Data services: Uncrowned telecom king
March 25, 2013 | 8:46 am| | | Start Conversation
In Nigeria, Africa’s most populous country, voice services are undoubtedly king. But there is a young ‘ambitious prince’ lurking in the shadows, scheming and waiting for the perfect opportunity to usurp power.
The wisest men in the kingdom, magicians and seers have all seen the ominous future and are already aligning themselves with the prince’s philosophies and beliefs. The ‘old king’ is well aware of his treachery. But can he stop the wind of change? His power and popularity amongst the youths is growing every day.
Life without him is utterly dull and uninspiring – no ‘pinging’, no ‘facebooking’, no ‘tweets’. Quite boring, I must say. This young but ambitious prince is data services. This is no fairy tale; data will in no distant time become the core of telecoms in Nigeria.
Over the years, Nigeria’s telecoms market has witnessed significant growth. The sector has grown from about 400, 000 connections ten years ago to over 113 active mobile subscriptions in 2013. Much of the milestones recorded in telecoms can be attributed to two critical factors.
The existence of a quasi-independent regulator through effective policies created the enabling environment for the industry to grow. Also, the resilience of operators in expanding their network across the country cannot be over-emphasised.
Decline in voice revenue
Voice services, according to the industry analysts remains the major revenue stream for mobile network operators (MNOs) in the country. This trend is changing as operators step up investment in fibre build and the adoption of new wireless technologies. It is estimated that Nigerians spent N2.14 trillion on voice calls and Short Messaging Service (SMS) between January, 2011 and December, 2012.
The above figure is based on an industry Average Revenue Per User (ARPU) of N912 million monthly spend by subscribers on MTN Nigeria, Globacom, Airtel, Etisalat Nigeria, Visafone, Starcomms, and Multi-Links network. Nigeria currently has 113 million active mobile subscriptions, according to data from the Nigerian Communications Commission (NCC).
But interestingly, the contribution of voice revenue to the overall income of the nation’s operators has continued to decline over the past four years. This, according to analysts is due to heated competition in the telecoms industry voice revenues, reports have shown dropped by about 12 percent between 2009 and 2010, with another drastic decline at the end of 2012.
The decline, viewed by operators as worrisome, has spurred a reassessment of data strategy across the board for more focus on the internet access market in coming years to offset the losses from voice revenue, analysts said. With the steady decline in voice revenues, operators are increasingly looking to data services as the next revenue generating stream.
Growth of mobile data
“We have continued to witness significant growth in our data business. “Year-on-year, we have seen growth in excess of 100 percent. The data business is going to be a lot more important than voice in the near future. We are seeing huge demand for data services. This has informed further investment in our 3G network,” Wale Goodluck, corporate services executive, MTN Nigeria told BusinessDay in an interview recently.
MTN Group results for the year ended 31 December 2012 further buttresses Goodluck’s point. The results shows that “data revenue (excluding SMS) increased by 111.6 percent (247.8 percent) in naira supported by the availability of affordable data-enabled devices (both GPRS and 3G).
“During the year, according to the financial report, a total of 3.8 million smartphones and 201,000 dongles were active on the network. This, MTN said was achieved through partnerships with independent device resellers, free SIM cards, and data bundle offers, as well as the refitting of service centres to make them device oriented. MTN Nigeria also saw strong growth in Blackberry subscriber revenues. Similar growth was witnessed on other networks in 2012.”
The low Personal Computer (PC) and fixed broadband penetrations in Nigeria, according to industry analysts combined with smartphone price reductions and affordable mobile data plans is contributing significantly to increasing adoption of mobile broadband. Overall, there is a general shift to data services from voice, where revenues are starting to plateau.
“There is a growing focus on data plans and operators want handsets to reflect this,” James Rutherford of Nokia Corporation was quoted in an industry report.
Affordable smartphones, together with the falling mobile data tariffs, are set to drive a mobile broadband adoption wave across Africa. According to an Informa Telecoms and Media report, there will be about 265 million data subscribers in Africa by 2015, up from the current 12 million subscribers. “Prices of smartphones are likely to decline. The sub-$100 smartphone is steadily becoming a reality.”
Low-end smartphones are increasingly available and these types of phones will likely grow at a compound annual growth rate of 15 percent over the coming years. “Data services will increase dramatically among the target market between the ages of 12 and 30,” Rutherford added.
Telecoms operators, mobile phone manufacturers and application developer are entering into strategic partnership to expand the scope of Nigeria’s internet access market. Social network, Facebook and Nokia are looking to improve the number of Nigerians online through the introduction of a built-in Facebook button available on the new Nokia Asha 205.
Introduced into the Nigerian market this month, the Nokia Asha 205 is the first Nokia phone that includes a dedicated Facebook button, designed for people who want the fastest, one-click access to popular Facebook features.
Etisalat is also enabling millions of mobile users owning basic mobile phones across Africa and Asia are now able to join the online community using a new low-cost USSD messaging service. This service will provide access to email, social networking and messaging services, to basic mobile devices and
feature phones at very affordable prices.
This follows an agreement between the Etisalat Group, the leading operator in the Middle-East, Africa and Asia, and Mahindra Comviva, the global leader in providing mobile financial and value added solutions, which was signed at Mobile World Congress in Barcelona.
The first Etisalat market to deploy the new messaging solution is Etisalat Nigeria, whose 15 million subscribers will soon be able to enjoy the benefit of advanced communications on any handset. Steven Evans, chief executive officer, Etisalat Nigeria explained the rationale behind being the first Etisalat operating unit to deploy the new messaging solution.
“Nigeria has a vast population of young people a majority of which are basic-phone holders with no or minimum data capabilities. As we continue to attract new customers to our network across various segments, it is our desire that we are able to address their needs to enjoy emailing, instant messaging, and social networking amongst other services no matter the type of handset they are using.”
Data traffic is improving, even if the value lags, growing 83 percent quarterly in Q1 2012, according to BuzzCity, a United Kingdom (UK) – based mobile advertising firm. There is a surge in mobile data traffic without the corresponding increase in data revenues.
This phenomenon is referred to as the ‘scissors effect’ or ‘revenue gap’. So, how do operators address poor data revenues amid soaring subscriber growth? Greger Blennerud, director of business development at Ericsson Networks, advised mobile network operators to adopt
good segmentation models so as to differentiate from competitors, capture value and increase the size of the market.
“Introducing higher broadband speeds gives more opportunities to do this, as well as introducing low-end packages with small bucket sizes and time-based, pre-paid charging, which will also improve market segmentation.”
Lending his view, Mayank Sharma, vice president, Africa Region, Comviva, a provider of mobile solution beyond VAS (Value Added Service) also urged telecoms operators to adopt new technologies that complement their infrastructure and assist them launch innovative data in order to boost revenues.
Telecoms operators, Sharma said “will need to ensure efficient network management to minimise the revenue leakages and cost overheads.”
Industry analysts told BusinessDay that broadband infrastructure remains the fundamental barrier to the development of efficient and affordable data services. According to the industry analysts, until better coverage and service standards are met in the market, as well as a reduction in prices, data services will likely remain a minority activity restricted to the top 5 percent of the population.
The ability of telecoms operators to deploy requisite broadband infrastructure needed to improve Nigeria’s broadband internet penetration is being hampered by prohibitive costs of right-of-way.
Speaking at the Lagos conference organised by BusinessDay in conjunction with the NCC, Omobola Johnson, minister, communications technology, said that the Right-of-Way (RoW) procurement contributed 50 percent of the cost of fibre build.
She said that the cost of RoW procurement was probably the highest in the world today. High cost of maintaining the infrastructure after deployment, according to her had become a critical drawback to investment in broadband infrastructure. Incidences of vandalism, power constraints and wanton theft of fibre cables is rife specifically in an industry where the mobile ARPU can only discourage investment in fibre build.
“No right thinking infrastructure provider will invest in the deployment of infrastructure, if this situation prevails. We will continue to have tremendous under-utilised capacity of international bandwidth,’’ the minister said.
For Wale Goodluck, corporate services executive, MTN Nigeria, “The market is becoming more sophisticated and data-intensive. Customers want data and broadband and they want it now. So, in terms of being able to access data, there is a great need to leapfrog on infrastructure development. Given the lack of a fixed-line network to build upon, there are physical difficulties in building infrastructure that is required, as well as bureaucratic obstacles, and this will take tim
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