Nigeria’s 4th largest telecom operator, 9Mobile, which controls 9% market share, serving 15.4 million subscribers, has a New Year message: the firm will use IoT and machine learning to find new markets and territories. The Acting Managing Director, Stephane Beuvelet, hopes to recapture the old Etisalat Nigeria moment through product innovation at scale.

“From an aggressive enhancement of network capacity and innovative features to boost HD voice and video/data services, LTE network coverage expansion to 15 new cities, more innovative data offerings including triple play and streaming service, to digital services that support your everyday needs such as our 9Pay payment service, we are set to break fallow grounds in emerging areas like Internet of Things (IoT) and Machine Learning capabilities to drive superior customer experience,”  Acting Managing Director, Stephane Beuvelet, said

If they do execute in that space, that would be the phase 3 of the mobile telephony era: 2000s gave us the era of voice; 2010s gave us mobile internet, and 2020s will deliver amalgam of services like IoT built on the mobile connectivity which I expect to become ubiquitous by 2022.

Yet, 9Mobile should not see the revenue paralysis as purely technology-anchored. Yes, the biggest problem in Nigerian telecom is not just innovating on technology. The players must innovate on business model also. It is that business model innovation that would enable companies like 9Mobile to use the customer data to create new revenue models to fund these new ambitious projects.

I am surprised the company is not banking on using its customer data (under the right privacy) to architect this new future. Until someone can use the data telcos have captured via SIM card registration to build contract-based revenue system, among others, this harmattan of revenue erosion will remain.

Build a faster network, someone buys $1 worth of mobile internet credit, and spends 3 hours on WhatsApp calling someone in London. You have not helped yourself immensely as a telco. But if you get that person to buy a monthly package, then, it is immaterial what he does with his phone. That redesign of using customer data to create new revenue streams would be catalytic to the survival of the industry.

Apple is a company that differentiates on hardware within exclusive software. What makes Apple so unique is narrowing, and I expect the core feature differences to disappear by 2021, essentially two iPhone evolutions away. Android devices are very close. You may even argue that we are already there.

Every fashionista passes because it is a trend: spending $1,000 on a mass market phone will not work if there are good alternatives at $700. The finite hardware maturity improvement will catch up with Apple. Since it cannot claim it has the exclusivity to software innovation with Google Pixel and Samsung Galaxy coming along, not many will spend $1,000 for a phone. The major down-projection of iPhone X sales is a testament that others are rising even as Apple innovates. As uniquely Apple, the company deflected the problem to China last night.

Apple CEO Tim Cook released a statement, warning investors Wednesday that the company is lowering expectations for its first quarter 2019 performance: “While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.”

If you are an Apple investor, do not fall for that explanation above. Yes, Apple has a very big problem in its business model: you are transforming into a service company, and at the same time you want to stay premium on your hardware, restricting volume..

Simply, the company is making it clear that its future is going to include services. So, if you hold Apple stocks because of iPhones and iPads, you may have to reconsider. By dropping the disclosure, Apple wants investors to focus on its revenue bottomline and not the number of devices sold. As far as the company is concerned, if it can grow revenue through payment, apps, licensing, etc, investors should not overly care what is happening on hardware as the company transmutes into making services a key part of its future. Simply, Apple has gone Services.

As I have noted before, Apple needs to make very cheap iPhone so that more people can use its hardware to participate in the services. You do not expect to have huge volume when your hardware is very expensive. It is either you focus on selling expensive hardware or you expand access to improve the number of people that can participate in the services through affordable hardware. Apple has no service future if it plans to thrive in services with very expensive hardware like we have today. Simply, it needs a cheaper version!

Yet, Apple has to be very strategic in its pricing. My suggestion is this: increase the price of the highest version of iPhone to $1,200 and make it more premium. And then introduce a phone brand called Apple and make the price $350. Make the design of Apple (the phone brand) to be radically different so that you do not cannibalize the premium iPhone. By having these two brands, Apple can compete in both the upper and lower segments of the markets. We will have Apples in Nigeria while they will sell their iPhones in New York. This is similar to Toyota selling Lexus and Honda selling Acura.

Fortune in a newsletter captured these elements thus.

In a blab-fest worthy of Dr. Phil, Apple CEO Tim Cook issued a 1,370-word letter to investors about a surprise 5% revenue drop, then went on CNBC for another 15 minutes of excuse-making.

Instead of bringing in $91.5 billion in the holiday quarter, as Wall Street analysts expected, Apple’s revenue totaled just $84 billion. That’s down from an all-time record of $88.3 billion a year earlier. The main culprit was slipping sales in China, Cook said. Apple’s stock, already down 30% in the past three months, fell another 9% in morning trading on Thursday. That pushed Apple’s market cap below those of Amazon and Google. (It was already trailing Microsoft .) But Apple’s CEO said he remains “confident and excited” about Apple’s long-term future.

[…]

Recommended reads must start with Bloomberg columnist Shira Ovide, who chastises Cook for not warning investors years earlier about the forces conspiring to stall smartphone sales.

Apple would be fine but it needs to understand that services win on volume, and it is time it adjusts strategy to grow user base with cheaper devices. If not, the revenue will be dropping from here.

Apple CEO Tim Cook released a statement, warning investors Wednesday that the company is lowering expectations for its first quarter 2019 performance: “While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.”

The full letter.

Today we are revising our guidance for Apple’s fiscal 2019 first quarter, which ended on December 29. We now expect the following:

Revenue of approximately $84 billion
Gross margin of approximately 38 percent
Operating expenses of approximately $8.7 billion
Other income/(expense) of approximately $550 million
Tax rate of approximately 16.5 percent before discrete items
We expect the number of shares used in computing diluted EPS to be approximately 4.77 billion.
Based on these estimates, our revenue will be lower than our original guidance for the quarter, with other items remaining broadly in line with our guidance.

While it will be a number of weeks before we complete and report our final results, we wanted to get some preliminary information to you now. Our final results may differ somewhat from these preliminary estimates.
When we discussed our Q1 guidance with you about 60 days ago, we knew the first quarter would be impacted by both macroeconomic and Apple-specific factors. Based on our best estimates of how these would play out, we predicted that we would report slight revenue growth year-over-year for the quarter. As you may recall, we discussed four factors:

First, we knew the different timing of our iPhone launches would affect our year-over-year compares. Our top models, iPhone XS and iPhone XS Max, shipped in Q4’18 — placing the channel fill and early sales in that quarter, whereas last year iPhone X shipped in Q1’18, placing the channel fill and early sales in the December quarter. We knew this would create a difficult compare for Q1’19, and this played out broadly in line with our expectations.

Second, we knew the strong US dollar would create foreign exchange headwinds and forecasted this would reduce our revenue growth by about 200 basis points as compared to the previous year. This also played out broadly in line with our expectations.

Third, we knew we had an unprecedented number of new products to ramp during the quarter and predicted that supply constraints would gate our sales of certain products during Q1. Again, this also played out broadly in line with our expectations. Sales of Apple Watch Series 4 and iPad Pro were constrained much or all of the quarter. AirPods and MacBook Air were also constrained.

Fourth, we expected economic weakness in some emerging markets. This turned out to have a significantly greater impact than we had projected.

In addition, these and other factors resulted in fewer iPhone upgrades than we had anticipated.
These last two points have led us to reduce our revenue guidance. I’d like to go a bit deeper on both.

Emerging Market Challenges

While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.

China’s economy began to slow in the second half of 2018. The government-reported GDP growth during the September quarter was the second lowest in the last 25 years. We believe the economic environment in China has been further impacted by rising trade tensions with the United States. As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed. And market data has shown that the contraction in Greater China’s smartphone market has been particularly sharp.

Despite these challenges, we believe that our business in China has a bright future. The iOS developer community in China is among the most innovative, creative and vibrant in the world. Our products enjoy a strong following among customers, with a very high level of engagement and satisfaction. Our results in China include a new record for Services revenue, and our installed base of devices grew over the last year. We are proud to participate in the Chinese marketplace.

iPhone

Lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall to our guidance and for much more than our entire year-over-year revenue decline. In fact, categories outside of iPhone (Services, Mac, iPad, Wearables/Home/Accessories) combined to grow almost 19 percent year-over-year.

While Greater China and other emerging markets accounted for the vast majority of the year-over-year iPhone revenue decline, in some developed markets, iPhone upgrades also were not as strong as we thought they would be. While macroeconomic challenges in some markets were a key contributor to this trend, we believe there are other factors broadly impacting our iPhone performance, including consumers adapting to a world with fewer carrier subsidies, US dollar strength-related price increases, and some customers taking advantage of significantly reduced pricing for iPhone battery replacements.

Many Positive Results in the December Quarter

While it’s disappointing to revise our guidance, our performance in many areas showed remarkable strength in spite of these challenges.

Our installed base of active devices hit a new all-time high—growing by more than 100 million units in 12 months. There are more Apple devices being used than ever before, and it’s a testament to the ongoing loyalty, satisfaction and engagement of our customers.

Also, as I mentioned earlier, revenue outside of our iPhone business grew by almost 19 percent year-over-year, including all-time record revenue from Services, Wearables and Mac. Our non-iPhone businesses have less exposure to emerging markets, and the vast majority of Services revenue is related to the size of the installed base, not current period sales.

Services generated over $10.8 billion in revenue during the quarter, growing to a new quarterly record in every geographic segment, and we are on track to achieve our goal of doubling the size of this business from 2016 to 2020.

Wearables grew by almost 50 percent year-over-year, as Apple Watch and AirPods were wildly popular among holiday shoppers; launches of MacBook Air and Mac mini powered the Mac to year-over-year revenue growth and the launch of the new iPad Pro drove iPad to year-over-year double-digit revenue growth.
We also expect to set all-time revenue records in several developed countries, including the United States, Canada, Germany, Italy, Spain, the Netherlands and Korea. And, while we saw challenges in some emerging markets, others set records, including Mexico, Poland, Malaysia and Vietnam.

Finally, we also expect to report a new all-time record for Apple’s earnings per share.

Looking Ahead

Our profitability and cash flow generation are strong, and we expect to exit the quarter with approximately $130 billion in net cash. As we have stated before, we plan to become net-cash neutral over time.

As we exit a challenging quarter, we are as confident as ever in the fundamental strength of our business. We manage Apple for the long term, and Apple has always used periods of adversity to re-examine our approach, to take advantage of our culture of flexibility, adaptability and creativity, and to emerge better as a result.
Most importantly, we are confident and excited about our pipeline of future products and services. Apple innovates like no other company on earth, and we are not taking our foot off the gas.

We can’t change macroeconomic conditions, but we are undertaking and accelerating other initiatives to improve our results. One such initiative is making it simple to trade in a phone in our stores, finance the purchase over time, and get help transferring data from the current to the new phone. This is not only great for the environment, it is great for the customer, as their existing phone acts as a subsidy for their new phone, and it is great for developers, as it can help grow our installed base.

This is one of a number of steps we are taking to respond. We can make these adjustments because Apple’s strength is in our resilience, the talent and creativity of our team, and the deeply held passion for the work we do every day.

Expectations are high for Apple because they should be. We are committed to exceeding those expectations every day.

That has always been the Apple way, and it always will be.

Tim

Fintech will contribute $150 billion to sub-Saharan Africa’s GDP by 2022, according to Financial Sector Deepening Africa, a development-finance organization. According to IMF, sub-Saharan Africa has a total GDP of $1.6 trillion with Nigeria contributing nearly 30% of that number.

The contribution of the financial-technology industry to sub-Saharan Africa’s economic output will increase by at least $40 billion to $150 billion by 2022, according to Financial Sector Deepening Africa, a development-finance organization.

The industry currently employs about 3 million people directly and indirectly in the region, FSD Africa Financial Markets Director Evans Osano said in an interview on Thursday. Sub-Saharan Africa’s gross domestic product is about $1.6 trillion, according to data compiled by the International Monetary Fund.

Personally, I do think this estimate is low. Yes, $150 billion is small by 2022. Nonetheless, I understand that technology has a way of “destroying value” where new services dissipate broad industrial revenue which cannot be captured in traditional models used in GDP calculation. For example, when you use WhatsApp for a three-hour call from Lagos to London, after loading a $1-equivalent airtime, you have destroyed value for telcos [you might have paid more than $50 to call London direct with MTN sim card).

However, the differential of $49 does not go to WhatsApp since WhatsApp is free. Simply, that money is saved by you, but GDP may not capture it. To most economic models, revenue has dropped in the telecoms sector because MTN made $1 instead of the $50 which might have been possible without WhatsApp. Of course, without WhatsApp, you would not have tried making a three-hour from Lagos to London! The dissipation of value and creation of new values would be huge as new technologies penetrate into industrial sectors.

According to MasterCard and The Fletcher School, “of the $301 billion of funds flows from consumers to businesses in Nigeria, 98 percent is still based on cash.” Fintech will not merely have to move those $295 billion-worth cash transactions online/digital; it must create new value in the process. MPESA did not just digitize payment in Kenya; it added value upon the payment layer. For the whole of Africa, we should be hitting excess of additional $150 billion on economic growth by 2022. That is why investors are pumping money into African fintech startups: lots of money to be made.