Revenue declines force African mobile innovation

African mobile service operators are bundling and adding services as well as investing in solar-powered phones as ways to increase their average revenue per user (ARPU) in light of decreased profits.

Mobile users have reduced spending on voice services at the same time that operators face increased competition from new networks while increased consumer awareness is also driving down the cost of making phone calls.

As a result, networks have been forced to bundle voice and services. Data is proving to be an alternative revenue source in Sub-Saharan Africa after the SEACOM and TEAMS fiber-optic cables lit up Eastern and Southern Africa.

"Data is the future -- it is a key competitive advantage to push up depressed ARPU and generate more revenue. The undersea cables will ensure that the continent enjoys more bandwidth with faster connectivity," said Themba Khumalo, MTN Uganda CEO.

For East African networks, data offers the possibility of increased income especially in rural areas where ISPs have not penetrated and broadband is still a dream. The networks can ride on existing base stations to offer EDGE (Advanced Data Rates for GSM Evolution) and 3G services.

MTN has the most robust network in 21 African countries, but its widest array of value-added services is in South Africa where competition and investments in such services are high.

For South Africa, MTN offers MMS (Multimedia Messaging Service), instant messaging, e-mail, vehicle tracking, asset tracking and location-based services such as MTN2myaid and MTN WhereRU. In addition, MTN has invested in a range of content services to coincide with the 2010 FIFA World Cup, mobile content, music bundles and mobile banking.

The mobile phone has also emerged as an avenue for video, and satellite TV provider-DSTv is partnering with MTN and Safaricom to offer free DSTv mobile services across Africa. The service is free until next April when a subscription fee will be introduced.

The new avenues have also led to growth of other companies whose core businesses are to provide value-added services to mobile-phone users.

At the AfricaCom conference two weeks ago, Openwave Systems launched Mobile Internet ReadySet, a low-cost, prepackaged platform that provides operators with a central point from which to offer new, revenue-generating, mobile Internet services.

Mobile Internet ReadySet is riding on the wave of quick returns, which may attract companies that have suffered from increased competition and longer periods of returns on investments.

The software provides traffic management tools including content adaptation and acceleration, bandwidth optimization, and service promotion and billing, in a single package.

"ReadySet serves as a single management point for the operator to control and observe all Internet services. We believe Mobile Internet ReadySet, as well as our location and messaging offerings, will enable smaller operators to effectively differentiate their customer offerings while growing their mobile data revenue," said John Giere, Openwave senior vice president of products and marketing.

While value-added services may be easy to advertise, and increase uptake, spreading infrastructure in rural areas still remains a problem. The networks may have invested in renewable-energy-powered base stations in areas with no electricity, but spending remains low. This has forced networks to drum up support for solar- powered phones, as a way of raising the average revenue per user.

"Considering market dynamics in Africa, solar handsets with the right cost will keep remote customers connected without being connected to the national power grid," said MTN's Khumalo.

The push for solar-powered phones is spearheaded by Chinese manufacturer ZTE and Intivation, a Dutch company that developed the solar-phone concept. Intivation, ZTE and Safaricom launched solar phones in Kenya in September.

"With solar phones, people talk more because the phone is on throughout, GPRS-enabled phones allow more revenue streams through data and the cheap costs allow more people to own handsets," said Isaac Matalanga, Africa business director at Intivation.

The 2010 FIFA World Cup in South Africa is projected to be the major driving force for mobile video content although popular TV shows are likely to drive revenue up.

According to Juniper Research, the global mobile market for sports, leisure and information content is set to grow from its just under US$4.2 billion in 2006 to $9.5 billion by 2011.

Although Juniper forecasts Europe as the largest geographic market, which is expected to account for 40 percent of the revenue, Africa is set to increase its uptake as mobile phones spread more into the remote areas.

"The continued roll out of 3G services globally will provide the platform for the development of high-quality, video-content-based services," said Bruce Gibson, the report author.

In East Africa, ISPs have faced competition from GSM (Global System for Mobile Communications) companies in the provision of bandwidth and other managed services. The convergence and unified license plan has led to blurred lines and allowed companies to offer more than traditional services.

Most companies are offering corporate customers bundled services to keep them within the network. Telkom Kenya has reduced its costs of CDMA (Code Division Multiple Access) calls and is offering uncapped costs for home users and bundled services under CDMA, GSM, and corporate bandwidth.

ISPs in Kenya are also offering cheaper rates for bandwidth, local loop, hosting and virtual private networks. This encourages corporate users to buy services from one company.