Are VAS Becoming a Revenue Driver in the Mobile Communications Market in Sub- Saharan Africa?

Are VAS Becoming a Revenue Driver in the Are VAS Becoming a Revenue Driver in the Mobile Communications Market in SubMobile Communications Market in Sub--

Saharan Africa?Saharan Africa?

Jiaqi Sun, Jiaqi Sun, ResearchResearch AnalystAnalyst

Information & Communication TechnologiesInformation & Communication Technologies

30th 30th NovemberNovember 20112011

Today’s Presenter

Jiaqi Sun, Research Analyst

Frost & Sullivan

2

• Jiaqi joined Frost & Sullivan’s African ICT team in 2009. He focuses on

analysing the unified communications and telecommunications industry

in sub Saharan Africa

• Dynamic expertise in mobile broadband, VAS, fixed-line

communications, unified messaging, mobile payment, and M&As

• Prior to joining Frost & Sullivan, Jiaqi worked briefly as a junior

consultant with SHIVA Capital GmbH in Munich Germany, focusing on

the automotive and real estate markets of China and India

Agenda

2

3

Introduction

VAS Offerings – Present and Future

Strategic Objectives and Business Models

1

3

4

5

6

VAS Opportunities

VAS Best Practices

Conclusions

7 Q & A

Introduction

Mobile Services Evolve by Adding Complementary Mediums of Communications

Voice + SMSVoice + Messaging +

Internet

Voice + Multimedia +

Applications

Traditional Mobile Basic Mobile Advanced Mobile

4

Communications Communications Communications

VAS Delivery Mediums Examples

SMS/MMS Premium-rated SMS, SMS/MMS subscriptions

USSD Airtime transfer, mobile money transfer

IVR Information services by dialing short-codes

Web Images, music, game and video downloading

Combinations of above mediums WebtoSMS, SMStoEmail, Voice SMS

VAS

Call-related VAS

Call Blocking, Call Forwarding,

Callback, Missed

Multimedia VAS

Messaging:

SMS and MMS Subscriptions, IM,

Premium Content:

Broadband Internet,

Other VAS

Enterprises

Mobile Commerce (B2B

Consumers

Mobile Payment (P2B and P2P), SIM

Introduction

Primary Categories of VAS

5

Note: Other enterprise VAS are mainly application-based services including mobile advertising and marketing, premium-rated SMS, FMC/telemetry

services, shared bundles , and customer support services.

Other consumer VAS include, among others, CUG, maps, email, and social networking applications.

Callback, Missed Call Alert, Airtime

Transfer, ReachabilityNotification

Subscriptions, IM, Voicemail, Voice

SMS, SMStoEmail, WebtoSMS

Broadband Internet, Ringback Tones,

Blackberry/iPhone, Conference Calling,

Entertainment

Mobile Commerce (B2B and B2P), Bulk SMS, Rate

Analyzers, Self-Service Portals, Itemized Billing, and other enterprise VAS

and P2P), SIM Replacement,

Cellphone Blacklisting, Itemized Billing, Mobile

TV, and other consumer VAS

Source: Frost & Sullivan analysis.

South Africa Kenya Nigeria Uganda MessagingPremium Content

Other VAS (Consumer)

Other VAS (Enterprise)

•Vodacom•MTN

•Safaricom•Orange

•Starcomms•Airtel

•WaridtelNetwork

Operators√ √ √ √

•Internet Solutions•MWEB•Webstorm

•AccessKenya Group •Wananchi Group •KenyaWeb

•21st Century Technologies•Africa Online•iWay Africa

•Infocom•Africa Online •AfsatCommunications

ISPs √ √

•Interactive


Key VAS Market Participants

6

•Content Connect Africa•EA Mobile•35050•DSTV Mobile

•Interactive Media Services •Liberty Africa •Mtech Communica-tions

•MES/Exact Mobile •3way Communica-tions•FIJI Ventures

•SMS Media •In2EastAfrica •Ultimate Media Consult

Value-Added Content and Catalogue Providers

√ √ √ √

•Apple •Google•RIM•Comviva•Ericsson •VISA (Fundamo) •MCI Consultants•Buzz Bus•Ad Mob•MXit

•Google •Microsoft•Ericsson•Nokia •Samsung •eMobilis •Softlink Options

•Datatronics •Peers Consulting •Eresoft •Multisoft Consulting •Future Technology Systems •Ericsson

•ATX Technology •BitWork Technologies •Future Link Technologies •Data Fundi •Yo Uganda

Application Developers

√ √ √ √


Safaricom Vodacom Orange MTN Airtel

Messaging VAS

Premium Content VAS


Trends of Major Categories of VAS Offered by Network Operators

7

Premium Content VAS

Other VAS (Enterprise)

Other VAS (Consumer)


Stable IncreasingDecreasing


Strategic Objectives of VAS

Main ObjectiveSub-Objectives Tactics

• Reduce customer churn•

8


Total Revenue Growth

••Increase data ARPU

• Drive subscriber growth

• Boost voice minutes

• Build competitive differentiation

• Reduce OPEX

• Customer loyalty programs

• SMS televoting services

• Dynamic billing structures

• Customer education


Impacts of VAS Offerings on Business Models

Backward Integration

Short term Medium term Long term

9


Strategic AlliancesIntegration

Organic Growth

Forward

Integration

Goals • Partnering with

technology vendors and

content providers

• Merging with media and

broadcasting service providers

• Acquiring ISPs to enrich portfolios

• New technology R&D

Strategies

VAS Opportunities

Mobile Payment and Commerce Services are Primary VAS Revenue Drivers in SSA

High

Impact on R

evenue G

row

thIf

Successfu

l

Mobile payment/commerce

Telemetry services

Video calls

Rate Analyzers

Tracking of mobile phones

Social networking applications

10


Probability of Success

Low High

Low

Impact on R

evenue G

row

thIf

Successfu

l

Mobile advertising/marketing

Mobile TV

Bulk SMS

Self-service portals

CUG

VAS Best Practices

Devices and Verticalization are Primary Elements of Business Models

Low-Cost and Advanced Devices

Practicality and

Customized Solutions per

Industry Verticals and

Consumer Segments

Full Network Coverage

� Devices are important in mature and high-growth markets as telecommunication service providers are striving to offer new and innovative VAS to attract and retain customers.

� Operators can enhance their brand awareness by offering handsets incorporating brand names or embedded applications.

Low-cost and Advanced Devices


� By providing customized solutions/services to different industry verticals and consumer segments in each country as well as from country to country, this practice maximizes the spend potential of

Customized Solutions per Industry Verticals and Segments

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and Efficiency-Enhancing Products

Strategic Alliances

Segments

High Value-to-Price Ratios

Niche Areas for

Differentia-tion


country to country, this practice maximizes the spend potential of different industries and consumer segments.

� Customer relation management (CRM), enterprise resource planning (ERP), and subscriber data management applications help providers understand customers’ requirements and improve customer support services, driving data uptakes.

Full Network Coverage� Practical applications, such as mobile money

transfer/payment/banking services, can enhance customer value through reduced opportunity cost such as time, convenience, and transportation on visiting banking branches.

� Efficiency-enhancing products, such as monitoring and tracking solutions, will improve operating efficiency in production processes, monitoring and other repetitive activities of enterprises.

Practical and Efficiency-Enhancing Products

VAS Best Practices

Value, Partnership and Niche Areas are Key Elements of Competitive Strategies

Low-Cost and Advanced Devices

Practicality and

Customized Solutions per

Industry Verticals and

Consumer Segments


� Value is determined by benchmarking the market (equilibrium) price and service offerings. Operators and ISPs should offer a higher value-to-price ratio than their competitors by charging a lower price and/or offering more content.

� Market prices fluctuate in the short term, especially for new services like VAS, operators and ISPs should forecast future equilibrium market prices and service development trends to preset value-to-price ratios.


Full Network CoverageStrategic Alliances

12

and Efficiency-Enhancing Products

Strategic Alliances

Segments


Niche Areas for

Differentia-tion



� Strategic alliances are an effective tactic to quickly enrich product ranges and expand geographical footprints.

� Network operators can partner with content providers, technology vendors, and/or ISPs to offer innovative multimedia VAS.

Strategic Alliances


� Network operators and ISPs should focus on those areas that were poorly developed by existing service providers, such as mobile applications and telemetry services, as these areas present the best opportunity for differentiation.

� Network availability and quality of services are key differentiators for VAS requiring stable network performance and large network capacity.

Niche Areas for Differentiation

Conclusions

VAS is a new source of revenue and enables

Customer Retention

New Customer

Recruitment

ARPU

Growth

• Reduced customer

churn rates through

• Reduced customer

churn rates through

• Value-to-price

targets are a key

• Value-to-price

targets are a key

• ARPU growth is the

direct route to

• ARPU growth is the

direct route to

Organic

Growth

• In the long term, the

organic growth

• In the long term, the

organic growth

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offering VAS retains

annuity revenues.

• Customer

satisfaction and

value are improved

through enhancing

user experiences.

offering VAS retains

annuity revenues.

• Customer

satisfaction and

value are improved

through enhancing

user experiences.

indicator to assess

the impact on new

customer

recruitments.

• Consumers are

attracted by

premium content.

• Enterprises put

more value on

quality of services.

indicator to assess

the impact on new

customer

recruitments.

• Consumers are

attracted by

premium content.

• Enterprises put

more value on

quality of services.

generating new

revenue by offering

VAS.

• ARPU is boosted

through increasing

data traffic and

voice minutes by

VAS offered

separately and in

bundles.

generating new

revenue by offering

VAS.

• ARPU is boosted

through increasing

data traffic and

voice minutes by

VAS offered

separately and in

bundles.

business model

through R&D is

most sustainable.

• Eventually VAS

becomes a total

revenue driver and a

niche area for new

market entrants.

business model

through R&D is

most sustainable.

• Eventually VAS

becomes a total

revenue driver and a

niche area for new

market entrants.

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