 | Issue: | Africa and the Middle East 2014 |
| Article no.: | 8 | |
| Topic: | Digital services take hold in Africa | |
| Author: | Matthew Reed | |
| Title: | Principal Analyst & Head of Research for the Middle East & Africa | |
| Organisation: | Informa Telecoms & Media | |
| PDF size: | 1600KB |
About author
Matthew Reed is a Principal Analyst with Informa Telecoms & Media and head of research for the Middle East and Africa. He is responsible for ITM’s data and written research for the region, which includes detailed coverage of local markets. Matthew’s research interests include operator strategy within the MEA region as well as network and regulatory developments. Matthew is a regular speaker and chair at industry conferences in the region. He also regularly comments on industry developments for local and international media.
Matthew joined Informa Telecoms & Media in February 2007, as editor of Middle East and Africa Wireless Analyst newsletter. Matthew’s previous roles include that of commissioning editor at Financial Times Business and deputy editor at Internet industry news site netimperative.com, as well as a stint as a freelance business writer and journalist, focusing on the telecom, media and technology industries.
Matthew holds an honours degree in economics and masters degrees in global politics and journalism.
Article abstract
Data usage and revenues are forecast to grow strongly in Africa, enabled by new submarine cables; more widely-available mobile broadband networks; and increasingly affordable smartphones and other data devices.
The growing availability of mobile broadband networks in Africa, combined with the take-up of advanced devices such as smartphones and tablets, is fuelling a rise in the use of digital media such as gaming, music, social-networking and video.
E-commerce is gaining momentum, as demonstrated by the launch and expansion of services such as Jumia and Konga.
Full Article
• Data usage and revenues are forecast to grow strongly in Africa, enabled by new submarine cables; more widely-available mobile broadband networks; and increasingly affordable smartphones and other data devices.
• The increase in connectivity in Africa is creating a platform for digital services such as mobile financial services, e-commerce and mobile and online content.
• The growth in data and digital services represents a big opportunity for operators and other players in the African telecoms market.
As African telecoms markets develop, operators are not only experiencing and seeking to further encourage a burgeoning demand for data, they are also looking to develop new offerings in areas such as mobile financial services; e-commerce; digital media, such as music, gaming and video; and enterprise services, such as cloud and M2M. Sometimes these services are grouped together and described as digital services.
Of course, the transition to data and digital services in Africa is less advanced overall than in many other world regions. But Africa does lead the world in one of these new service areas – that of mobile financial services.
Mobile money services
Safaricom’s M-Pesa service in Kenya is the outstanding example of Africa’s success with mobile money. The M-Pesa story has been well-publicized but it is so remarkable that it is worth revisiting. M-Pesa, which was launched by Safaricom in 2007, had 17.1 million users by March 2013 and contributed KES21.84 billion (US$252 million) to Safaricom’s revenues in the 2013 financial year (see fig.).
[Fig: Safaricom’s M-Pesa revenues, financial years 2010-2013]
Safaricom’s revenues from M-Pesa in the 2013 financial year were up by 29.5% year-on-year and accounted for 18% of the operator’s total revenues for that year. Non-voice services contributed 33% of Safaricom’s revenues in the 2013 financial year, with M-Pesa accounting for more than half of those non-voice revenues, while the rest was split fairly evenly between SMS, and fixed and mobile data.
Safaricom has added further features to M-Pesa beyond its core money-transfer functionality. In November 2012, it introduced the M-Shwari banking service in partnership with the Commercial Bank of Africa. M-Shwari customers can open savings accounts with very small sums and can also access microloans, all via their mobile phones. Safaricom said it had 1.2 million M-Shwari customers at the end of the 2013 financial year. Other M-Pesa applications, including bill payments, retail payments and business-to-business payments, have also been introduced.
But it hasn’t all been smooth sailing for Safaricom with M-Pesa. Perhaps partly as a result of the phenomenal growth of the service, there have been incidents of system delays and outages. As a result, Safaricom has embarked on a program to upgrade and expand the capacity of the M-Pesa system.
A number of other major operators in Africa have also introduced mobile-money services. Orange launched its Orange Money service in Cote D’Ivoire in 2008 and the service is now available through a dozen of Orange’s operations in Africa and the Middle East. In February 2013, Orange said that it had 4 million Orange Money customers in Africa and the Middle East.
Airtel, Etisalat, MTN and Millicom also have mobile-money offerings. Airtel offers mobile-money services across much of its African footprint through a partnership with Ecobank. Etisalat has launched mobile-money in a number of its African operations, including those in Egypt and Nigeria. MTN said it had almost 12.1 million mobile-money customers at the end of June 2013, a year-on-year increase of 64.5%.
Early in 2013, Millicom unveiled a new strategy based on the growth in digital services, such as mobile money, in Africa and Latin America, the two regions in which the group operates. As part of that strategy, Millicom said that it expects to make revenues of between US$600 million and US$1 billion a year from mobile financial services by 2017. Millicom has already launched mobile financial services in a number of its African operations: 42% of its customers in Tanzania are using these services, making Tanzania the group’s most advanced market for mobile money.
E-commerce
E-commerce is new to much of sub-Saharan Africa, having been held back by factors such as the low level of access to the Internet and to credit cards in the region. But, as some of these restrictions are lifted, e-commerce is gaining momentum, as demonstrated by the launch and expansion of services such as Jumia and Konga.
Jumia is a shopping portal that sells consumer electronics and fashion goods; it has operations in Cote D’Ivoire, Egypt, Kenya, Morocco and Nigeria. Shoppers can pay on delivery, which circumvents the need for credit cards. Jumia recently launched an Android mobile app that allows customers to shop from their mobile phones.
Konga is a Nigerian shopping portal that also focuses on fashion and electronics.
Jumia is backed by Rocket Internet, a Berlin-based incubator of online businesses, which is also behind a number of other e-commerce ventures in Africa including: Hellofood, which allows customers to order food from restaurants; Jovago, a hotel-booking portal; Carmido, an online car dealership; and Kaymu, a trading platform.
Millicom has acquired a stake in Rocket’s African ventures – as well as a similar stake in Rocket’s portfolio in Latin America – as part of the telecoms group’s strategy of focusing on the growth potential of digital services. MTN has recently joined Millicom and Rocket as a third partner in their African e-commerce venture. MTN has also linked up with Rocket to develop e-commerce in the Middle East.
Orange is also addressing the e-commerce market in Africa – and elsewhere – through a new subsidiary, Orange Horizons, which the French group set up in early 2013. Orange Horizons’ brief is to develop new businesses, such as online stores, other digital services or MVNOs in those markets where Orange is not present as a mass-market telecoms operator.
The first two projects launched by Orange Horizons were aimed at the South African market. One of the projects is an online store that sells telecoms devices and accessories, and the other is a content website that hosts news and other editorial designed for a South African market.
Digital media
The growing availability of mobile broadband networks in Africa, combined with the take-up of advanced devices such as smartphones and tablets, is fuelling a rise in the use of digital media such as gaming, music, social-networking and video.
That growth is demonstrated by operator results, such as those from MTN Nigeria, which said recently that the number of unique users of its content portal MTN Play rose from 135,000 in October 2012 to 720,000 in March 2013. There had been a total of 2.3 million downloads of the MTN Afrinolly app by March 2013, with the number of app downloads – as well as the number of minutes spent viewing Afrinolly’s movie, music and celebrity news content – rising rapidly each month.
Increasingly, operators in Africa are forming partnerships with specialist content providers in order to offer services that are designed to produce additional revenues – either from the data-access or the content itself – and potentially improve customer loyalty.
For example, in 2012, Orange launched the music-streaming service Deezer in Africa through its subsidiaries in Cote D’Ivoire and Mauritius, by bundling access to Deezer with broadband subscriptions. Orange also has an agreement with games publisher Gameloft to distribute Gameloft titles in Africa and the Middle East. MTN Nigeria is offering a dedicated data plan for Eskimi, the Nigerian social-networking service. Subscribers can buy unlimited access to Eskimi, which claims to have six million users, for a flat weekly or monthly fee.
Corporate and cloud services
Africa’s business market is expanding as a result of economic growth on the continent and is an increasingly important target for operators.
Among them, Orange is extending its business-market activities and portfolio in Africa through its Orange Business Services unit. The operator is able to take advantage of its substantial resources in the region, which include: its local subsidiaries; its investments in submarine cables connecting to Africa; and assets such as the Orange Labs R&D unit in Cairo and customer-service centers in Cairo and Mauritius.
Orange Business Services says it is seeing business-sector demand in Africa for services such as VPNs, unified communications and IT services including data centers and cloud-computing services.
Vodafone recently revealed that its revenues from Africa’s business sector have been growing strongly, exceeding €1 billion (US$1.4 billion) during the year to March 2013. The operator said that it would set up new offices in Nairobi and Accra in order to meet the growing demands from corporate customers on the continent. These new facilities would be in addition to the existing customer-service centers for the corporate market that Vodafone runs in Cairo and Johannesburg with its subsidiaries Vodafone Egypt and Vodacom.
Cloud computing is a hot topic in the industry at present. MTN’s approach has been to develop a portfolio of cloud-based services for SMEs, which it launched in Ghana and Nigeria in April 2013 and plans to extend to Cameroon, Cote D’Ivoire, Uganda and South Africa.
Africa’s business sector is diverse, with numerous microbusinesses and SMEs, as well as some large corporations, and operators need to take that into account when addressing this market.
