Tanzania: Why Mobile Money, Data Are Telcos Revenue Drivers

Dar es Salaam — It is still the cash cow of mobile operators but revenue of voice calls is decreasing year after year amid changing dynamics in the telecommunication industry.

With technological advancement which is shaping the industry with more options for communicating, revenue from data and mobile financial services is growing fast while that of voice services which is the traditional source of revenue has been decreasing in the last two years.

Data from the largest mobile operator Vodacom - that may reflect the industry trend - indicate that messaging, data and mobile money recorded the fastest service revenues while that of the voice calls continued to decrease.

Vodacom which accounts for 32 per cent of the subscription market share by last December generated Sh1.02 trillion from its services with about 40 per cent being from the voice services.

However, the voice service revenue had declined by 1.1 per cent to Sh388.1 billion, according to the company's preliminary results for the year ending March this year.

On the other hand, the company's M-Pesa revenue increased by 14.5 per cent to Sh333.5 billion while mobile data revenue increased by 17.9 per cent to Sh167 billion.

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The trend reflects the trend that internet users are increasing in the country with majority of the customers doing it through smartphones.

Experts say more will happen in the telecommunication industry with unpredictable revenue strength.

"Telecommunication industry is more driven by technology and innovations, thus, we cannot be certain of what revenue stream is going to dominate. The operators have become like a platform for other services to occur... think of mobile money integrated with banks and sim banking and all kinds of mobile payments," says economics Professor Honest Ngowi who is also the principal of Mzumbe University's Dar es Salaam campus.

"It is one of disruptive industries meaning that a lot will happen and overshadow some current services. So, I think the future is on the digital services which revenue is increasing and slowly will overshadow others," he adds.

In Tanzania, the tariffs of the voice calls have been falling following a stiff competition which has resulted into price war among the operators.

Until December 2018, Tanzania was home to seven operators with Vodacom accounting for the largest market share at 32 per cent followed by Mic (Tigo) at 29 per cent and Airtel at 25 per cent. Halotel becomes fourth with nine per cent with Zantel, TTCL and Smart accounting for three per cent, two per cent and 0.30 per cent respectively, according to Tanzania Communications Regulatory Authority (TCRA).

With majority of the operators having mobile money services which are also integrated with banks, the number of active registered accounts for mobile money stood at 23.3 million in December 2018, compared with 19.4 million at the end of December 2017.

Vodacom alone transacted Sh49.3 trillion per year through its M-Pesa, representing a 38.6 per cent of the mobile financial services industry, according to the company's finance director Jacques Marais who recently briefed investors through a conference call.

"We will continue to drive long-term shareholder value and lead Tanzania through the digital journey, leveraging data analytics and segmentation. The acquisition of 700MHz spectrum in the year provides a good opportunity to increase 4G coverage across the country and extend our leadership position in data," he said. "Our focus on data monetization and acceleration of smartphone penetration, as well as leveraging on our expanding base to drive data adoption remain the key drivers to help bridge the digital divide," he said adding that M-Pesa is one of the company's key driver.

Globally, the mobile revolution has resulted in new forms of competition for telcos and shrinking revenue from traditional offerings like voice and texting.

Social media and smartphones have shifted customer preferences toward mobile platforms and helped generate products that cut directly into what once formed the lion's share of telco profits.

Tools like WhatsApp, FaceTime, and Google Hangouts have established themselves as "free" alternatives to paid voice and texting services. As a result, customers no longer expect to pay much for voice and texting, but rather data, which can give them access to a slew of alternatives at little to no cost.

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