AfricaCom 2011: Connecting the unconnected

AfricaCom 2011: Connecting the unconnected Dominic Smith reviews AfricaCom, the number 1 event for the African telecoms industry with more than 6,000 participants and 250 exhibitors.

A regular fixture on the telecoms industry event calendar, AfricaCom brings together all the key players in the African telecoms industry for two packed days of conference and exhibition activities in Cape Town, South Africa. Informa Telecoms & Media seems to have struck upon a winning formula for the event with an excellent conference programme, free participation for African operators and the attractive Cape Town location ensuring there is always a good level of attendance and a real buzz around exhibition floor.

Changing lives

The conference keynotes set the tone for the event, with Michèle Scanlon from Indian Atlantic doing an excellent job chairing the opening panel session with leading executives from Vodacom International, MTN and Orange Group debating the topic of “Transforming Operator Models”.

What comes across in such a debate is just how important mobile communications is to Africa as a whole, with both Vodacom and MTN using the mantra “changing lives” at the centre of their company visions. A common theme to emerge was also the need to develop skillsets and change the mindsets of staff, with a strong drive towards recruiting and training more local people in each country of operation.

Market conditions in Africa are extremely tough though, with fierce competition in many countries leading to voice tariff erosion and very low ARPUs (see our interview with Duncan Watta from Essar Kenya for an example). Marc Rennard, Executive Vice President for Orange, described how a third of Orange’s customers are now in Africa where they are present in 22 countries, however these operations contribute much less than a third of Orange’s overall revenues.

With such limited fixed telecoms infrastructure for most of the continent, mobile is seen as the primary way to connect people to the internet with Johan Dennelind, CEO of Vodacom International suggesting that 80-90% of internet use will be on a mobile device. Orange’s Rennard agreed with this sentiment, revealing that much of the data services growth is currently driven by social networking sites such as Facebook which has grown by 50% in the last 6 months alone and now has more than 36m users in Africa.

The second largest mobile market

Nick Jotischky, Informa’s Principal Analyst for Middle East & Africa, presented the results of their latest survey and research into the major trends and influences for the African market, with one of the most tweeted statistics being that Africa now has 600m subscribers making it the world’s second largest mobile market by connections. Though true in simple terms, this was qualified in Jotischky’s presentation with the comment that this equates to approximately 420m unique customers due to the multi-SIM phenomena that sees around 30-40% of subscribers carrying SIMs from multiple networks.

One of the key stats to emerge was the Top 10 African Markets by year on year growth rate. Top of the list is Ethiopia which has grown by an astonishing 169.8% in the last year, despite being a monopoly market. This is also not a small market, with now more than 10 million GSM subscribers, but a population of around 80 million means there is still huge opportunity for further growth. The other interesting observation around the Top 10 fastest growing markets is that typically these markets are not dominated by the big name players you will find in the largest markets, i.e. MTN, Vodacom and Orange. They may not be there yet, but these would seem like pretty good targets for investment in the future.

With voice tariff erosion in all markets, data services are seen as the great potential for growth in Africa. However, Africa is currently running at well below half of the global average with only around 11% of service revenues coming from data services, compared with nearly 30% globally according to Informa’s figures. And if you exclude M-Pesa transaction revenues from this number the percentage is likely to be much lower.

So there is still a long way to go for data services in Africa, but with LTE rollouts already planned in the three largest markets of South Africa, Egypt and Nigeria, there is a huge amount of investment underway to try and take advantage of this opportunity.

The big shift in Africa is now coming from the need to focus more on customer retention and loyalty, rather than just new subscriber acquisition, with 22% of survey respondents saying retention is now a higher priority and 60% saying retention and acquisition are equally important. Informa’s research highlights the worrying statistic that 71% of respondents believe that customers are less loyal today compared with two years ago, with network coverage, quality and capacity ranked as the top factors affecting churn.

However the top drivers for retention / loyalty come in the form of specialist customer services and discounted tariffs / bundles, with 89% of respondents flagging these as either important or very important to their business. In support of these retention strategies, first call resolution and customer care business processes were identified as the two most important areas of focus.

Final thoughts

Since returning from Cape Town I’ve seen a few reviews that have focused on the words of Serame Taukobong from MTN, who highlighted the need to connect Africa with the rest of the world. It’s a nice soundbite, but is this reflecting day-to-day reality for the majority of African operators?

The level of interest and discussion we had around our CRM solution confirms what Informa’s research reveals about the urgent need to focus on managing the customer relationship and building customer loyalty. Prepaid customers that make up the vast majority of African subscribers have for too long been left out in the cold when it comes to customer services, and the net result is high levels of churn and missed opportunities to increase ARPU with additional services.

So it would appear that for most African operators it’s not so much about connecting continents as connecting with their customers. And CRM needs to move from being seen as just a cost centre, to being an opportunity to differentiate, upsell and enhance the overall customer experience.
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