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Telcos across Africa are focusing on effectively maximising the return on investment from data and monetising emerging opportunities such as the Internet of Things (IoT) to remain competitive and afloat.
This is due to increasing levels of competition and is forcing them to seek new methods to stem the steady decline of traditional voice services.
According to George Kalebaila, research director for telecommunications, media & Internet of Things at International Data Corporation (IDC), they expect greater market consolidation as telcos increase efforts to acquire smaller ISPs in response to the challenging marketing conditions.
“Market consolidation, especially in West Africa will be driven by heightened market saturation, declining average revenues per user (ARPUs), increasing operating expenditure and diminishing profit margins on services. IDC expects some consolidation, especially between local ISPs that possess 4G LTE frequencies and fibre-to-the-x or FTTX infrastructure and multinational telcos with solid financial support,” he says.
In markets where 4G adoption is already gaining traction, discussions around fifth-generation network technology (5G) will take centre stage, creating awareness and bringing the possibilities and expectations of future data networks to the forefront.
“IDC expects vendors to focus on the higher bandwidth 5G offers and its potential ability to support emerging services such as IoT, seamless video on demand or IPTV, drone video recording, smart city solutions and virtual reality applications,” says Kalebaila. “We also expect 5G to deliver gigabit connections that enable seamless delivery of rich multimedia services and applications.”
As competition continues to increase in the more mature telecom and IT markets in Africa, the need to attract and retain customers through differentiation has become imperative. This means that telcos must move beyond traditional connectivity offerings and provide IT services such as unified communications and collaboration, cloud and data centre services.
“In the medium to long term, telcos will be forced to re-evaluate their business models to efficiently design, develop and deliver cost-effective solutions and services. This may compel telcos to migrate from operating legacy networks to deploying agile systems that are capable of increasing operational efficiency while speeding up the time to market of new solutions,” he says.
“Those telcos that prioritise technologies such as network functions virtualisation or NFV and software-defined networking or SDN for the delivery of connectivity, cloud and data centre services, will be well placed to maximise cost savings, achieve greater efficiency and increase productivity.”
In 2017, telcos are also expected to focus more on 4G monetisation strategies such as enhanced data offerings, service bundling and partnerships with digital media companies from a content perspective. While the deployment of 4G networks is already gaining traction across Africa, spectrum availability, low customer awareness, low coverage, high tariffs and the cost of 4G smartphone devices remain key challenges.
“The availability of affordable 4G smartphones is expected to increase 4G penetration and those telcos that are creative in their offering and allow customers to trade in their existing 3G smartphones and devices will differentiate themselves,” says Kalebaila. “Rather than focus on extolling the features of 4G, telcos could further drive adoption by introducing innovative data bundles and transparent prices, particularly as 4G provides an opportunity to start transitioning to a data-centric model and preparing for a voiceless future.”
He says open application programming interfaces (APIs) will become more commonplace, enabling the developer ecosystem to drive innovation and for telcos to improve partner management. “Historically, open APIs were used in traditional telco services such as USSD and SMS. Going forward, we expect the remarkable growth of financial services platforms, such as mobile money platforms, and breakthrough emerging technologies, such as IoT, to drive the release of APIs by telcos to the developer ecosystem. This will allow telcos to harness innovative and localised solutions.”
Kalebaila says that telcos that take concrete steps to transform themselves internally will be best positioned to survive digital disruption. “The key focus areas in 2017 will include business model transformations and network efficiency improvements using IDCs 3rd Platform technologies, namely cloud, big data, mobility and social business,” he says.
Before they can become digital transformation partners to their clients, the telcos will first need to harmonise their internal IT environments with external-facing IT systems and become digital providers to their own internal business functions. “By streamlining, optimising and modernising their own IT environments, telcos can leverage the lessons learnt internally to optimise customer service and experience to their external clients,” says Kalebaila.
He adds that telcos need to identify their key challenges, prioritise the development of unique digital transformation strategies and implement a phased approach to digital transformation.
“Telcos can, for example, use big data technologies to upsell and cross-sell services, design new products and services, or create new revenue generation streams from existing customer data assets. Understanding and tracking customer behaviour will also help telcos provide personalised and optimised offerings to their subscribers, to enhance customer loyalty.”