While research firm Ovum has said revenues from mobile value-added services (VAS) are slowing internationally, local industry observers and mobile operators tend to think the local market is ripe and ready for rapid growth - if operators take advantage of the ample opportunities out there.
Worldwide, according to Ovum, VAS revenues are expected to grow at a compound annual growth rate of 10% between now and 2018 - driven predominantly by the African and Asia-Pacific markets.
"The African market shows the greatest potential, given that it is still in the early stages of development and has lower revenues than the rest of the world. There will be a high growth in VASes in this region over the forecast period, propelled by services based on mobile entertainment and mobile utility. This growth is heightened by the fact that Africa is a mobile-first market, which leads to more services being consumed on mobile than on the PC."
Lessening loss
With more cuts in mobile termination rates (MTRs) recently announced - and asymmetry that favours the smaller mobile players - analysts say VAS will be a differentiator in growing revenue and margins as voice revenue declines.
Africa Analysis analyst Dobek Pater points out that the MTR glide path that saw prices dropping over the past three years - to the current fee of 40c - have cut into the larger operators' margins. "Vodacom has already lost around 40% of its interconnect revenue (I think). The proposed glide path will possibly result in the loss of another R4 billion to R5 billion (ie, less than 10% of the revenue base) and VAS will be one way of making up that loss."
About two weeks ago, the Independent Communications Authority of SA (ICASA) announced MTRs - the fees operators pay to carry calls on each other's networks - have been put on a three-year sliding scale, which will see the inter-operator fees dropping by 50% next year - down to 20c - and thereafter 5c a year, until it reaches 10c in 2016.
World Wide Worx MD Arthur Goldstuck says these new MTRs will make it obligatory for the networks - especially Vodacom and MTN - to begin more aggressive exploration of their VAS opportunities, challenges and necessities.
Oscar Ruiz, partner and head of AT Kearney's communications, media and technology practice in Africa, says as MTRs drop and voice becomes more of a commodity, operators will shift their focus largely towards data - "but few are able to grow data profitably and VAS will be key for this".
Ample opportunity
Goldstuck says the only limitation on innovation is lack of vision and imagination. Pater says the opportunity for innovation is probably limitless in a sense - as new applications continue to be developed. He says operators will start looking at the feasibility of deploying service delivery platforms, which will allow them to develop new products quickly from a set of standard building blocks and deliver services of a consistent quality.
Consulting firm AT Kearney points out that the possibilities in the world of mobile are vast - both in the mobile-rich country of SA and globally. "The mobile industry has shown solid growth in recent years, with both total connections and subscriber numbers growing strongly. The headline hides a number of regional trends - with the growth of data highlighting new types of industry growth in the developed markets and increased SIM and subscriber penetration in the emerging markets.
"With 3.2 billion people of the seven billion on earth enjoying the social and economic benefits of access to a mobile phone and a further 700 million subscribers expected by 2017, there is still huge potential for further strong growth in the mobile industry to 2017 and beyond."
Phil Patel, chief officer of the consumer business unit at Vodacom, says, however, the company has to date underinvested in VAS. He says, as is the case overseas, music and video will be huge driving forces for consumers in SA. "These are big areas of VAS for Vodacom, but they have not been developed enough. Now that data is affordable enough to start using these services more, we can expand on these. Things like Spotify and video are top of mind for us."
Patel says payment services - like prepaid electricity and perhaps even an e-toll payment service - will also be a focus for the company as mobile users seek to use their devices to make everyday tasks easier.
Mike Fairon, general manager for products and solutions at MTN, says the company is constantly exploring new ventures, concepts and products, and the local market is "full of opportunities". The challenge, he says, is to source local services that can be commercialised for both revenue and consumer value.
Ruiz points out that a "copy and paste" approach will not work in the local market - where customers are as diverse as cultures. "VAS propositions successful in the sophisticated Asian markets or the more traditional EU and USA markets will not necessarily be successful in Africa. Understanding of segments and the development of very targeted VAS propositions is required."
He says, however, that few are ready. "Big data capabilities have to be built."
Fairon says in a world fast approaching the ideal of an "Internet of Things", innovation in the mobile world is everywhere. "There is ample room to build an ecosystem that encapsulates immense benefits for the operator, consumer, service provider and the development community."
Ruiz suggests operators look to partnering - and even sharing risks with - original equipment manufacturers "to enable data and VAS growth and reach a broader customer base".
Patel says Vodacom is working on a number of VAS initiatives. "VAS is about the evolution of products and services - and we are only at stage one."
Vodacom is expected to launch a revamped version of its mobile money service, M-Pesa, soon. Introduced in SA three years ago, M-Pesa has as yet failed to gain traction. In May, Vodacom CEO Shameel Joosub said the mobile money offering would be re-launched on a new IT platform that would interface directly into banks. He said Vodacom was also looking into expanding the distribution channel to add on more points of sale.
MTN, meanwhile, is marketing its Mobile Money as a fast-growing service that could fundamentally change the face of financial services in SA.
Share