Mobile operators have turned to new content models and exclusive applications to stem the tide of rapidly dwindling customer growth.
Over the last year, operators have faced a number of drastic changes to the industry, which have forced them to look at new ways of keeping customers on their networks.
New legislation in the form of the SIM card registration Act has systematically hacked at their customer bases, and international analysts say they have no choice but to look at these models to bring growth back to their bottom line.
The new laws have seen Vodacom and MTN each drop a million subscribers over the year, and both have seen a significant slowdown in revenue growth locally.
Many in the industry expected the operators to embark on a price war to curb the losses. However, Bain & Company's managing partner in SA, Vittorio Massone, says a one-on-one price war is not the best way for the operators to stay competitive.
“When competition is fierce, the kneejerk reaction is to cut prices; [but] innovative applications and services could keep the customer loyal and provide the value-add that operators need to differentiate,” he comments.
Massone says high churn is a specific characteristic of the South African market, with the prepaid market facing a rate as high as 40%. Application and content development will help prevent churn and provide a new revenue stream for the operators.
Changing tack
With SA's mobile market now mature, and far more competitive than before, operators are starting to realise there needs to be new avenues of growth.
Cell C has been heading the charge, under the leadership of newly-installed CEO Lars Reichelt. The company has created niche packages, which are marketed with content specific to the target consumer.
Its Winc package, aimed at women, and Gospel Life packages, which target the South African Christian community, are being well received. Both packages come with music downloads and speciality community donations. For example, of the revenue generated from calls made by Winc subscribers, 1% is donated to the Women in Confidence fund.
Also, the company's recent deal with Nike brings Cell C subscribers applications and videos specific to the international brand. Customers are given access to football training videos, and it also ships with DVD content.
Playing ball
MTN has also signed a recent deal that will boost its content provision revenues. International football club Manchester United and MTN will now offer content specific to the club's activities, which MTN hopes will draw in new customers.
“With the global focus on smartphones and the evolution of mobile Web to broadband-based offerings, we are positioning ourselves to be presented as a major player in the applications arena,” says Tony Sousa, senior manager at MTN SA.
The company says it is not only going to focus on content and applications for mobile phones, but will also start looking at creating Web sites around these products. “MTN, through MTN Play, most definitely intends to increase its participation by providing additional content services in supplying more rich media services that in time will expand from mobile to include online Web applications,” adds Sousa.
Vodacom has long sat on its mobile portal provided through Vodafone, which allows users to pull games, music and other content to their phones. There are industry mutterings of a possible local content deal that will be exciting; however, the company has not confirmed this move. It has also signed an exclusive application deal with Nedbank to provide mobile money.
Whether the content and application model can rope in new customers and increase the operators' revenues remains to be seen. However, Massone says South African mobile companies should not overlook an international trend that will become integral to their customers.
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