14 July 2017

West Africa Com 2017 - a Sobered Mobile Industry Takes Stock of the Scale of the Coming Digital Transformation

London — 100% of delegates at West Africa Com 2017 said they were optimistic about their industry's future but there is a developing understanding of the scale of what's happening. Less blaming it all on those nasty OTTs and more getting down to what can be done to change the business model. Russell Southwood reports on highlights from the conference.

Birago Diene Moctor Beye, Head of Wholesale and Carriers Division, Sonatel gave the welcoming address in which he said the company had rolled out 360 4G sites in Dakar, Touba and Saly and opened a Tier 3 data centre last June. He also noted the on-going project for sharing its infrastructure with other carriers.

Thecla Mbongue, Senior research Analyst, Ovum gave a useful overview of the mobile landscape in West Africa. The region has 321 million subscribers, 33% of Africa's total subscriber base. Overall there is an average 87% penetration level, which ranges on a country basis from 37% in Niger to 137% in Ghana. But significantly overall revenues fell slightly from US$14.9 million in 2015 to US$14.5 million in 2016.

Mbongue's forecasts were optimistic about smartphones: at an all-African level the average will go from 28% in 2016 to 75% in 2025. Basic and feature phones were 70% in 2016 but were predicted to fall to 22% by 2025.

On a panel that asked What can regulators do to accelerate the spread of Internet connectivity in West Africa?, Amadou Makhtar Fall, Head of Legal and Regulatory, Sonatel complained that OTT operators don't pay taxes and share the same obligations as mobile operators. He said that this was unfair competition and would have an impact on their investment in 4G.

Interestingly, this kind of argument did not dominate the event: it felt like operators were beginning to move on and face the new business environment. Indeed Sonatel now has someone whose job title includes the phrase Digital Ecosystem Relations.

There was a discussion on Telco Financing that I moderated and in my opening remarks I talked about the end of the mobile paradigm and trends that were already visible in Africa. See link:

I was the Chair for Day 2 and I took a straw poll asking delegates whether they were optimistic or pessimistic about the future of the telecoms sector in Africa: 100% were optimistic.

Abdalla Saeed, CEO of Sudanese owned Expresso gave the keynote on day 2. The company has sold its Ghana subsidiary and is now present in three West African countries: Mauritania, Senegal and Guinea. He said:"There are rapid, interesting shifts in the industry mot experienced before... We are moving to a digital and data era... As we struggle with slower revenue growth (and) the high CAPEX needed to remain as leaders in the industry, EBIDTA margins are challenged... .The digital shift will bring challenges."

This shift brought with it the challenge of building partnerships to implement the moves needed to handle what was happening:"We have to move from managing scale to managing complexity." As part of the same transition he mentioned that it had a 2020 Plan to build efficiencies into its operating model that was already beginning to generate savings.

He spoke about Expresso's experience in Senegal where there was "falling ARPUs, hyper-competition and OTTs." He predicted that its 3G/4G base was likely to overtake its 2G base by mid 2019 with 64% of users having either a 3G (58%) or a 4G (6%) handset.

Education and learning NGO Handi'Educ CEO Fatou Diop said operators needed to come to terms with the OTT operators and find ways of building partnerships that benefitted both of them. On the operators, she said they needed to "adapt a design rather than an engineering culture."

Phanish Bardwaj, Head Key Accounts, MENA, Mahindra Comviva gave a presentation that got down to the nuts and bolts of the digital transformation operators need to make. He looked at a range of different verticals like retail and banking and described the different ways in which data could be used as incentives to users and SMS used for A2P notifications.

Bardwaj told delegates:"Data is the new currency in the digital ecosystem... Data should not be sold as GBs any more but has to be sold as engagement (for digital services and transactions)".

Former CEO Virgin Mobile in South Africa, Steve Bailey, Ignition Telecoms talked about launching MVNOs in South Africa and the business case for operators in West Africa allowing their network to be used by MVNOs. There are currently 10 MVNOs in South Africa, the largest in the market being FNB (a bank), Mr Price Mobile (retail), Virgin and Me&You (an independent).

He said that to succeed an MVNO needed: an existing customer base, a niche, marketing and advertising assets, a distribution channel and an established brand:"MVNOs normally take about 10% of the market." He said that in West Africa there were opportunities for microfinance companies, cross-border MVNOs, media, churches and football clubs.

Tomorrow's operators need to focus on the new sources of revenues: MVNOs, mobile money and financial transactions, digital transactions, volume data, digital advertising and data centres.

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