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Mobile communications for socio-economic growth Africa

Ahmet OzalpIssue:Africa and the Middle East 2009
Article no.:4
Topic:Mobile communications for socio-economic growth Africa
Author:Ahmet Ozalp
Title:CEO
Organisation:Telenity
PDF size:186KB

About author

Ahmet Ozalp is the CEO of Telenity; he has nearly two decades of experience in telecommunications, wireless and digital media industries, as an executive, technologist and investor. Most recently, Mr Ozalp was a Partner at Atlas Venture, an early stage venture capital firm, where he focused on investments in telecommunications, wireless and digital media. Previously, Mr Ozalp was Vice President of Marketing at Narad Networks, a broadband access and cable infrastructure company acquired by Ciena, a consultant for Bain & Company, a capital market strategist with Goldman Sachs and Director of Engineering at NewNet (acquired by ADC Telecom) where he had started his career as a software engineer. Mr Ozalp has had several article published and holds two patents in wireless communications and advanced intelligent networks. Ahmet Ozalp holds an MBA degree from the Wharton School at the University of Pennsylvania, an MS in Electrical Engineering from Columbia and a BS in Electrical Engineering from Bogazici University.

 

Article abstract

The African telecommunications market has only become important to vendors in recent years, because of Africa’s geography, largely rural populations and high cost of fixed telecommunications infrastructure. Telecom vendors entering the market, often use integrators and local representatives, but continue to sell the same solutions as in their home markets and not solutions developed to meet African needs. A vendor’s home office staff needs extensive, on-the-ground, experience in Africa to develop products and services that truly meet the continent’s varied needs.

 

Full Article

Africa has always been perceived as a growth market with great potential. Its mobile phone industry is growing at nearly double the global rate; this, and a wave of consolidation and heated competition within the region, is attracting new investment. Yet, for all its growth potential, Africa has not received real, practical, attention proportional to the ongoing discussion of its potential. The global economic crisis has shifted from a half-hearted attitude towards investing in Africa to budgeted and well staffed business plans in support of various African markets. As software and hardware vendors, system integrators, business consultancy groups and managed services providers struggle to find new opportunities in their comfort zone markets, they are forced to look at Africa more closely. The trouble comes from trying to push existing products and services designed for different markets into Africa as vendors struggle to make up revenue lost elsewhere. The region needs products and services geared to its own necessities and preferences rather than become a complimentary market for excess capacity. For example, rural areas in Africa need remote data collection on healthcare, education, agriculture, business, banking, finance and government. There is a need to bridge this gap, enabling wider access to mobile communications in Africa. To achieve this, vendors must establish real relationships in Africa. This is required not just for sales and marketing, but at all levels of a vendor’s organization. Support engineers and deployment engineers must be trained to do business in Africa, both remotely and locally, so they can react with the same efficiency as they would in other world markets. Remote offices, or partners in Africa with local staff trained at company headquarters appears to be a nice solution, but may not be sufficient. To really service the needs of their African customers, vendors must expose their headquarters staff to Africa. It is only that way that a vendor can make the transition and become a trusted name and partner in Africa. Anything short of that, Africa will continue as another number within the EMEA sales figures - and managers will question whether their operations in Africa are worthwhile. Once vendors truly commit to Africa, they end up learning both how to develop products for Africa and how to service customers in Africa. Rather than bring products from other markets to Africa, they will develop products for Africa and may consider doing the reverse and selling them in other markets, where applicable. Take mobility and untethered communication as an example. Virtually all operators drive revenue from basic voice and text messaging services. Africa’s telecommunications market is dominated by wireless given the shortcomings of its landline infrastructure, and Africa’s mobile market, the fastest growing in the world, has a very low (35 per cent) mobile penetration rate, and an extremely low average revenue per user (ARPU) - this means there is still plenty of room for high growth in the future. In such a market, operator revenues can still grow tremendously simply by increasing call completion among existing subscribers and adding new subscribers to the base. A next wave of growth certainly will follow patterns seen in certain more developed markets such as India which is quite similar to Africa in its socio-economic diversity, its vast range of purchasing power - from high to low, and educational levels. We would anticipate greater use of data services in regions where SMS is not so dominant, enhanced services such as location based or video driven services, and personalization services. Obviously, the need for basic services in Africa is still largely unsatisfied and that the growth potential for enhanced services is largely untapped. So, going back to how the vendors should approach Africa, it appears reasonable to address first things first and provide better support for basic services. In a user community where prepaid callers are abundant, credits for outgoing calls not to be taken for granted, developing services to increase call completion builds revenue. There are primarily two main ways to increase call completion: supporting outbound calls through services such as ‘collect’- receiving party pays - mobile calls; and helping inbound calls through intelligent call routing so that a call placed has the greatest possible chance for completion. Such basic services may not stir much excitement on first glance, but are precisely what the African operator needs to drive greater revenue with their existing infrastructure - without waiting on social and economic trends to develop new revenue sources. Another factor in the African mobile market are the restricted capabilities of most handsets. By 2014,the Africa and Middle East region is expected to account for the largest annual shipment volume of low-cost handsets - with predicted sales of 166 million, representing 24 per cent of all sales that year, up 54 per cent compared to 2009. With cost of service and handset restrictions in mind, the interaction of subscribers with their service providers should avoid live operator assistance to keep costs down. Services such as balance checks on prepaid accounts, balance refills or balance transfers should be easily accessible and, despite the restricted handset, without the involvement of a live agent. This calls for the greater use of service channels such as the Unstructured Supplementary Service Data (USSD) channel and back end operator support for it through USSD browsers. This service channel may be used for other push-pull applications such as content purchasing, special day greetings to friends and family, tele-voting, call me back, etc. Once immediate needs are addressed, high bandwidth data services are the next critical priority for Africa’s overall development. Indeed, there is no need to follow a sequence here, so, subject to operator capacity, 3G services can be pushed concurrently. High bandwidth mobile data access is critical because as the most cost effective, most widely disseminated, access method it has the greatest chance of connecting Africa’s masses to the Internet. PC-penetration rates remain low and the initial costs for a PC are high. These factors define the mobile phone as Africa’s best tool to access the Internet. Given Africa’s lack of fixed line infrastructure, 3G mobile broadband technology seems destined to become the continent’s Internet delivery mechanism of choice. Over the long term, Africa’s social and economic indicators arguably stand to benefit from 3G-based services more than any other region. In search of new revenue streams, operators need to move quickly to adopt convergent networks and services such a value-added content, data and multi-media services in addition to their basic voice offering. The use of picture messaging, ring-tones, ring-back tones, video clips, location-based services and a wide array of data offerings will soon spread across the continent. The growing complexity and delays in time-to-market for new value-added services is creating a need for a common service delivery approach such as Service Delivery Platforms (SDP). SDP allows operators to offer variety of services to different subscriber segments easily and cost-effectively by eliminating long development cycles, cutting integration and operational costs, and providing rapid service launch capabilities. The next area for vendors to look at - again from the viewpoint of doing things designed for Africa - is business consultancy. This requires the vendor’s ongoing presence in Africa. This, preferably, will be via local offices, but with frequent, on-the-ground, support from headquarters staff that truly understands the unique aspects of the African operator. It takes an experienced team that has direct exposure in Africa, a team that itself has completed projects - rather than using a local integrator - before a vendor can claim to have reliable credentials. Only direct experience in Africa can educate vendors about the widely varied needs of local African markets. It is misleading to speak of Africa as a single market; those who do lack an appropriately granular understanding of the continent’s markets. One cannot easily compare Africa with the Middle East. Although, Middle Eastern markets certainly have some segments that are similar to African markets, they also contain sizable segments that are not. Handsets and popular services in the Middle East cover a wider range of capabilities and Middle Eastern markets are complex in different ways than those of Africa. Business practices in the Middle East and Africa are also different in their own ways. Many vendors now recognise the strengths and potential of Africa’s markets vendors and are devoting their time and resources to meet the market’s needs, they should understand that Africa is not an extension of their other markets, but has its own unique needs. Meeting these unique needs requires on-the-ground presence in Africa - primarily from headquarters staff - so all levels of the vendor’s organisation can develop an understanding of the African market. Vendors must continue to address the need for traditional products and services, but the greatest economic and social benefits will come from providing high bandwidth data services. In this respect, 3G mobile networks are likely to provide African users with the best access to the World Wide Web. Industry analyst expects Africa will reach around 324 million mobile subscribers in 2009; by 2013 the total should grow by 67.8 per cent to 543 million.

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