Worldwide, the traditional telecom industry has witnessed traditional revenue streams shrink but as the industry seeks further development and growth it’s turning its attention to Africa.
The mobile revenue in Africa is predicted to grow to $68 billion by 2022. While voice revenues in all likelihood will be flat as cheaper OTT services remain popular among cost-conscious customers, mobile broadband and digital services revenue are all predicted to double over the same period. The pressures on conventional revenue streams have started an industry-wide push for innovations that can utilize the massive infrastructure and data most telcos possess.
In the context of Africa, some new influences are visible and some of the same conditions apply as do in the rest of the world.
Modern customers want greater convenience and enhanced experiences and are open to engaging with their service providers via increasingly complex omnichannel initiatives. ‘Sculpting customer experiences’ is the mantra today. Providing connectivity and digital access remains the essential part of the telcos’ offering, but there’s so much more for them to do now and plan for in the years to come. As technology evolves rapidly, ubiquitous connectivity will become table stakes and the game will be all about what more can telcos offer?
Innovation-fed transformation across the telecoms value chain is driving African telecom operators to plan for these new value propositions. Digital technologies have brought several new aspects to light. The growing ubiquity of smart devices has catalyzed customer demand for new services and increasingly personalized experiences. New entrants intensify competition creating downward pressure on pricing, and regulations are becoming stronger. To maintain a competitive edge and relevance, telcos must look for newer ways to differentiate themselves, get and hold customers, and power top-line growth.
Investing in digital technologies will be fundamental to build a new foundation for growth, enabling the digital revolution across multiple industry sectors, and amplifying access to connectivity to power socio-economic advances in the continent.
There are four aspects where investment in digital technologies will be particularly valuable.
- Networks of tomorrow
- New digital offerings
- Reimagining customer engagement
- Bridging the gap in innovation
For African telecom companies, the ‘new’ journey will be a harmonizing act: they need to safeguard their primary offerings while rotating to the new—identifying, developing, and releasing new digital offerings — to drive revenue growth.
While African telecom companies are looking to contain costs, they are also seeking revenue growth. Utilizing its large customer base, each telecom company has developed diversification plans based on data services, digital services, mobile money services, and Value Added Services (VAS).
Mobile handsets are perhaps the leading sources of individual customer data available currently. Telcom companies are at the forefront of data custodianship as subscribers use various data-generating apps and services connected to their mobile devices. These present considerable opportunities for telecom companies to mine enormous amounts of individual customer data, build complex and multidimensional customer profiles, and develop individualized customer offers and experiences to deepen brand affinity and increase wallet share.
Africa’s data revolution is rolling in full swing, and telecom companies, both old and new, embrace a range of strategies – from cheap smartphones to the roll-out of fast speed networks – to maintain and grow their data revenue, while not neglecting voice completely.
The increased affordability of data-enabled devices is driving the data explosion. With the rise in data use, simple voice calling handsets are losing their luster, and several African operators are now selling cheap smartphones via partnerships with Chinese device manufacturers such as Huawei and Tecno.
Also, there is a batch of exclusive LTE entrants arriving in Africa. With no history of offering voice services, these new entrants have bypassed 2G and 3G networks and directly built LTE networks in Africa. For instance, Surfline Communication launched Ghana’s first LTE network in 2014. African governments have been granting data-only licenses, wherein telecom companies can only begin providing voice when they have hit certain penetration levels with data.
Telecom companies can decide to own the customer rather than the network. This model places telcos higher up the value chain through a customer-centric lifestyle platform. Use cases like content streaming, banking services, and gaming, can give telecom companies revenues by adding and diversifying the present mobile services–reliant ARPU. Building an ecosystem that caters to end-to-end apps will allow telcos the opportunity to monetize both transaction and subscription fees, besides higher data consumption.
This is great for telecom companies, as they own a ready-made platform for seizing additional customer spending. They can build 360-degree profiles of their customers, that companies can collect, act on, and monetize. Mobile money, is a valuable entry point for telcos to grow, as Safaricom did with M-Pesa.
Globally, there is no other continent that moves more money on mobile phones than Africa. The continent is presently responsible for an astounding 45.6% of mobile money activity in the world—an estimate of at least $26.8 billion in transaction value in 2018 alone—this number excludes bank-operated solutions.
Africa’s telecom companies are at the forefront of plans to bring banking to millions of Africans, in some cases for the first time, after the coronavirus dramatically accelerated the use of digital financial services.
By offering customers frictionless payment options besides other mobile financial services, telecom companies add considerable value and play a fundamental role in driving change. Technology firms (old and new), retailers, mobility companies – and others – are all looking for ways to incorporate mobile financial services into their business models. The timing is perfect for telecom companies that are looking to capitalize on their reach in remote villages and urban slums to pivot to financial services and banking.
Adapting to New Landscapes
Telcos looking to improve outcomes and eliminate inefficiencies are running a comprehensive analysis of the state of their operations, utilizing a customer-centric lens. Where are their fundamental capabilities most potent? Are they tactically employing resources to support the right competencies? Where are they falling short on delivering an exceptional customer experience? Where must operations be reinforced—and where should they be restructured?
Revolutionary telcos must decide what they are – a utility or a tech innovator? Either choice has extensive tactical implications that will impact everything from leadership down to the frontline operating model. In many cases, it could overturn how these businesses have been run for decades.
Regardless of the approach, African telcos will require to shift their trajectory quickly if they want to stay in the game. By investing in a customer-centric approach, they will be better placed to enhance customer loyalty, reduce churn, increase ARPU, and capture more spending even as their markets mature. But these changes demand time, calculated focus, and investment—all of which will be limited if telcos wait too long to make their play.