OTT (Over The Top) services like WhatsApp and Skype are decimating revenue for telecom operators around the world. The trajectory is an existential threat to the operators, as if the revenue base is lost, these operators could collapse. From Kenya to Brazil, Nigeria to Indonesia and beyond, operators are exploring ways to overcome this problem.
OTT services use the infrastructure made possible by telecom operators to enable users to communicate with marginal monetary value accruing to the operators. OTT destroys monetary value (the revenue) in the industry; it does not by itself keep the value. The revenue MTN loses on SMS due to Skype is not directly transferred to Skype. That monetary value is simply destroyed, though the user benefits for using it largely free.
In Nigeria, the telecom industry has lobbied for government to regulate the use of the OTT services. The industry regulator, Nigerian Communication Commission (NCC), has noted that it would not be regulating the services. The EVC of the government institution, Prof. Umar Danbatta, in First Annual Lecture of CKN News noted:
“As a regulator, we will remain technology-neutral and will not regulate social media use of apps also referred as OTT’s. We nevertheless use our moral authority to request that Nigerians take advantage of the social media platforms to exchange information and participate in the political, social and economic processes of our country” Prof. Umar Danbatta,
In this piece, I propose three ways telcos can deal with this OTT problem in Nigeria. It will take a long-term approach. It is evident that the telcos have enough customer base to execute the steps proposed.
(Table below presents the number of subscribers per each individual telecoms operator at the end Q1 2017) (Source: NCC).
Build Credit Bureau with Banks
In Nigeria, the telecom operators already have massive personal data of Nigerians through the biometric SIM card registration. They will need to work with the banking sector to integrate all they have with BVN (bank verification number) in partnership with NIPSS. The goal is to make it easier for operators to ascertain the credit worthiness of subscribers towards moving into monthly paid plans. They can also work with NIMC and integrate its own data. They have the technical capacity, and can execute this project if they work together, to fund a credit bureau with focus for the telecom and banking sector..
Locked Smartphone With Contract
To help in the penetration of smartphone in Nigeria, the telcos will use the credit data they have collected to know those they can sell smartphone with option to pay over time. This is not really about the ability to earn salaries. There are many rich Nigerians with no formal salary (asks herdsmen that sell cows seasonably). The goal is that even those not earning salaries, they simply have to agree to pay when due. The telcos have to trust them. This system can be solid if all the telcos work together. Anyone that buys and refuses to pay off may never get SIM card ever since they have a central database of all people offered credit.Yes, you cannot have a default contract and still buy a new SIM card or even register a new SIM card. With this, they will increase the smartphone penetration and reap on their investments on 4G with more people having the tools to use data. Imagine if people can pay for Tecno phones at six installment payments. The number of smartphone users will skyrocket. That will benefit the telcos to push their data products.
Unlimited Monthly Data Plan
The present model of Pay As You Go is the easy way out. But that is going to hurt the telcos in long-term. You buy a N500 data of Etisalat and you can do WhatsApp for ten days. It makes no business sense to telcos. They have to innovate ferociously to exist. They have to sell their packages in monthly plan which means that if the user has paid, it does not matter if the person is doing WhatsApp or not. But to offer this plan, they need to have more data about the users and that is where the credit system is critical. They can still sell to PAYG customers but they will now increase the rate to compensate for the inherent lost value since those people will be doing WhatsApp and Skype outside monthly payment plan. They cannot increase that cost now without the monthly plan alternative. (Note: unlimited is never unlimited, they need to cap the monthly plan data usage.)
I do believe that the telcos need to think outside the box and come together. All the pieces are available at the moment to redesign their revenue base. But they need to execute. A new business strategy is required and that will mean working with banking institution and pioneering new areas like credit bureau. There are basic pillars which can help them overcome some of the challenges they have today.---
Join Tekedia Capital and build Next Africa with min of $10,000 in startups.