being tested and much harder environment for launching MVNOs
differentiate over distribution or operating model
developed, e.g. Movitel in Mozambique, VNL • They are a growing area of focus though, in
in Ghana (DIY low power solar solutions), solar particular in the most developed markets such as
chargers (Vodacom) or through projects such as South Africa, Egypt or Morocco. Regional platforms
‘openBTS’, ‘the village telco’ could well develop across markets with regional
Source: specialised press, project experience, company news releases
Note: 1. Shared Service Centres MVNEs Source: GSMA, operators websites, project experience
8 The future of Telecoms in Africa The “blueprint for the brave” 9
Growth of data
Bandwidth usage, Africa
Data: banking on the (still Data demand: what are the use cases for the
International usage, Gbit/s
2007-11 CAGR
oncoming) data tsunami? new African middle class?
85%
Africa’s total bandwidth usage grew at 85% CAGR between 2007 and Consumer data demand is driven by the need to initiatives ranging from mHealth to mMoney, eGov,
2007 2009 2009 2010 2011 2011, a rate of growth beaten globally only by the Middle East. Mobile communicate, by innovative online services and jobs/cattle/crop price market monitors, weather
data now makes a noticeable contribution to operators’ revenues rich-form entertainment. There is a wide gap − Africa is a land of innovation where tech firms
Data share of revenue today between consumers’ ultimate aspirations (Nokia, Google) now locate their innovation labs
Key players, Africa only
Developing data infrastructure has been a challenge but significant growth in and existing supply
20 MTN usage is now visible Mass market adoption through middle classes and
Vodacom
Safaricom
• Developing international and national infrastructure for Africa has been a long Early adopters now consume a wide range of richer applications will continue to fuel demand
15 process involving many stakeholders in funding the development of international popular data services, accessed on mobile or fixed • Most importantly, African middle classes are rapidly
hubs and domestic infrastructure • As in other geographies data demand is driven by: increasing spend on digital entertainment
10
• Bandwidth usage grew at 85% CAGR in 2007-11 mainly driven by: − the desire to communicate with peers • Applications are getting richer. Entertainment is a
− declining prices, essentially a result of submarine connectivity − accessing data-based information and services case in point as both international and local firms are
5
− latent demand met by increased data supply − accessing entertainment in data rich formats rapidly building local content offerings (partnerships)
− increased speeds and quality of service • In the African context these drivers are compounded • Bandwidth constrained applications based on SMS
0
2009 2010 2011 2012 • Telecommunications operators are progressively evolving their business models by the impact that communications have on are aiming for richer formats (e.g. Facebook)
and network infrastructure towards data connectivity everyday life, such as instant messenger services • Many new form factors are coming to market,
(lower cost than via SMS or email) starting with more affordable smart phones (e.g.
Regional bandwidth usage
Compound annual growth 2007-11 Sustained significant growth is also expected for the period 2013-17 • Innovation is apparent and drives demand, with ‘Huwaei 4Afrika’) but also web TVs
• Cisco considers that Africa will be the fastest growing region in terms of mobile
Mid
dle data traffic and will grow by c.77% CAGR (17 fold) over the 2013 to 2017,
Ea
47% st
generating by 2017 over 0.9 exabytes/month of data
98%
a da
47%
Can
Data revenues are now an important contributor to operator revenues – the
pe Oceana US &
profitability of data now needs to be carefully though through
Driver Consumer need Example products and services
• For major players, data has already become an important contributor to total
Immediate • Communications with friends, family and • Google SMS service: allows access to Gmail via SMS; Google search gateways is
Seco
55% revenues. In 2012, non SMS data contributed 14% of total revenues for Vodacom network colleagues another popular service allowing searches through SMS
nd fa
85% and 7% for Safaricom adjacencies: • In multiple format across many different types of • MTN and Orange have each developed data light versions of Facebook (e.g.
Af r i c
Euro
st
• As data increasingly contributes to operator margins, its standalone profitability advanced platforms 0.facebook) to be accessed over low-grade mobile phones
est g
a
messaging and • Using in the first instance lower grade products • Since May 2012, Facebook is the most visited internet site in Nigeria 1
needs to be carefully thought through, from infrastructure investment cases to
58%
row
social data (e.g. 0.facebook) but rapidly moving to improved • Mxit developed very rapidly as the #1 social networking in South Africa, battling
subscriber acquisitions, beyond demand stimulation
L
at
th
ia
As 71%
in
Am communications interfaces with Facebook
rica e − building a data market is a balancing act between funding demand stimulation • Accessing local interfaces that fit African comms
through lower margins (e.g. low data prices; attractive local content online: cultures
MTN and Afrinolly content application) and making data profitable in the longer Features of new • Life-enabling services e.g. job, transport updates, • Daktari 1525 is a partnership between Safaricom and Call-a-doctor, it offers advice
Da run life and business translators and referrals (however it does not offer online diagnosis)
ta
Data share of revenue inc is lik support services & • Banking services, for the un-banked or • Mfarm is an SMS based service which allows farmers to check the real time crop
lev rea ely − this will require crafting an appropriate mix of access technologies (3/4G, Wifi,
els s information under-banked prices
Regional average clo ing o to co
ser ve nt WiMAX) and data services to grow operations in a profitable way • eGovernment services such as health services, • Citizen TV (Kenya) is one of many African news channels available also emitting on
oth to t r tim inue
er h e
MEA ma ose s , to for those unable to reach advice You Tube for online information access
rke e
Lat ts en in • Small business support services such as • Voice of America keeps Nigerians up to date with an SMS based news service
19% in Agricultural services, to access crop price or
A
weather information
m
61%
eri
26%
ca
A strong desire • Digital entertainment in its widest possible • YouTube partners in South Africa, Nigeria, Kenya and Uganda with content
E
. Eu
n
for media form, delivered to individual homes or directly providers such as Nollywood Love and Lagos TV for local offerings
Japa
rope Asia & Pacific
entertainment in individuals rather than through collective access • New form factors are emerging, from smartphones apps (e.g. MTN Afrinolly) to
rich format • Wider offerings, currently not met/distributed by simple low-cost connected web TVs such as Vodacom’s ‘Webbox’
28%
local television or other media • Traditional forms of entertainment such as pay-TV remain strong, in particular
• Catch-up trend of African population towards Multichoice, distributed over several platforms: satellite (DSTV), online (M-Net) and
non linear online entertainment services mobile (DSTV Mobile), typically through partnerships. It faces hard competition,
47% although alternatives (e.g. Top TV, GTV) struggle for share
32%
ca
40%
ri W.
me rop Eu
N. A e
Source: Gartner Mobile services Worldwide, 2012Q4
Note: MTN markets are SA, Nigeria, Ghana. Vodacom, SA (82%) also Tanzania, Lesotho, DRC, and Mozambique Source: Telegraphy 2012, ITM Broadband in Africa 2012, company websites, annual reports, (1) Open Society country profile
10 The future of Telecoms in Africa The “blueprint for the brave” 11Data demand: what are the use cases for Data supply: unleashing International infrastructure investments
International sub-sea cable
African Businesses? international connectivity Projected connectivity in 2014
to fuel growth
Demand for managed data has grown rapidly across Africa. Rapid ICT growth, initially fuelled by demand for traditional IT is Once a bottleneck, international sub-sea cable and satellite connectivity
Operators have expanded the richness of connectivity and now supported by the need to grow rapidly, keep costs low and have significantly improved, bringing costs down and helping to bridge
IT offerings, whilst getting on board and framing the SME remain flexible the digital divide between Africa and the rest of the world Sub-sea cable has reduced costs
Monthly USD subscriber
cloud opportunity • Companies providing traditional IT services such as web hosting,
web agency services and IT support have grown very rapidly in International connectivity remains the lifeblood of data offerings The arrival of a sub sea
African operators have formally branched out dedicated recent years • Most data connectivity is for content (whether consumer or business) that is still cable has the potential
to more than halve the
business units to focus on SMEs • Many successful African businesses are faced with a shortage of IT located outside of Africa; and international connectivity can typically make a cost per subscriber for
-53%
• Specific offerings for businesses and corporates have always existed skills whilst pre-packaged end to end solutions are available. This significant portion (up to 50%) of the price of fixed broadband broadband
but in the course of 2010-2012, the richness of the data and ICT triggers a rapid shift of basic functions outsourcing • There are two elements reducing the need for international data but both are only
offerings to businesses has dramatically improved • Cloud solutions are increasingly popular, in particular services nascent and for now fail to reach scale:
-87%
• This is in part due to the skills and efforts put in by operators into that provide best practice business support tools at low costs, − local exchanges (IXP) allow direct traffic routing locally. There are c.20 in Africa but
business-focused operations over recent years supplanting the need to buy software and run internal teams co-locating carriers is hard. West Africa lacks local peering
A c.10 fold
• Connectivity offerings, in particular in urban centres, have now • In a very dynamic African business environment, the need for − more content is developed locally and African populations are avid of local reduction in
reached a level close to the refinement and grade levels traditionally flexibility and scalability is acute content. This remains small in comparison to international offers international
Via Satellite Via sub-sea connectivity costs
seen in more developed economies (pre-sub sea cable
The launch of a handful of key sub-marine cables around the African contour launch)
Driver Business need Example products and services has triggered a rapid price drop and mass (coastal) availability Int’l connectivity cost
• Between 2009 and 2012 a handful of cables launched on the Eastern (EASSy, Other costs
Immediate •A wider breadth of connectivity needs beyond • The portfolio range varies significantly by telco
TEAMS, SEACOM) and Western (Glo-1, Main-1, ACE) coasts of Africa, triggering
network simple broadband • Dedicated or shared satellite, fibre, DSL, mobile links between sites
an almost 90% drop in international data costs at launch An example: SES Astra
adjacencies: -higher bandwidth (Fibre) • Innovation in dedicated managed network solutions including backbone, African satellites
• By 2014 a new generation of cables directly connecting to the Americas
going beyond - managed data (MetroEth.) mobile access points, inter-site backbone links, managed VPN, mobile fleet
(WASACE, SACS, Sa-ex) and Asia (BRICS) will have launched and further accelerate Satellite Position Payload Launch
business basic - secure comms (VPN) management
the phenomenon, bringing the number of cables to c.20 NSS-703 47°W C & Ku Oct 1994
connectivity - mobile solutions (APN, M2M) • Innovation in billing (forward or reverse to employees of a specific business)
• Satellite connectivity costs have also dropped as a result. New satellites were NSS-5 340 E 64C / Ku Sep 1997
services - integrated communications (email, IM,
launched in 2012 and are now planned for 2014 (e.g. SES Astra)
hosted VoIP) NSS-7 338 E 97C / Ku Apr 2002
• For market players, the ability to derive a competitive cost advantage from better
Developing ICT • Support the growth of internal IT needs • Panda security offers South African cloud based antivirus based on a NSS-10 322.5 56 C Feb 2005
access to data has the potential to be disruptive (sub-scale units)
offerings to: beyond connectivity freemium model ASTRA 4A 5E 40 C / 6 Ku Nov 2007
-meet internal IT • Includes dedicated housing space, managed • Afrihost provides a full suite of dedicated and managed hosting services, NSS-12 57 E 88 C / Ku` Oct 2009
A tipping point: lower international costs could bring the price of data
needs storage, basic IT software needs, e.g. security, domain management. It has partnered with MTN to provide data access and SES-4 338 E 52 C / 72 Ku Feb 2012
offerings below the critical $15/month level for the middle classes
-develop external mail management hosting as a bundled service SES-5 5E C & Ku Jul 2012
• As an example of lower price levels, a $30/month subscription could potentially
digital interfaces • Digital agency capabilities including • Web Africa is an African website hosting service
reduce by over half to c.$15 if data is sourced by sub sea cable ASTRA 2F 28.2 E Ku & Ka Oct 2012
developing business interfaces with • FaxFX is a leading South Africa services provider in faxing solution platforms
• In many African countries a $15/month price level can often be associated with ASTRA 2G 28.2E Ku & Ka Q1 2014
customers, distributors and suppliers, for business. The business also offers a free fax to email service
the beginning of mass adoption, in case price reductions are passed on to the
covering website design and development, • Woza online is a Google initiative with the South African government to help
consumer
web hosting get SMEs online An example: SES Astra coverage in Sub Saharan Africa –
Innovation in • Functional support, growth and scalability of • Zoho.com is an online cloud based service which provides business with a Ku band1
new hosted IT functions, ‘variabilisation’ of IT costs suite of business software at low cost
2007 2009 Feb 2012
business • Outsourcing needs for a basic set of functions • MTN Cloud services were launched in December 2012 in a number of West
functions and (admin, HR, CRM functionalities) African markets; it provides a full suite of cloud services as business function
virtualisation • Innovation vs. traditional Western world enablers to SMEs and corporates
cloud based solution to cover for instance • Vodacom is partnering with CloudWare to also offer a wide range of almost
Desktop as a Service (‘DaaS’) off the shelf cloud based software solutions, which can be rapidly deployed
• eCommerce solutions across its existing SME customer base Jul 2012 Oct 2012 Q1 2014
The service catalogue can be wide: collaboration portals, document management,
process designer, IP telephony, unified comms, email, CRM, report designer, subscriber
analytics, sales force applications, SAP, Oracle, payroll, HR, procurement, logistics,
accounting, firewall, backup, remote desktop
Source: SES Astra marketing, Analysys Mason 2012
Source: Company websites, Annual reports, Balancing Act, Telegraphy, MTN Notes: C-band access is widespread across the continent, due to wider beams and better signal propagation
12 The future of Telecoms in Africa The “blueprint for the brave” 13Data supply: domestic infrastructure sharing, Data supply: data access networks are
acting as a catalyst ramping up, but slowly (a costly process)
Growth of data Many countries still lack a national telecommunications backbone to Urban centres are seeing widespread availability and increasingly stronger Deploying deeper voice and data access
deliver high speed data to their populations and businesses; these are competition. Data coverage outside major centres remains limited; networks
National infrastructure initiatives
getting into shape, whether through public or private initiatives operators highlight costs as the key limiting expansion factor
Example of private infrastructure initiatives in Southern Africa
Typical Telco, GSM/GPRS/3G Network coverage
2G and 3G coverage vs. population density, 2010 and 2012
2012: MTN, Neotel, Vodacom Further investment in national backbone infrastructure is still required to Data network access and mobile broadband offerings in urban centres is
join forces for national fbre deliver high speed broadband access deeper within each country becoming increasingly widespread ... and competitive Population density 2010 coverage
• Whilst many African countries have benefited from access to sub-sea cable, only • Whilst 2G coverage is increasing slowly in-country, 3G coverage typically remains
few of them have the in-country national infrastructure to deliver this throughout confined to main urban centres, where the more affluent smartphone users are
their country to domestic regional hubs currently broadly located
• Domestic connectivity is often achieved through strings of micro-wave towers • Many technologies and data offerings are competing: mobile data (3G/4G),
and satellite connectivity, which are sub-optimal to carry large amounts of data WiMAX, proprietary FWA, satellite, fibre, fixed DSL, or fixed cable in some cases,
without incurring incremental investments. each with their own benefits and target segments
Coverage
• Many operators are taking a multi-technology approach to reaching their 2G
Infrastructure sharing initiatives, whether private or public, are acting as subscribers (e.g. both 3G and WiMAX; or cable and data). In doing so, they 2012 coverage 3G
market catalysts. They need to remain consistent with wider policy making need to remain agile, to run converged core networks and keep a close eye on
• Investments are being made by the private sector and by governments in technology cost control.
developing voice and data infrastructure, often through fibre sharing. An example of
• In doing this, national utilities have a key role to play in commercialising existing Outside urban centres, access to data remains limited population pockets
that are hard to reach
infrastructure, whether ducts, poles or actual fibre. This has been the case in many • Mobile data coverage is used also for fixed nomadic internet access and plays a
geographies, e.g. in Tanzania (TANESCO) key role in developing data access in less urban areas
Coverage
• The development of cross-country backbone infrastructure needs to be consistent • Further expansion will happen in time but operators face a high cost of expansion:
2G
with wider development initiatives, e.g. access to electricity insufficient backhaul infrastructure, limited power supply, lower demand from 3G
lower density and lower smartphone penetration, making the economics of
Recent LTE launches
If there is a role for public institutions to foster growth in underserved areas expansion rapidly challenging 2012 (not exhaustive)
and address areas of market failure, then what is it? • Operators need to identify alternative operating models for rural expansion.
• There exist many models for infrastructure sharing and in all of them public Company Country Date
institutions can play a key role, either by directly taking part in the commercial/ 3G or not 3G? LTE or not LTE? Neotel South Africa Mar 2012
operational construct or through shaping and influencing • Some countries have already launched LTE but coverage remains limited. Whilst Movicel Angola Apr 2012
• A number of regulators have decided to enforce infrastructure sharing through LTE provides higher speed, wider coverage (when sub 1GHz) and cost efficiencies, MTC Namibia May 2012
policy (e.g. mast sharing, urban duct sharing), such as in Ghana or ‘heavy’ it could still lack a mobile device base for some time Mascom Botswana Jun 2012
regulatory moves (public infracos, functional separations) • As a fixed/nomadic broadband alternative, it is however very attractive. Mobile Telesis Tanzania Oct 2012
• As private initiatives gather pace and as data becomes paramount to the private broadband now surpasses fixed broadband in many markets (eg. SA) Vodacom South Africa Oct 2012
A range of potential constructs for infrastructure sharing sector, the role for public intervention may have to be redefined • For operators not having launched 3G, the temptation is high to leapfrog directly
Cell C South Africa Dec 2012
to LTE (at least for combo sites) but the downside of not allowing data access to
Airtel Nigeria Dec 2012
Method Description Example the rapidly growing smartphone device base can be high.
Asset sharing Share between operators a number of identified assets, on 1:1 or Operators in Ghana agreeing to co-share ducts; tower sharing in
rent basis Kenya Expansion challenges faced by Telcos
Percentage respondents giving 5/5
Private
Sale and lease back Identified assets are sold or transferred to a consolidating 3rd party Most towercos (Eaton, Helios towers) in many sub-Saharan
for management, then leased back to the former owner markets. Fibre swap deals in Kenya (e.g. KDN) Cost of expansion 55
Joint ventures Better control in carve-outs through JV; allows external funding; MTN tower sales; world bank funded multi-operator fibre venture Insufficient backhaul 40
allows to share future investments in underserved areas in Burundi; tower agreements in rural areas Cost of retail bb services 37
PPP contracts PPP contracts between telcos and public sector, built as service Government bulk capacity purchase in Rwanda; BOT in DRC Cost of int’l b/width 31
contracts or BOT1
Low PC penetration 27
Public
Public infracos Independent public led structures to roll out services where private Sierra Leone: Salcab; South Africa: Broadband Infraco Ltd handset affordability 18
is unwilling
Insufficient int’l b/width 18
Functional separation Incumbents are split into operationally separate entities to facilitate Proposed functional separation of Telkom in South Africa by the Lack of radio spectrum 16
retail competition at arm’s length government
Insufficient demand 12
Source: SSA Observatory 2012, ITM Broadband in Africa 2012, all launch data from Telegeography
Note: Survey conducted online in July 2011, targeted list of C-level industry professionals. 46% of
250+ respondents were mobile, fixed or converged operators, ISPs (16%), vendors (14%) and content
Note: 1. BOT: Build, Operate, Transfer providers (7%)
14 The future of Telecoms in Africa The “blueprint for the brave” 15A growing ICT sector rapidly getting into shape
Estimated size of the ICT enterprise services
IT services: a rapidly Mobile money: getting on Mobile Money: fast growth but hard to break
into on your own
market 2013 – c.$9b
changing competitive to the next phase M-PESA customers and revenue
FY09–12, Safaricom
landscape in a rapidly (maturity)
25 16% 16
Customers
MPESA revenues vs total
20
growing market
12
11%
15
8% 8
15
10 14
4% 9 4
5
IT maturity follows improvements in data connectivity. Most telcos have Almost all mobile operators now have a mobile money offering, although 6
recognised the opportunity to expand in IT services and are making the IT not as successful as M-Pesa of Kenya. Delivering more mature mobile
0 0
service provider landscape more competitive as a result banking services is what telcos may now be looking for 2009 2010 2011 2012
$200m
African ICT remains under-developed and suffers from poor access to Mobile money is an attractive diversification opportunity already well proven Mobile phone used to send money
electricity, low PC and broadband penetration – Those barriers to growth are in Kenya. Almost all mobile operators in Africa have now launched one flavour Percentage aged 15+, 2011
reducing as demand increases and suppliers adapt but success is taking time to replicate
100 The success of mobile money in Kenya, both in
• African states are developing e-government and e-education; SMEs are seeking • For Safaricom, M-Pesa contributes 18% of revenues, more than data (7%). In urban and rural areas, is yet to be replicated
online advertising, e/m-payment, admin outsourcing services and digital 2010 it contributed to 35% of incremental revenues 80
82
IT readiness: crucially, still dependent on availability of commercial front-ends; multinationals set up in Africa continue to seek global • Most African operators have launched mobile money paradigms: beyond A recent success: 48m
basic communication layers
standard data/IT services revenues, it creates stickiness and value of the end user 60 58 transactions pcm in 2012
compared to 1.9m in 2010
• Service providers are deploying hubs and data centre capabilities across the • The success of M-Pesa in Kenya remains unique: over 80% of adults in urban areas
Cloud based services 40 37
continent. Countries where BPO are well established (Morocco, Kenya) have have used mobile phones to send money in 2011, vs. 37% in Tanzania,18% in 31
IT requirements and maturity
Traditional data centre
developed data centre infrastructure for some time. South Africa may already have Nigeria and only 7% in SA 20 18
20
100,000 sq.m floor space 11 8
5 7
Managed data Multi-party cooperation is an art – identifying the appropriate partners to 0
Kenya Tanzania Uganda Nigeria South
There is now a wide range of players with very different strategies to achieve both individual strategic ambitions and overall market growth for Africa
Basic connectivity capturing IT opportunities mobile money is challenging
• Small business-focussed data access providers and resellers have existed for over • Mobile money typically involves many stakeholders, from mobile operators to Example cooperation models for mobile money
Voice communications a decade but are now facing high data costs (from low scale), miss a competitive retailers, utilities, employers, banks, consumers and crafting an appropriate partner
Mobile • M-Pesa: leading mobile payment service in
edge as new technologies become available, and finally require more investments selection programme is crucial carrier Kenya
Business adoption level (e.g. data centre) • Regulations dictate what mobile money services can be provided, how and by solutions • Tigo cash: payment service deployed in Tigo
• Some data providers now seek regional expansion e.g. (Ecoband, MWEB, iBurst, whom, and therefore influence cooperation strategies. geographies
• Airtel money: mobile payment service in
Data centre workload growth, MEA
Suburban) as data demand remains strong Airtel geographies
Workloads, million • Some telcos have looked to partner with focused ISPs or else have tried to buy There could soon be a next wave of more mature mobile banking services: • MTN: deployed in Uganda, Cote d’Ivoire,
them (e.g. Safaricom ISP acquisition trail in Kenya) mobile-only banks, micro-finance, mInsurance Rwanda, South Africa
• There is now a need to grow a wider range of mobile banking and insurance Distribution • M-KOPA: prepaid solar power paid through
Cloud alliances M-Pesa in Kenya
Cloud solutions are expected to grow rapidly in Africa and data centre services on mobile phones, beyond simple payments. To achieve this, different with • UCHUMI: Retail chain using M-Pesa
Traditional x5
11 facilities are developing rapidly in the hottest urban centres models may need to be put in place. utilities and payment in Kenya
• Cisco believes MEA will be the fastest growing region for datacentre workloads • Banking could take a new shape with mobile-only banks such as TYME in South retailers • NWSC: in Uganda, water bills paid through
Airtel, MTN money
7 and that Middle East and African data centre workload will be multiplied by Africa (MTN, SABA, retailers Pic’n’Pay and Boxer) • Multichoice: pay-TV top-up via M-Pesa
5 almost 5 between 2012 and 2016. • Micro-finance products could be further enabled by mobile, e.g. in Nigeria (cloud
Alliances • TYME: partners with Pic’n’Pay and SABA for
2 3 • Beyond a simple ‘catch-up’ effect with Western Europe or North America, based micro-banking software from MTN) with a mobile-only bank
1
this trend is also accelerated by the comparative lack of IT skills within African • mInsurance (e.g. MTN group agreement with Hollard) financial • Mshwari: Safaricom and CBA on deposits
1 2 3 4
institutions and loans
businesses, making the case for outsource business functions through cloud even
• BNP Paribas: Partner to Orange Money
more attractive service in West Africa
2011 2012 2013 2014 2015 2016
• M-Pesa SA: Partnership Vodacom/Nedbank
on mobile money
A competitive provider landscape for data and IT services
Financial • Wizzit: Subsidiary of Bank of Athens,
institution provides mobile banking in South Africa
• Focused business data players with regional/multicountry
solutions with ABSA and the SA Post Office
presence (Connecteo)
• Standard Bank: acquired MTN banking
• ISPs with services for both consumer and business segments
business in South Africa
(Access Kenya, Ringo)
• FNB: eWallet service delivered as a mobile
• IT solutions integrators and consultancies (Tata)
application in South Africa, can also be
• Mobile operators, with clear IT ambitions (MTN)
used with FNB ATMs
• Fixed telecoms incumbent with existing business customer
relationships (Telkom SA)
• Wholesale data providers with retail ambitions (Liquid Telecom,
Suburban Telecom)
• International cloud solutions providers (IBM, BT)
• Data centre players (e.g. Teraco, Dimension data)
Source: Safaricom annual report 2012, AfricaNext 2010, CGAP “Drivers of Mobile Money Profitability” 2011, “A
Source: Cisco Analysis 2012, Deloitte analysis Review of Financial Inclusion”, Teleography, Global Financial Inclusion (Global Findex) Database, Deloitte research
16 The future of Telecoms in Africa The “blueprint for the brave” 17Media services for the African middle classes:
TV, and then? (million households) Media: how to make Mobile advertising:
Sub-Saharan TV households
2012-2018 middle classes enter a set to grow
mobile digital age?
50 2
4 A mere 11m
more pay-TV
40 households in
SSA by 2018
26
30
26
20 Analogue
2
8 DTH FTA
10 3 DTT FTA
2
11 DTT Pay
7
0 DTH Pay Mobile advertising: made possible by
2012 2018 Telcos have successfully taken a more traditional dual-pronged owning/ Mobile advertising is maturing in many markets globally as a powerful
smartphones and set for very rapid growth
partnering approach to content delivery. They are now succeeding in and direct advertising medium. The specificities of the African continent
SSA TV households vs. the African middle-class1 bringing digital media experiences to the next tier of the middle class could make it even bigger for African telcos – up to $1.3b by 2016 Smartphone handsets in circulation forecast
(indicative) 2010 – 2016, South Africa only
African media : highly fragmented and complex but changing fast through Global advertising spend is shifting to emerging markets and to Africa in
digital/mobile engagement and talented local creation particular as the next frontier of global consumers 20 Smartphones
20 80%
Share of phones 18
53 • A wide range of cultures and legacy local media makes the African media • Mobile phones are the most ubiquitous personal technology in Africa; phones are
2012
40 36 15
landscape very fragmented – a challenge for the largest scale media operations a powerful, albeit intrusive, advertising media 15 60%
million people
13
such as Multichoice (DSTV) • The African mobile advertising market could be worth only $136m1 in 2012 but
10
What mobile • Modes of content delivery are changing fast, from analogue state or regional TV it could be supply-constrained rather than demandconstrained – it could possibly 10 40%
8 33%
media offerings and radio broadcasters and newspapers, and DTH, to DTT (albeit slowly), mobile increase to $1.3b1 by 2016 30%
105 26%
for the next 5 5 22%
20%
middle class tier VAS or fixed cable/IPTV triple-play − advertisers, both global and local are delivering mobile ad campaigns and want 13%
17%
8%
• Content creation is shifting from international or South Africa to more local hubs more of these in particular in Africa. Firms like Unilever, Coca-Cola and Reckitt-
0 0%
that are developing fast (Nolly/River/Zolly-wood) and African populations are avid Benckiser are committing increasing ad spend levels to the continent 2010 2011 2012 2013 2014 2015 2015
63 of such locally-relevant content − however the infrastructure typically does not support advertising medium
2018
51
42 beyond urban districts and African consumers are overall very hard to reach with Digital advertising spend
South Africa only, 2011 and 2016
Media for the middle class: strategies for top and bottom any type of focus, in particular the next tiers of the African middle class
Floating class • The top: enjoys premium entertainment through a variety of channels, triple or • Some stakeholders are getting organised, USD million
Other middle class quadruple play offerings and multi-screen experiences – needs to be retained − global agencies buying into Africa, rapidly developing affiliate networks; mobile
TV households 63
2011
• The rest: mobile broadband –enabled phones as first ever screens, before TV or ad networks and mobile agencies
13 x11
PC. Simple VAS are enjoyed on the small screen and are a stepping stone to more − mobile browsers, such as Opera, are deploying advanced solutions for search
Telco’s right to play in content enriched experiences – needs to be convinced to spend on media and charged a and display, in line with online 219
2016
Own, partner or let go?
low fee (sub $10 or15)
147
Telco-led • Continued investments in portals and Smartphone era and the role for telcos Mobile advertising
content mobile TV (e.g. in SA) In developing media experiences, telcos need to strike a careful balance • Smartphones represent only a very small proportion of phones in Africa, apart spend growth:
offerings • Platforms help telcos develop their VAS and 63% CAGR to 2016
between core and non-core, and owning vs. partnering from leading markets such as South Africa (17%). But this will increase rapidly,
content offering, e.g. Comviva for the VAS
technology, Baidu and Opera for browers or • core skills are local market knowledge, technology adaptation and integration, possibly faster than most expect, through the grey market (e.g. second hand
Mobile advertising in Africa: emerging roles
Spice for the exclusive African local content multi-format delivery, devices, promotion of content (app stores) as opposed to phones from WE and ME) or low-cost smartphone initiatives (e.g. 4Afrika:
Content • Telcos are working with content partners to content creation or aggregation, albeit if the latter needs to be kick-started (e.g. Microsoft, Huwaei)
Advertisers • Unilever and Coca-Cola have stated for a
partners make their content available on mobile, the app incubation centres) • For telcos, in may be imperative to develop a structured approach to marketing long time that they have a strong focus on
range is very wide
• Many local television programmes are • there are many opportunities for telcos to define seamless customer journeys, for their valuable digital assets, for instance through a consolidated platform (e.g. growing in Africa
• Many other brands want to reach African
doubling up online and delivering content instance through adapting digital apps to low connectivity (0.facebook); multi- WEVE in the UK), advanced analytics or controlled portals and browsers (Baidu)
populations
over YouTube (Lagos TV, Citizen TV) screen (add mobile to an existing media offering); hybrid TV and wireless models
• Applications are adapted for low Advertising • Ogilvy Africa was launched in 2012 with
connectivity (0.Facebook) (possibly with DTT) agencies Scangroup
• AdVine is a leading South African sales
Media-led • Canal+ launched dedicated African
agency
content channels (+d’Afrique)
• Media Reach is the Nigerian affiliate of
offerings • Multichoice launched DTT channels GoTV in
OMD
2011
• Chinese StarTimes also launched DTT Mobile • Opera is a leading mobile browser used in
platforms in Africa advertising Africa; it recently acquired 4th screen and
• Scale is critical for media distributors (e.g. networks, Mobile Theory
GTV, HiTV) tech providers • France Telecom is developing an African-
and browsers specific mobile browser with Baidu, the
The media graveyard: Chinese browser
• HiTV (Nigeria) failed to secure football rights and closed
Mobile • Vodacom runs an opt-in mobile ad service
• GTV collapsed in 2009, failing to achieve scale rapidly
operators (AdMe)
• Smart TV (Swedish DTT venture) exited Kenya and Uganda
• MTN runs ad platforms in South Africa and
Nigeria
• Tigo runs targeted ads and discounts for
subscribers
Source: Annual reports, Investor presentations, Balancing Act 2012, Digital TV Research 2013 Source: BMI-T, MTN, Bloomberg, Mobile Marketing Awards 2012, company websites
Notes: 1. Middle class: above $2 per day Note: 1. Informa Telecoms and Media 2012
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