Africa’s mobile market will go open access – it’s not if but when and how it all work out
Global Voice Group - An Apology
Africa’s mobile market will go open access – it’s not if but when and how it all work out
In the shiny, gadget-obsessed developed world, the centre of gravity has shifted in the mobile market. It’s no longer the handset vendors and carriers who are calling the shots but companies like Apple and Google who developing phones, operating systems and a developer ecosystem. Suddenly it’s what software apps the mobile device can run and its ease of use dominating the conversation, not what price plan or what operator will allow you to browse in its content “walled garden”. Russell Southwood looks at what implications this will have for operators in Africa and how they will need to learn to live with open access.
The major driver for the changes in the developed world has been the roll-out of smartphones that have computing capabilities. The success of Google’s Android OS and Apple’s iPhone OS have changed the balance of power. Now the discussion is about which companies will get these phones not about which carriers will choose.
One example illustrates how the perception of who “owns” the customer has changed. Vodafone made the mistake of trying to preload apps for its 360 content product with an Android upgrade and had to go into reverse on it almost as quickly as it did it. Smartphone users are smart people and won’t accept things being foisted on them.
The prize for the carriers who have let go of their market power to have these smartphones is that these users make big use of data. So if the carrier can keep up with provisioning its network, then it has some chance of holding or growing its ARPUs in circumstances where ARPUs might otherwise go downhill. The percentage market share of smartphones is still relatively low but the value of their customers is disproportionately high.
Before this change, operators would say that they could not open up their networks to new devices and content because they needed to make sure everything worked properly and that content did not reflect badly on their brand values. Practical things like handset certification programmes made this seem hard to argue with. Indeed when the iPhone came out, various mobile company executives said rather patronisingly that Apple didn’t really know how to design handsets and if it had been left to them they would have done it differently. The problem is that operators are like soap powders: they all wash whiter but few really change the way users can do things.
So how will this shift of power play out in Africa? The more affluent African users have already opted for smartphones. Blackberries and iPhones are seen almost wherever you go on the continent and doubtless Android phones will follow. Given the current level of smartphone use in key African markets, it is not hard to predict that they will gain 3-5% of the market over the next 3 years. A dozen Chinese handset vendors we spoke to in March this year we’re saying that they would offer US$100 smartphone handsets and the point of Android is that you don’t pay a licence fee to use.
Although this market share is tiny, it is the market segment that will generate a disproportionate amount of income. In many ways, these phones will be like a social x-ray as their use will probably be mapped against the currently rather indistinct contours of the rising African middle class.
But the waves made by what these African smartphone users can do with their phone will spill over into the aspirations of the mid-range phone users. They may not have the cash to afford smartphones but they will want some of that functionality. If all their friends in Nairobi are organising their life on Facebook or MXit on their smartphones and laptops, they won’t want to be left out. If the latest hilarious You Tube clip is making the rounds in Dakar or Lagos, they will want to see what everyone else is watching. So there has to be a race to provide smartphone like functionalities and content at lower and lower price points.
So where does this leave Africa’s mobile operators? Their marketing spend dominates the physical landscape and media of most African countries. Their sponsorship of events and TV programmes seeks to persuade users that they like the same things as their users: reality shows, football and music.
But the mindspace hold on their users is not always that strong. Users stay with carriers that have dominant market share because they don’t want to have to change their number. It’s far easier to buy additional SIM cards to take advantages of all those tactical marketing offers that seem to substitute for developing long-term loyalty. But for the rest, there’s a constant restless churn as a significant number of users “game” their way through the tactical marketing offer maze.
The underlying problem for operators is that there is actually very little difference between them. Network coverage? Yes, but most people’s calling pattern is actually mainly local so you judge on your home patch. Quality of service? Take this test. Make a call using three different operators and ask a blindfolded person whether they can tell which operator is which on the basis of quality of service. Customer service? The customer service managers we have spoken to rather shyly confess that all is not as it should be. You might say the same for all the mobile operators’ new data service once they have matched each other’s offers and networks.
So you have a product that is largely indistinguishable from your competitor except for ….yes, you guessed it: handset functionality (what the user can do) and content and services. Although Africa has become a big global market, it would be hard to argue that it has much influence over handset specification. So that leaves content and services.
Africa’s mobile operators are at many levels in their management decision-making – from the most elevated CEO down to the lowliest line manager – dominated by engineers. Of course, there are exceptions to this generalisation but the overall impact of this configuration is that these individuals are good at addressing “hardware” issues (keeping the network running, installing the upgrade) rather than “soft” issues like content and services. You can count the number of interesting, Africa-specific content and service applications on one hand. No-one at any level of seniority is actually focused on getting the defining content and apps. Who’s currently negotiating with Apple to get the iTunes store to Africa?
The big mobile operators don’t really know how to do content and there’s not much sign of them going out and learning what they don’t know. So into this gap have come the global content brands like Facebook and You Tube, all of which feature in the top ten of most used websites for African countries that Alexa analyses. But where, oh where are the local versions of these brands that have appeared in other developing markets like India and Brazil?
Worse still, the mobile operators have been greed in the revenue splits they give for SMS services and thus have not really given away enough to encourage a nascent content ecosystem. You have to give something away in order to get something back.
A sign saying “mobile is media” should be attached to the foreheads of senior managers to remind them. According to a national survey carried out in Ghana for Audiencescapes, 16% of the sample had got news and information in the last week using SMS compared to 18% from newspapers. A similar pattern recurs wherever market research surveys are carried out. But only Vodacom in South Africa has really made any attempt to think about mobiles as media and sell advertising on this medium.
The African mobile operators that will be successful in this open access mobile world will be those that seek to offer content and services seamlessly across a wide range of devices. Everything has to synch with everything. The majority of users are not techno-savvy , they just want it to do things they like doing. The content and services provided are the things that will provide the character of the product offer. Relationships with old media like television and the successful programmes that people love will help build this.
But above all mobile operators have to decide whether they are in the content business or not. If they aren’t, they need to develop relationships with companies and people who will do the work of building developer ecosystems and put enough of the revenue share into this work to ensure they get the most interesting content and apps. Making things happen can build success as much as doing everything yourself.
If the mobile operator says “yes” it wants to be involved in content, it has to understand what that means. The core demographic for content is 18-24 years old. Do you understand what this group is about? At the Digital Africa Summit in March, two different African fathers confessed that they found that their daughters challenged in ways that they would never have spoken to their parents. Welcome to tomorrow’s Africa.
Success in this kind of content is all about taking risks with a cheekiness and irreverence that makes people laugh. How does this square with a buttoned-down corporate approach that needs three people to sign things off? The success of old media like Kiss FM in Kenya was based precisely on pushing the boundaries of what was acceptable and thumbing its nose at convention. Is that how you see yourself as a mobile operator? It is more the attitude of a Richard Branson Virgin challenger company than that of the low-risk taking public company.
In the open access mobile world, it will no longer be acceptable to insist on completely different standards for the implementation of apps. Interconnection of content and apps will ensure maximum use: everyone wants to socialise with everyone. So welcome to the world of open access mobile….