Emerg­ing tech­nolo­gies: New rev­enue op­por­tu­ni­ties for African tel­cos

Over The Top play­ers have cre­ated loyal cus­tomer bases as they pro­vide valu­able services at low costs, all lever­ag­ing the in­fra­struc­ture that Tel­cos built.

Financial Nigeria Magazine - - Contents - Mariam Ab­dul­lahi is Telco In­dus­try Lead at SAP Africa

Al­though Africa's largest telco op­er­a­tors are gen­er­ally show­ing growth in their cus­tomer bases, it is pub­lic knowl­edge that rev­enue growth has some­what stalled to as lit­tle as 1% year on year. This means that de­spite at­tract­ing an in­creased num­ber of cus­tomers, the amount each of these cus­tomers spend, is de­creas­ing. In the wake of dig­i­tally trans­form­ing economies, it is safe to as­sume that the tra­di­tional rev­enue mod­els of voice, SMS and data rev­enues are erod­ing and may soon be­come ir­rel­e­vant. Thanks to a com­bi­na­tion of ma­tur­ing tech­nol­ogy, reg­u­la­tory in­ter­ven­tions, in­creas­ing lev­els of so­phis­ti­ca­tion and dis­cern­ment among con­sumers, the dis­rup­tion brought by free or low-cost pub­lic wi-fi and Over The Top (OTT) pow­er­houses such as What­sApp, tra­di­tional telco rev­enue streams are un­der se­vere threat.

What­sApp, and its more than 900 mil­lion ac­tive users around the world, lever­age Telco in­fra­struc­ture to send 30 bil­lion mes­sages per day at no cost. Google's ev­er­ex­pand­ing fi­bre net­work in the US is en­abling an al­ways-on­line life­style, while China's WeChat not only con­nects its 600 mil­lion sub­scribers with in­stant mes­sag­ing, but has also es­tab­lished it­self as a dig­i­tal plat­form pro­vid­ing services rang­ing from real-time traf­fic up­dates to mo­bile pay­ments.

These OTT play­ers have cre­ated loyal cus­tomer bases as they pro­vide valu­able services at low costs, all lever­ag­ing the in­fra­struc­ture that Tel­cos built. So, with slow­ing rev­enue growth, do Tel­cos in­vest in their own OTT apps and prod­ucts to start re­claim­ing some of the rev­enue and brand equity claimed by the likes of What­sApp?

I would ar­gue that a far bet­ter route to the con­tin­ued suc­cess and growth of the African telco in­dus­try is not to look back at missed op­por­tu­ni­ties, but to rather look ahead to the emerg­ing tech­nolo­gies that will shape the busi­ness and con­sumer land­scape across the African con­ti­nent. And there's no big­ger or bet­ter emerg­ing op­por­tu­nity than the In­ter­net of Things.

The USD 60 tril­lion op­por­tu­nity

With a pro­jected 50 bil­lion things con­nected by 2020, the In­ter­net of Things is set to be­come one of the most sig­nif­i­cant tech­no­log­i­cal in­no­va­tions in his­tory. Gen­eral Elec­tric es­ti­mates that in­vest­ment into the In­dus­trial In­ter­net of Things will reach USD 60-tril­lion over the next 15 years, while McKin­sey pre­dicts the IoT mar­ket will at­tain a com­pound an­nual growth rate of 32.6% by 2020.

Within the next few decades, sen­sors will per­me­ate ev­ery as­pect of our lives. In this hy­per­con­nected age, ev­ery­thing from cars to ma­chines to live­stock and crops will have a sen­sor. In a re­cent col­lab­o­ra­tion be­tween Bosch and SAP, IoT was im­ple­mented to mon­i­tor as­para­gus farm­ing op­er­a­tions to im­prove yield, while also pro­vid­ing farm­ers with key in­sights

based on ac­cu­rate data that helps make them more prof­itable.

The pos­si­bil­i­ties are end­less: for ex­am­ple, a re­frig­er­a­tor pro­vided by a cooldrink ven­dor with the pur­pose of stor­ing their prod­uct can be re­motely mon­i­tored to en­sure it is in­deed stock­ing the in­tended prod­ucts and pro­vide the ven­dor with re­al­time in­sights into the most pop­u­lar prod­ucts while alert­ing them au­to­mat­i­cally when stocks run low. All of this re­quires con­nec­tiv­ity, and at a sur­face level IoT is a golden rev­enue op­por­tu­nity for Tel­cos. With so many 'things' to con­nect, it makes sense that Tel­cos pro­vide the base­line con­nec­tiv­ity.

How­ever, IoT works on nar­row­band con­nec­tiv­ity, mean­ing it can op­er­ate with­out us­ing telco in­fra­struc­ture. It's not enough for Tel­cos to sim­ply pro­vide the in­fra­struc­ture. For the IoT op­por­tu­nity to ben­e­fit Tel­cos, they need to de­velop a com­pre­hen­sive in­no­va­tion frame­work to take ad­van­tage of emerg­ing op­por­tu­ni­ties and cre­ate new forms of value.

The build­ing blocks of a reimag­ined telco busi­ness model

To meet the de­mands of a rapidly chang­ing busi­ness and tech­nol­ogy en­vi­ron­ment, many Tel­cos have bol­stered their dig­i­tal ca­pa­bil­i­ties by ap­point­ing Chief Dig­i­tal Of­fi­cers. There is an in­her­ent risk to this, how­ever: if it is the pre­rog­a­tive of one per­son or line-of-busi­ness to man­age and drive in­no­va­tion, the telco is un­likely to reap the full ben­e­fits of an in­no­va­tion pro­gramme. CEOs should en­cour­age a cul­ture of in­no­va­tion by en­abling all em­ploy­ees to con­trib­ute to the process, gain­ing in­put from all op­er­a­tional and en­ter­prise teams to limit siloed think­ing and do away with in­ter­nal seg­re­ga­tion.

Tel­cos should look specif­i­cally at im­ple­ment­ing four key com­po­nents to drive an ef­fec­tive in­no­va­tion process, namely:

1. An in­no­va­tion strat­egy that high­lights how the telco wants to take ad­van­tage of emerg­ing tech­nolo­gies such as IoT;

2. An un­der­stand­ing of the busi­ness mod­els that would best sup­port their cus­tomers' ob­jec­tives and ap­proach to busi­ness;

3. An ac­cu­rate and cen­tral sys­tem of

records; and

4. A team of ex­perts to en­sure all com­po­nents in the in­no­va­tion en­gine work to­gether seam­lessly and ef­fec­tively.

In one ex­am­ple, Zimabwe's Econet works with truck­ing com­pa­nies by lever­ag­ing IoT to col­lect in­for­ma­tion for in­sur­ance com­pa­nies. A new busi­ness model in this con­text could in­clude a part­ner­ship with the Zim­bab­wean gov­ern­ment to feed data re­lated to road con­di­tions to the gov­ern­ment to in­form them of road is­sues and en­sure ad­e­quate in­fra­struc­ture main­te­nance is con­ducted.

The risk of a DIY mind­set

Tel­cos have tra­di­tion­ally ex­celled at part­ner­ing with hand­set providers and some OTT play­ers. Notwith­stand­ing, there is an un­de­ni­able oc­ca­sional ten­dency to take a "we-can-do-it-all" ap­proach. In the con­text of the emerg­ing tech­nolo­gies such as IoT, part­ner­ing strate­gi­cally is es­sen­tial to suc­cess. A Telco need not be a sen­sor man­u­fac­turer to ben­e­fit from IoT. Strate­gic part­ner­ships with giants like Huawei and Sam­sung would make more sense. There is emerg­ing a niche, nim­ble set of play­ers that are com­pet­ing with these es­tab­lished play­ers in the sen­sor busi­ness. The world of IT is now trans­formed into a SenseCom­pute-Ac­tu­ate phe­nom­e­non. In this con­text Tel­cos should fo­cus on their big­gest as­set – data – whilst forg­ing strate­gic part­ner­ships with hard­ware and soft­ware lead­ers to in­crease the pace of in­no­va­tion.

By analysing cus­tomer data ef­fec­tively, Tel­cos can help de­velop new busi­ness mod­els that are tai­lor-made to the needs of the mod­ern busi­ness en­vi­ron­ment. Com­pa­nies such as GE Health­care of­fer a glimpse at the pos­si­bil­i­ties: for ev­ery ma­chine they con­nect in a ru­ral hos­pi­tal, GE Health­care pro­vides hos­pi­tal man­age­ment with con­nec­tiv­ity and data on bed oc­cu­pancy, day-to-day us­age trends, and more, giv­ing the hos­pi­tal vi­tal in­sights into its op­er­a­tions and cre­at­ing op­por­tu­ni­ties for greater ef­fi­ciency.

Tel­cos should work with soft­ware play­ers as well – and this is where SAP of­fers im­mense value. Soft­ware com­pa­nies have al­ready made huge in­vest­ments on prac­ti­cal, proven so­lu­tions to col­lect, an­a­lyse and process huge vol­umes of data. They can be con­sid­ered as nat­u­ral coin­no­va­tors in op­por­tu­ni­ties lead­ing to new busi­ness mod­els or rev­enue streams. SAP's anal­y­sis shows that al­most 76% of the world's trans­ac­tions touch our very own soft­ware sys­tems de­ployed by clients glob­ally. We see the dig­i­ti­za­tion era bring­ing in a new set of op­por­tu­ni­ties to bring our vi­sion of mak­ing the world run bet­ter and sim­pler a re­al­ity.

How­ever, it is crit­i­cal that Tel­cos move fast: ma­jor global tech firms such as Google, Face­book and Mi­crosoft are all in­vest­ing in new con­nec­tiv­ity so­lu­tions for emerg­ing markets. If they work, the Tel­cos will be­come even less es­sen­tial to the suc­cess of these com­pa­nies or the needs of their cus­tomers. If Tel­cos don't in­vest in find­ing in­no­va­tive ways of sup­port­ing these com­pa­nies, they will sim­ply do it them­selves. The op­por­tu­nity cost could run into tril­lions of dol­lars.

While African Tel­cos have been helped by the slow pace of smart­phone adop­tion on the con­ti­nent, this is likely to change as low­cost smart­phones per­me­ate the mar­ket. The avail­abil­ity of ex­po­nen­tial tech­nolo­gies, in­creas­ing lev­els of cus­tomer so­phis­ti­ca­tion, and the grow­ing avail­abil­ity of broad­band and al­ter­na­tive con­nec­tiv­ity op­tions are all putting pres­sure on Telco rev­enues. Af­ter 20 years of rel­a­tively man­age­able busi­ness con­di­tions, Tel­cos are fac­ing a far more com­pet­i­tive and dis­rup­tive busi­ness en­vi­ron­ment.

Right now, Tel­cos have the lux­ury of in­vest­ing in in­no­va­tion and rein­vent­ing their busi­ness mod­els. The first gold rush is over. But there are more gold seams – from IoT to life­style services and more – of­fer­ing greater rev­enue op­por­tu­ni­ties than ever be­fore. It is crit­i­cal that they heed the warn­ing signs and find new ways of de­liv­er­ing value to busi­nesses and con­sumers.

To meet the de­mands of a rapidly chang­ing busi­ness and tech­nol­ogy en­vi­ron­ment, many Tel­cos have bol­stered their dig­i­tal ca­pa­bil­i­ties by ap­point­ing Chief Dig­i­tal Of­fi­cers. There is an in­her­ent risk to this.

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