New business model to save African cybercafés – higher bandwidth, higher margins and transactions

Top Story

The growing number of African Internet users accessing the Internet via their mobile phone is increasingly becoming a threat to the survival of cybercafés. According to the 2010 Digital Life report by TSN Research International, about 36% of Tanzanian Internet users access emails via mobile phones against 31% doing the same via computers. These changes in Internet users’ behaviours can be witness in many other countries across the continent. So, what can cybercafés owners do about it? Isabelle Gross spoke to Gregory Eid, CEO of Teledata ICT about its business model for cybercafés branded Cafes Club and the growing revenue opportunities in transactional services.

Privately owned Ghanaian company Teledata ICT started in 2004 by offering internet and data services to business customers. Among these business customers there was a solid pool of cybercafés with their particular requirements and limitations. Cybercafes need bandwidth and consume a lot of data.

With high wholesale bandwidth prices, the business case of offering good quality internet services at an affordable price to the general public became a challenge for some of Teledata’s cybercafés customers: they were either making no money or they were offering poor quality internet services. For Teledata, it became a problem too and according to Gregory Eid, the company had to decide if it wanted to continue to supply data connectivity to cybercafés or abandon offering services to this customer segment.

Rather than throwing the baby out with the bathwater, Teledata engaged with the cybercafés owners and discussed with them their situation. They came up with a checklist of problems that if properly addressed could turn cybercafés into a viable and profitable business. On this basis, Teledata decided to continue to provide data services to cybercafés.

With its existing pool of cybercafés customers, Teledata launched a “branded” cybercafé concept labelled “Cafes Club”. It offers good quality internet services and at the same time it enables Teledata to sort out some business fundamentals that plague cybercafés and drive them to bankruptcy and closure. In Teledata’s “Cafes Club”, Gregory Eid explains “every Internet user gets 1MB/s and is charged 1Ghanaian Cedi per hour (US$0.65). Teledata charges in turn a wholesale price of 0.40 Ghanaian Cedi per hour (US$0.26) to cybercafé owners”. This translates into a 60% margin for the cybercafé owner while the end users are assured of getting 1MB capacity which allows for quality browsing and acts further as a customer retainer for cybercafés. Giving end users more speed doesn’t necessarily translate into in heavy downloads. At the start Teledata forecasted peak bandwidth usage around 100MB but data feeding back from the cybercafés indicates more a peak bandwidth usage around 7MB.

This new business model that Teledata is rolling out in cybercafés that want to come under its brand “Cafes Club” enables cybercafés owners to make money and stay in business. When going through the checklist of problems that cybercafés owners put forward to Teledata, it also became clear that most of them didn’t have much business acumen. One example was a cybercafé that was closing down daily at 6pm while the bulk of potential customers, workers and students would prefer to come in the evening after their work or their university lectures. To address these limitations, Teledata also provides to cybercafés owners an integrated billing platform allowing them to issue pre-paid vouchers to Internet customers and to monitor properly their sales. Cafes Club cybercafés are present in Accra but also in eight regions across Ghana. According to Gregory Eid, Teledata is quickly getting to 500 cybercafes running under its brand “Cafes Club” and plans to reach the number of 1,000 in one year time.

Teledata’s projects don’t stop at offering a sustainable business model for cybercafé owners. The company wants to build on its billing platform and the growing number of cybercafés under its brand to offer other services. It already offers for example domain name registration services. Anyone can come to a Cafes Club cybercafé and buy an annual domain registration for 25 Ghanaian Cedi (US$16). The billing platform with its printed vouchers has the potential to evolve into an e-payment platform enabling customers to purchase vouchers for topping up their pre-paid electricity meter, to buy top-ups for their mobile phone or any other e-commerce services. These transactional services will also provide an additional revenue stream for cybercafés owners as the competition coming from mobile operators offering Internet services heats up.


Reader announcement:

Subscribe to Balancing Act’s Web TV Channel to get the latest information face-to-face with Africa’s industry players: Click here:

To get breaking news, up-to-the-minute views and rumours circulating in the business, follow us on Twitter: BalancingActAfr