Bad Network: Telecom Operators in SSA Live on Borrow Time -Report
Bad network situation remains pathetic after a long while when Bain & company said in a report that mobile phone operators in Sub-Saharan Africa market are playing on borrowed time.
In its focus on nation, it stated that for Nigeria, the time is right to grow the market.
The research by Bain & Company stated that Nigeria has room to strengthen existing 4G coverage in urban and periurban areas.
It explained further that network quality is the number one reason Nigerians switch providers.
According to Bain & Company, With 50 million to 60 million potential new data subscribers, operators that strike the right balance between network quality and device volume will be well positioned to win in this market.
According to the company, with an underdeveloped fixed-line network, mobile is the primary channel for communications in Nigeria.
Yet network coverage gaps are prevalent, even in dense urban areas.
“Our survey of mobile users in Nigeria found that roughly 40% of customers use multiple SIM cards as a workaround for network issues”, the firm stated.
The high cost of mobile devices is also a significant impediment to improving data-driven ARPU.
The report reads that robust network investments, cheaper smartphones and data, and a rapidly expanding population of connected youth have fueled strong growth for the US$60 billion SSA mobile market.
It stated that as the market matures, operators risk falling into the “doom scenario” that has plagued their counterparts around the globe: saturated markets, an uneven response to evolving consumer preferences, and falling revenues.
According to Bain, the SSA mobile market is changing, and fast.
The firm noted that in the new landscape, mobile customers are more concerned with network quality than prices.
Moreover, video content, social media and messaging are replacing voice for how people communicate, buy and sell goods, and conduct banking, it added.
Bain & Company explicated that SSA Telcos have responded slowly, and customers are taking note.
In its survey of thousands of mobile customers in Nigeria, South Africa, Kenya, Ghana and Ivory Coast found that customers are increasingly dissatisfied with mobile service quality.
In some markets, notably Nigeria and South Africa, consumers regularly swap out SIM cards to chase better networks or value.
Collectively, operators’ low Net Promoter Score® which is a measurement of satisfaction and loyalty affirms that they are falling short of transforming customers into advocates.
“SSA operators are hitting the same headwinds that have already buffeted more mature markets, average revenues per user (ARPU) rates are declining and subscriber growth is slowing.
“For example, from 2013 to 2018, traditional voice revenues in South Africa declined by about 10% as data applications are substituting for voice.
“And while mobile data prices in the SSA region are higher than in other markets, the growth from data is not enough to compensate for the loss in voice revenue.
“In addition, market saturation and pricing wars have created a race to the bottom, in which operators can no longer compete based on low-cost offerings alone.
“As a result, SSA recurring mobile revenues could decline as much as 5% over the next five years unless operators change course”, Bain & Company analysed.
The company said in the report that the writing is on the wall. It stated that what worked for the past 10 years will not be sustainable for the next 10.
“To succeed in the coming decade, Telcos’ product-based approach that offers basic services must shift to a customer-centric strategy that focuses on investments in the customer experience.
“Based on our on-the-ground research into customer mobile usage and preferences in the region, we have identified three questions that operators need to answer in order to win in this rapidly changing landscape”, it added.
Network or devices? Price or experience? Operator or innovator? Telcos that make the right choices now will be better positioned to win over the long term.
According to the company’s report, network quality is the most important purchasing criterion for mobile customers in the SSA region, our research found.
It noted that investing in strong network coverage and capacity is fundamental to driving higher data-driven ARPUs.
But growing the market cannot rely on an “if you build it, they will come” strategy. SSA operators must also provide access aggressively, the company observed.
It said: “This requires a two-step approach: expand coverage with a good network and get more smartphones into the hands of customers”.
On the second question which is whether an investment in a world-class network would increase positioning.
Bain said: “To create the right conditions for growth, operators must first improve network coverage and capacity through targeted, demand-based investments.
“This will improve the customer experience on digital platforms, which will boost data-driven ARPUs.
“Our research confirms that focusing these investments in high-demand areas, such as urban and periurban locations where customers have middle to high disposable income can reduce the payback period to about three years”.
On increase smartphone penetration, it stated that a world-class network is useless if customers can’t access it. Therefore, Telcos need to invest in getting more 4G-enabled smart devices into customers’ hands.
It noted that in price-sensitive markets, the cost of a smartphone or data device is a major barrier to entry.
“Overcoming this hurdle may require operators to adopt a “give them the razor, sell them the blade” approach by marketing branded, low-cost or refurbished devices and subsidising 50% or more of the cost in return for a lock-in period.
It added that the profitability of such a strategy will hinge on getting the right data devices to the right customers based on usage.
Most Nigerian customers have more than one SIM card, largely because of network issues
Bain advises that operators in Nigeria should focus on strengthening 4G coverage, particularly in urban and periurban areas, where a little over half of the country’s population live.
“For example, in Lagos, demand is high for 4G coverage, yet the number of 4G towers falls well short of those available for 2G and 3G users.
Operators can deploy a phased approach to introduce branded, 4G-enabled smartphones that get more users on board and keep them there”, the company stated.
It noted that expanding the 4G network will enhance the customer experience on digital platforms, while furnishing low-cost or subsidised 4G devices will enable Nigerian Telcos to increase the demand for mobile data.
“Providing better coverage and improved access will elevate the customer experience, improve customer loyalty and increase operators’ share of wallet by eliminating the need for multiple SIMs”, Bain & Company added.
South Africa’s market has tremendous potential value for operators that can overcome the country’s high churn and SIM-swapping rates, the report stated.
“According to our research, one-third of subscribers in South Africa use multiple SIM cards. The number one reason is a desire to take advantage of cheaper prices and promotions.
It said that churn is also three to four times higher in South Africa than in developed markets.
In this market, where mobile provider loyalty is up for grabs, Telcos should simplify and personalise, the report reads.
Bain stated that South African operators need to improve the experience for their most important revenue contributors, postpaid subscribers.
This customer segment accounts for only 16% of the market, but provides nearly half of the revenue.
The top three mobile operators offer more than 20 plans each, yet just a handful of offerings produce the majority of revenue.
Bad Network: Telecom Operators in SSA Live on Borrow Time -Report