Seasons Greetings from Balancing Act - Issue no 857

16 December 2016

Top Story

Dear readers, viewers, contributors and advertisers

The year seems to have sped by and so much seems to have happened that it’s hard to get your arms round it. I noted at the opening of my end of year review in 2015 that there was a large mobile operator that had taken three years not to launch its VoD platform. The earliest it looks likely to do so will be Q1 2017, a full four years later. So like much of the year it’s been a case of quick, quick, slow.

#Legacybusinessmodels must fall: The African Tech Summit in September 2016 in London crystalized it all for me. This was an event full of both people innovating at scale and people funding that innovation in Africa and there was not a single mobile operator in the room. The centre of gravity for the development of tomorrow’s market has moved from those providing the networks to those creating content and services on the platform they provide

Tim Lambrechts, Mobihunter referred to the #Datamustfall campaign out of South Africa (Why is data in South Africa more expensive than in a high-cost market like Nigeria?) and there seemed to be a widespread consensus that although it posed enormous challenges for operators, data prices must indeed fall. Quick as a flash, Jess Williamson, Techstars tweeted:”Looking forward to the next big thing South African hashtag: #legacybusinessmodelsmust fall”

Time for operators to look at innovative ways of using all their data capacity in ways that Africans can afford it. This is why the market for digital advertising matters for all those interested in Africa’s online future and why we published a report on Africa’s advertising market: Corbyn Munnik’s slide which launched in Nigeria this year offers content with free data and will launch in another large African market in early 2017.

Mobile operators as a platform: We finally heard a lot less from mobile operators about them not wanting to end up as a “dumb pipe” and perhaps from some the glimmerings of an understanding that their business model does indeed need to change. Michael Joseph, CEO, Safaricom was very candid about its shortcomings both as an innovator and as a platform for innovation.

But sharing the pain has not yet visibly translated into sharing the gain. APIs are sill not open for innovators across many operators, although Manny Teixeira, MTN was quick to point out to me that the Big Yellow had made the move. The most intriguing conversation was with a large mobile operator’s CMO at AfricaCom who talked about creating a digital platform strategy that would completely rework how the operator does business. Maybe 2017 will begin to see some of these ideas in practice...

Nearly everyone who might be content and services on the platform will tell you that it’s impossible not to imagine a future without the mobile operators. Olivier Laouchez, Trace TV  tried to square the content vs data businesses by suggesting that African mobile operators will buy into media and content like their global counterparts: there was much talk of the Verizon/Time Warner deal.

But the reality of Africa’s mobile markets is much grimmer. Bharti sold Airtel’s low cards to stay in the game and will probably eventually quit the continent. Millicom did acquire content assets but is looking at selling its African subsidiaries. The pressures on operators as the market transitions are enormous. And we’re still waiting to see what Vodacom and MTN do in terms of responding to the new shape of the market.

But the only person I spoke to who didn’t even raise their relationship with mobile operators was Uber that operates without a revenue share or carrier billing.

Uber, Uber, Uber: I was in Kenya in October asking people what app had had the biggest impact on people’s lives. There were some obvious answers like mPesa and everything that is part of its ecosystem but the real surprises were What’s App and Uber. Huge numbers of Kenyans now have What’s App family groups to keep in touch.

And Uber? Well in 12 months it has gone from nothing in Kenya to 100,000 active users with a hybrid cash model that the company will use across Africa: Think back to the beginning of Jumia’s operations in Sub-Saharan Africa and the time it took them to get this kind of foothold.

It would be easy to dismiss this change in Kenya as only proving that Kenya is different. But I was in Mali in February 2016 asking what apps were most well used and in that case one of the main answers was Viber. The rest of Mali’s online ecosystem is less well developed but there was no stopping them when it came to using communications apps.

VoD/Music – Beyond the hype curve?: With the sharp drop in oil prices, Unitel’s music service Kisom almost crashed and burned: it’s proving impossible to pay international music providers and the price for the pay-for service with data included proved too high at US$7 a month. It’s now lowered the price to US$3.50 and has 150,000 users for what is now a local music service.

It sometimes felt like there have been more VoD services launched than there are subscribers. I met half a dozen new ones at the continent’s TV buyers market DISCOP. The arrival of Netflix (and latterly Amazon) galvanized Naspers into launching Showmax. Smaller operators like PockitTV and Tuluntulu  are demonstrating some interesting numbers that might finally demonstrate that we’ve got beyond the hype curve.

More International Cable Projects, lower wholesale prices: I enjoyed presenting and facilitating a panel (sponsored by Main One) at ITW in Chicago this year. One of the hot topics of the discussion was whether Africa could sustain the number of new cables being proposed. The price per mbps is now below US$50 at volume in the bigger markets.

There are four international cable projects – one on the west coast of the continent and three on the east coast of the continent. The one on the west coast goes from Angola to Brazil and now has a proposed link connecting it to Miami. The three east coast cables are all doing a version of the same route. Off the record, they will probably admit that there really ought to be only one cable but there’s insufficient consensus to bring that about. Maybe in 2017?

Whatever anybody tells you, the new cables will drive down wholesale capacity prices to commodity levels. The big question is then how quickly operators will get on the bus and start offering commodity pricing at the retail level.

The other big news of note is the very French grand vision of Bollore’s Vivendi, which is proposing to build 5,000 kms of fibre to connect half a dozen African countries. The five linked by the railway will include: Benin, Togo, Niger, Burkina Faso and Côte d'Ivoire. Fibre alongside a newly constructed railway will mean that it can build special fibre ducts and have access to rights of way in one fell swoop.

The Battle Over VoIP: The battle over VoIP calling remains emblematic because there are still those in the telecoms industry who still think the genii can be put back in the box. They don’t understand that What’s App, Viber and yes, even the Grandad of them all Skype all have significant user constituencies who will not go away or stay quiet.

The Moroccan regulator banned VoIP calling but soon discovered that it was in the middle of a vigorous consumer campaign against the ban, which it eventually had to overturm. At the time of the ban local You Tube channel operator Amin Raghib with more than a million subscribers complained:”I’m completely against this blockage…I pay the operator for Internet among Internet services is VoIP. It’s the operators’ nightmare. These applications lower operators’ revenues, particularly with the implementation of 4G.”

“The traditional telephone line is in the process of dying out. In the United States, VoIP is completely legal and this has inspired the operators to be more creative about offering Internet services rather than telecoms one.”

One shape of that more creative future was when Smile in Nigeria launched its VoLTE service. Yes, it was charging for minutes but it provides a translation for how much data was being used. One day all minutes will be data….

The high cost of international calling in the most resistant and non-competitive countries will be their downfall. One person I spoke to in one of these countries told me that the international monthly minutes into the country had almost halved over the last 12 months.

Finally getting to remote areas: The race is on to create a business model that will allow voice and data services to be extended beyond the existing idea of what constitutes the addressable market. We’ve covered a whole series of companies that are beginning to tackle that task including: Amotel (issue 847); Poa! (issue 844), Vanu (issue 830); Mawingu (issue 823); and Virural (issue 815).

Regulators need to become considerably more flexible around questions of spectrum access and interconnection in order to get investment into these hard-to-reach area.

Closer to home, we’ve redone our website and since the soft launch, have made a series of tweaks in response to your comments. The old website used Drupal and if I never have to use it again, it won’t be too soon.

In addition, our Web TV service Smart Monkey TV has got 1581 subscribers. Please join the party and subscribe, by clicking on the link below and pressing the red “Subscribe” button on the right at the top: The most successful of those interviewed get thousands of views and others get hundreds.

For those wanting to follow the development of Africa’s digital content and services market in detail, you really should subscribe to our fortnightly e-letter Digital Content Africa, which has just over 2,000 subscribers. For those interested in start-ups and Innovation, you need to subscribe to our fortnightly e-letter Innovation in Africa which has just over 1,100 subscribers. Click the link to subscriber to either:

This year we have carried out many different research and consultancy projects - both large and small - for a range of clients including operators, equipment vendors, investors and policy bodies. Because we operate discreetly, you may not be aware that we offer these services. If you think you have needs or requirements of this kind, talk to us about them. In what will be a year of great change, we will have both data and ideas to help you change your circumstances.

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A big thank you to all those who have helped News Update keep ahead of what was happening in 2016. Without your help, we would not have been able to bring you your weekly dose of information and new opportunities.

News Update will return in the New Year with issue 858 on 6 January 2017.

All the best

Russell Southwood
CEO
Balancing Act

Sylvain Beletre
Senior Analyst
Balancing Act

Alice Saywood
Marketing
Balancing Act