Millicom plans to go from being a mobile operator to a digital services company in 3-5 years in some African countries

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The discussion about mobile operators making the transition to digital has been relatively muted. MTN said last year this would be the direction it would be going in but did not give details. This week I spoke to Raul Martinez, Commercial Director – Africa, Millicom who laid out their stall for the kind of changes it’s going to be making.

The starting point for the transition to a becoming a digital services company is the level of revenues not attributable to traditional streams like voice and SMS. Currently Millicom in Africa gets 83% of its revenues from voice and SMS and 17% from Value Added Services (17%). Some mobile operators have a little more, others have a little less and yet others slice the definitions slightly differently.

Millicom already runs successful cable, triple and quad play services in Latin America and I wondered how this experience influenced their view on the same opportunities in Sub-Saharan Africa:”This gives us an advantage versus others groups in the region but there are infrastructure challenges.” This obviously means that it would need a higher level of investment but it has a team looking at the options.

The group also has possible content synergies as it has a TV company called MTG that has already opened a Free-To-Air station in Ghana and is looking at opening in more countries:”We developed our own sports channel in Latin America but in Africa, you have a big players DStv and it’s all about the (programme) rights. We have a team focused on new business that is looking at these opportunities.”

Millicom also took the step of investing in Rocket Internet (20% equity) in August 2013 and in December 2013 was joined by MTN, giving all three parties a third equity share in the company:”It was about us wanting into the digital lifestyle and digital services. There are things we can learn from Rocket…It’s not an integrated company relationship. There are countries where we overlap and we work together.”

So how did it feel to have another mobile operator have the same advantage?:”The market treated the deal well in terms of the stock price. We overlap with MTN in only two markets and it makes a lot of sense for Rocket.”

Millicom also has two other legs to this strategy of engaging with digital services. It has its own in-house Millicom Digital Ventures, based in Stockholm  and this launched its first service in April 2014 in Colombia.

It has also put money into setting up an incubator in Rwanda called Think:”The start-ups gain what we call ‘the unfair advantage’ of using our mobile networks. We can either do a full acquisition or a JV later.”

It also has a partnership with Over-The-Top provider Facebook in Tanzania where it has launched the service as zero rated in terms of its cost to subscribers. Millicom sees this as a partnership of mutual advantage: both sides want to grow Internet subscriber numbers as a common objective. It has also integrated its services into the Facebook platform so you can do things like check your data allowance and buy ringtones.

It doesn’t have its own music platform but in Latin America it has Tigo Music, which is a white label version of Deezer (which has a minority stake from Orange). Deezer sees this as one of its most successful implementations. In Colombia it is the biggest music distributor, bigger than iTunes and physical disc sales by record labels:”It’s important to think about local content in Africa and we’ll be bringing something to the market within 12 months.”

Film and video VoD services are also at an early stage but Martinez makes the point that content is in its new DNA as several senior managers have come out of the TV business:”We see successful players like iROKO. But we have the advantage of a big subscriber base so we want to see what to deploy.”

The other important card in its digital lifestyle hand is financial services: both in themselves and as a means of allowing subscribers to pay for digital services:”This is important in the markets we operate in and we’ve been especially successful, particularly in Chad where we’ve seen great growth. Rwanda and Tanzania are the most developed markets in our portfolio.”

It has developed the first remittance product between Rwanda and Tanzania that translates the money sent into the destination currency. Also it has paid back the interest on the money in its final pool back to customers. In Rwanda, it has acquired the national switch so that it can integrate payments into the banking system:”This will enable us to grow other digital spaces.”

“Through Tigo Cash (also known as Tigo Pesa) we have control of the wallet. That’s not a long-term advantage. It’s about building an ecosystem and we’re looking at other ways of bridging the payment gap. It’s better to be open than protective.”

The challenges for Millicom in making this transition are considerable:”The key challenge in Africa is still connectivity. As we transition from being a telco to a digital service provider, we need to build sustainable connectivity to grow this side of the business.”

To see a video clip interview in which Raul Martinez explores these issues, click on the link here:

Raul Martinez, Millicom will be a speaker at AfricaCom (11-13 November 2014). For further details visit the website  and follow it on #africacom


 

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Digital Content Africa Z19 – The Mobile Deal that is keeping Africans from having more music, film and TV on their mobiles
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Digital Content Africa Z16  - MTN Play Côte d’Ivoire is looking for digital content that will play well on mobile phones
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Videos interviews to watch:

Babatunde Olaifa on the biggest football website in Africa, Goal.com

Nkiru Balonwu, CEO, music platform Spinlet on how mobile operators take most of their revenues

John Davies, Intel on ways to connect the last 4 billion people unconnected globally with examples from Kenya, South Africa, India, Bangladesh and Colombia

Bastian Gotter of Lagos incubator Spark on providing services for Africans coming online

Fikayo Ogundipe, co-founder ToLet.com.ng on a Nigerian lettings site like no other

Videos interviews to watch:

Gillian Ezra, Simfy Africa on launching a music streaming service with MTN in South Africa

Jose Soares, Net 1 Mobile Solutions on the solar powered Wi-Fi lamp designed to change lives

Sascha Meinrath, X-Lab on using Mesh Wi-Fi to connect the unconnected in Somaliland and Tunisia

Andrea Bohnstedt on the challenges of SME investing and the African tech sector


Antos Stella, CCA on the impact of digital on the music business in Africa – The company MTN bought into


Brett Loubser on how WeChat Africa is both a radio station and a second screen


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