Mobile data revenue: the long road ahead for African mobile operators

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Back in December 2011 Balancing Act published an article on mobile data revenue which highlighted that data revenues for mobile operators in Sub-Sahara Africa remain tiny in most countries with the exception of South Africa and to a lesser extent Kenya. In the last couple of years many African mobile operators have launched 3G networks and more rollouts are in the pipeline. These are high CAPEX investments at stake and as in a poker game, the player needs to have the right cards in its hand to win the hand. Isabelle Gross looks at what mobile operators already have in their hands and which cards are missing to make the most out of their 3G investments.

In its Q4-2012 report, Pieter Uys, Vodacom Group CEO, reported for South Africa that “demand for smartphones remains high, with 655,000 devices activated during the quarter. We now have 4.8 million active smartphones on the network, which as of 31 December 2011 accounted for 18.0% of all active devices”. Undoubtedly, there are more and more smartphones making their way into Africa despite the high price tag of some of these smartphones.

Furthermore BlackBerry phones or Apple’s iPhones are no longer only solely owned by the privileged high-ranking executives working in banks or for a foreign companies. Recently, on two occasions, I came across people owning an iPhone that didn’t belong to the groups described above. Of course, this is not enough to get too hasty conclusions but these are interesting purchasing behaviours. The first owner of the iPhone was a guy exchanging currency on the street. He showed me proudly his iPhone which he took out from behind his stall which was not more than a couple of wooden planks nailed together. My second encounter with an unusual iPhone owner was with a policeman. Although the man didn’t exactly do street policing, salaries in the public sector in Africa are not that high.

While Vodacom in South Africa has an impressive smartphone penetration of 18% across all the active devices on its network, this figure is still a kind of far-fetched dream for most mobile operators in Sub-Sahara Africa.

For the countries at the bottom of the list of the GDP per capita country list, smartphone penetration will be more around 1 to 2% of the total devices on a given mobile operator’s network. Wealthier countries like Kenya will likely be around 10%. Nevertheless in wealthier or poorer African countries, there is a growing attraction for smartphones among mobile users and this has less to do with the notion of buying power than the desire to own a fashionable high-tech mobile phone.

By and large this is all good news for African mobile operators as they will have to push less on the marketing side to get smartphones in the market but the story doesn’t stop here. African mobile operators still have to somehow get these owners of smartphones to use data services and this is where it gets a bit more challenging.

In low-end African countries in particular, the true is that most owners of smartphones don’t use them for data services and mobile operators ought to ask themselves why so? Two primary explanations spring straight to mind. The first is that the data packages on offer are too expensive for the average smartphone owners. The second explanation is that most of the smartphone owners don’t have a need for data services because they don’t go on the Internet or check their emails or do anything else that would require a data connection.

A simple promotion targeted at smartphone owners offering free data services for a limited period of time should help to test the level of true of the first explanation. A while ago, a mobile operator based in West Africa just carried out such a promotion. Targeted smartphone owners ranged from Apple, HTC, Samsung, Nokia, LG, Huawei to ZTE. Each of them received an SMS offering free Internet on their smartphone as well as an invite to activate the service.

Around 9% of the smartphone owners targeted activated the service. In other words one in ten smartphone owners has an issue with the prices of the data service and will only use it on their smartphone if it is given away as a freebie. This issue can be addressed by a smarter pricing structure that takes more care of the customers’ specific needs.

However what is more worrying is that the vast majority of the smartphone owners targeted (except for those one that had their smartphones switched off when the SMS was sent out) didn’t bother. Obviously, they must be happy with using their smartphone for voice, SMS and some of the pre-installed applications that they have on their smartphones like the camera, the music player, the calendar, the alarm, the radio, the games, etc but what seems to be missing is this little tilting interest towards social networks, emails or the Internet at large.

It is clear that the task ahead for African mobile operators is to work out a way on how to get these smartphone owners on the online content ladder. What will work? Cheesy marketing campaigns like mobile operators are used to do for voice services or a more sustained educational effort? The latter option is more likely to yield positive results.

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This week on Balancing Act’s You Tube channel:


Editor of Stuff magazine Toby Shapshak on the changes in the use of devices in Africa

Philippe Jacquier, Orange Business on the launch of its cloud-based service, Flexible Computing

Dare Okoudjou, CEO, MFS Africa on selling mobile life insurance and the potential for mobile health insurance

Johan Nel, CEO, Umuntu Media on the launch of Mimiboard, an online pinboard for Africa

Roukaya Kasenally, Director of Comms, AMI
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Ofer Ronen, Sales Director - East Africa, Gilat Satcom
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