East African opportunities unclear as cellcos remain coy about data ARPU

Kenyatta Int'l Conference Centre, Nairobi: venue for this year's East Africa Com

Last year I had the pleasure of visiting Nairobi, Kenya for the first time, building meetings around the excellent East Africa Com conference and exhibition.

This year, given that my day-to-day commercial activity now does not give me much exposure to Africa, I will not attending. Were I still more active in Africa, however, I would certainly want to be there - and I would encourage anyone who does business with the telecoms operators of the East Africa region to head for the Kenyatta International Conference Centre on 27th-28th April.

This year's event will be graced by the presence of the Hon. Samuel Poghisio, the host country's Minister for Information & Communications and by Charles J.K Njoroge, Director General of telecoms regulatory agency the CCK (Communications Commission of Kenya). I don't recall the Kenyan Government and authorities being represented at such a high level at the 2009 event, so the organisers are to be congratulated for the upgrade.

Sponsors and exhibitors will doubtless also be impressed by the number of operator CEOs to whom they will have access during the two days of discussions. Of these, two of the biggest hitters are Michael Ghossein, CEO of France Telecom-controlled Telkom Kenya, the country's incumbent fixed-line operator and Michael Joseph, the long-standing CEO of Kenya's dominant (78.8% market share, according to WCIS) mobile operator Safaricom.

This may be one of the final conferences appearances for the latter, Joseph having announced his impending retirement. He joined the Kenyan operator in mid-2000, when Vodafone first invested in the company. Since then, he has guided the company from a subscriber base of fewer than 20,000 to over 15 million today. Along the way, Safaricom has become renowned for its M-Pesa mobile money transfer service, which has brought the advantages of financial services to very large numbers of Kenya's largely 'unbanked' population. Safaricom also attracted praise this week from Alexander Grouet of Mira Networks, a leading provider of connectivity and billing tools between business and mobile networks in Africa.

Grouet asks: "Would you plan a trip to a foreign destination if you didn't know what the place looked like, what there was to see, how much a hotel room cost and what local transportation was available?" Having concluded that most readers would not, Grouet then invites us to imagine that what we’re talking about is not your vacation, but your business. "Well that’s pretty much what it’s like for most content providers wanting to penetrate the SSA [sub-Saharan Africa] market", he continues. "Despite the hype, the market metrics WASPs crucially need in order to make the next step, such as data ARPU or WAP traffic, are virtually inaccessible. Even traditional market data resellers don't offer it, as optimistically named Africa VAS reports almost exclusively include blended indicators rather than content-specific ones." I don't recall if this is a fair accusation to direct towards the good folks at the reports business of Informa Telecoms & Media, the organisers of East Africa Com.

Even if it is, Grouet suggests that the fault for the scarcity of these vital data lies with operators. "Out of the 26 operators in the 5 countries I worked on last year (Nigeria, Kenya, Ghana, Senegal and Cote d'Ivoire) only 2 to my knowledge," he writes, "publicly released their data ARPU." The two cellcos in Mr. Grouet's good books are Safaricom and Starcomms, a Nigerian CDMA carrier.

"The most likely explanation for this", ventures Grouet, "is that the data figures are still so low on most networks that operators simply don’t want to release them at this stage." According to Grouet, even Safaricom's data ARPU, including M-Pesa, stands at just USD 1 monthly, while the figure for Starcomms, including EV-DO dongles, is just under USD 2 per month. "But at least, we know where they stand, and we will be able to measure their progress when they next update those figures," Grouet continues.

Grouet hopes that other African operators will break their silence on the topic of data revenues, not least because that unwillingness to share data "only has the counter-productive effect of making it harder for international content companies, who precisely could help operators boost their data traffic, penetrate their markets."

Let's see how many cellco attending East Africa Com agree with these sentiments. Were I to attend this year, I would probably like to pursue that line of questioning, not least because I have received marketing emails from Informa which suggests that the region's operators are somewhat focused on data services.

A speaker likely to turn in an entertaining presentation is Noel Herrity, CEO of Tanzania's Zantel, an operator in which the UAE's Etisalat owns a 51% stake. Mr. Herrity delivered a compelling, nicely paced talk at the 2009 iteration of the conference and delegates will be hoping for more of the same. Perhaps we can be optimistic about that - Herrity may be in buoyant mood in light of recent reports indicating that the operator has begun recording net customer additions again, following two quarters of net loss.

One speaker for whom it could be challenging to stay 'on message'? Bashar Arafeh, the COO of the East Africa Region for MEA mobile group Zain.

This might arise as a result of delegates' curiosity about the future of Zain's African operations. Subject to takeover speculation for many months now (see DTW articles passim.), these assets could well be the property of giant Indian cellco Bharti Airtel before too long. The most recent developments in this long-running saga may soon prompt a revival of the popular mini-series (well, it generated more hits than usual) which appeared here on-and-off for much of 2009, rejoicing in the clunky title 'Zain Africa Speculation Watch' (and variations thereon).

Other CxOs appearing on stage at next months event include:

• Hans Paulsen, CCO, Uganda Telecom
• Themba Khumalo, CEO, MTN Uganda
• Ali Bin Jarsh, CEO, Canartel, Sudan
• Julius Kinyua, CEO, Flashcom, Kenya
• Geoff Goss, CEO, Celsys, Zimbabwe
  

I'm sure this year's event will once again be a useful place to do business, gain market intelligence and enjoy the company of a crowd who always seem very open to networking and making new contacts.

East African opportunities unclear as cellcos remain coy about data ARPU

Good prospects for WiMAX as Uganda's mobile market grows strongly?

According to a recent Cellular News item, a new report from Pyramid Research predicts that mobile penetration in Uganda is expected to increase from 39.0% in 2009 to 70.7 % by 2014, driven by successful market liberalisation and increased competition.

Assuming the 39.0% is Pyramid's forecast y.e. 2009 figure, this is rather more optimistic than the 31.03% predicted by Informa Telecoms & Media.

The Pyramid report's author, Sylwia Boguszewska, anticipates that Uganda will see the second highest percentage increase in terms of mobile subscriptions in African countries - with only Cameroon's market set to grow more strongly.

Boguszewska notes that as a result of the liberalization process, the Ugandan mobile market is now contested by five mobile operators, three of which are well-established: MTN Uganda, Uganda Telecom, and Zain Uganda.

As Boguszewska explains, these longer-standing players have been joined more recently by Warid Telecom Uganda (in Feb 2008) and by Orange Uganda in March this year. A sixth entrant is set to join the fray soon. I understand that this will be an operation associated with the Ugandan arm of Indian eBusiness solution provider Anupam Global Soft, which, according to a Cellular News story from last summer, is owned by India's Reliance Communications and holds mobile and landline licenses. That same article stresses how far it might be unwise for any prospective new entrants to test the patience of of the country's regulator, the Uganda Communications Commission (UCC) with a delayed launch, recounting how HiTS Telecom came under fire for failing to launch on time. The recent launch of the France Telecom-backed Orange-branded MNO was facilitated by this failure on the part of HiTS Telecom. As was noted in Global Mobile Daily in March, France Telecom acquired a 53% stake in the Ugandan HiTS Telecom operation in October last year.

Released a little ahead of Pyramid's report was a Global Mobile Daily Uganda market update. This indicated that Uganda Telecom dominated mobile growth in 3Q08, with net additions nearly seven times as high as in 3Q07. It also reported strong interest in its W-CDMA services.

The GMD update suggests that Uganda Telecom's performance was thanks to the Libyan investor Lap Green, which acquired a majority stake in Uganda Telecom in 2Q07, and subsequently put in place an expansion strategy worth USD 115 million.

MTN Uganda, however, continued to report the highest ARPU in the market at USD9, and Uganda Telecom the lowest at USD5 in 3Q08.

The GMD update continues with an review of Internet services in Uganda, "which continued to grow in popularity, with fixed-broadband subscriptions increasing by 15% year on year in 3Q08."

"With total subscriptions reaching 4,050, fixed broadband is still the main mode of Internet access", continues the article, with mobile broadband accounting for only 500 subscriptions in 3Q08. Nonetheless, Informa Telecoms & Media estimates that mobile broadband subscriptions increased 150% quarter on quarter. According to Informa, deployments of fixed WiMAX are planned by licenced operators Infocom and TMP this year, following on from the launch of mobile WiMAX by Warid Telecom in December 2008.

Good prospects for WiMAX as Uganda's mobile market grows strongly?

Cellcos banking on m-financial services in tough 2009?

I recently made reference to the Mobile World Congress preview written by my former colleague, Informa Telecoms & Media Chief Research Officer Mark Newman. Mark's article was in large part dedicated to wondering about how tech vendors would be able to balance showcasing next generation mobile broadband technology with addressing operators' concerns about the need control costs in response to the global economic downturn. Right at the end of the article, however, Mark found the time to say that he felt growth potential in emerging markets will remain a theme of so this year's event, adding that discussions could centre on mobile banking.

There does seem to have been plenty of activity in this area of late, across a wide range of emerging markets. Yesterday's Cellular News email carried a highly relevant article about UK-based Monitise, which says that it has been awarded US$1.5 million by the Africa Enterprise Challenge Fund (AECF) to help fund the launch of its mobile banking and payments service in East Africa.

Monitise East Africa will initially offer services in Uganda and then plans to expand into Burundi, the Democratic Republic of Congo, Ethiopia, Kenya, Rwanda, Tanzania and Zambia. The service will enable the provision of banking, payment and money transfer services by both banks and mobile networks, within the regulatory framework of each market. Hugh Scott of AECF said: "By helping enterprises to build successful businesses in Africa, we believe that we can make market systems work better and generate wealth that benefits the entire society. Through the extension of the reach of the banks and allowing people to save, make payments and transfer money to their families, we believe that Monitise East Africa has the potential to transform the economic outlook for literally millions of people. I also firmly believe that in due course many of the people who use the service will, through the empowerment that a savings and payments culture delivers, become business people themselves, creating a truly sustainable economy."

The cellular news piece mentioned that the news from Monitise and AECF coincides with a recent launch by the UK's Department for International Development of a £1.4 million fund to spur the development of biometric and mobile phone-based banking in emerging economies in Asia and Africa. Known as Facilitating Access to Financial Services through Technology (FAST), this project will explore the options for introducing 'branchless banking' in developing countries and look at how technologies such as mobile phone banking can help the poor to access financial services.

Also in the news in recent months have been related operator-led initiatives - or at least initiatives in which certain MNOs are key partners. Again with reference to East Africa, I read a Global Mobile Daily new item just this week about Zain launching mobile banking services in Kenya and Tanzania in partership with Citigroup and Standard Chartered. Branded 'Zap', this service is also set to be extended to Uganda. Zain intends to offer the mobile banking service as part of 'One Network' allowing subscribers to send airtime to each other across Kenya, Tanzania and Uganda without roaming charges. 'Zap' is supported on all devices including ultra low cost handsets (ULCH) which are especially popular in Africa.

I also noticed last month, again courtesy of Global Mobile Daily, that in the same region, Rwandatel, the Rwanda-based unit of Libya's LAP Green will launch a mobile banking and cash transfer service in October 2009, according to reports, allowing subscribers to send and receive money via SMS. The operator has a target of 600,000 subscriptions by the middle of 2009. My feeling is that the low level of mobile penetration in the country (13.36% at y.e. 2008, according to WCIS) will be something of a stumbling block. I daresay that higher rates of penetration in some of the other markets mentioned here will mean that the benefits of mobile banking will spread faster elsewhere.

Ugandan incumbent telco, Uganda Telecom, meanwhile, has selected software developer Redknee to provide its 'Mobile Money 2.0' mobile money transfer solution, according to a Global Mobile Daily article this week, which reports: "Redknee's new Mobile Money 2.0 service will aim to allow subscribers to store and transfer money through their mobile device, and will be targeted at rural communities with poor or limited banking resources. Implementation of the solution will begin as soon as all requirements for launching the service have been approved, and will initially be available for subscribers making domestic payments and transfers, before being expanded to microfinance initiatives."

While there is plenty of mobile banking news coming out of East Africa, Francophone West Africa has seen fewer developments. In December, Global Mobile Daily reported that Orange, together with French bank BNP Paribas, will launch its Orange Money service in Côte d'Ivoire, apparently the first mobile-based payment and money transfer service in Western Africa, according to the operator.

This claim seems a little strange given that around a month earlier, GMD reported that Senegal's Sonatel is to offer the Orange Money mobile money transfer service in the country in partnership with banking group BICIS.

As a UK citizen, currently resident in my home country, and as someone who has lived in Poland, I could not have failed to notice this decade's westward movement of people from the EU accession countries of Central and Eastern Europe. When I returned from Kraków in 1997 after four enjoyable years working there, I initially found it frustrating to have very few opportunities to practise speaking the Polish language, with which I'd made some headway in my time away from home. In the years that followed, it soon became that case that not a day would pass without having the chance to chat with someone po polsku, be it a colleague in the office, the guy delivering groceries, the lady serving me coffee on the way to work or the carpenter quoting me a (very good) price to build a bookcase. It felt like Polska had followed me across the Baltic en masse. I love it that I can buy a jar of bigos and a packet of pierogi z mięsem on the high street of the SE England commuter town where I now live. It also makes me smile to travel along London's Finchley Road and see Polish language bus shelter advertisements for money remittance services. My guess is that a good proportion of the monies earned by the grocery van driver, the coffee shop lady and the carpenter have been sent back to Poland to support families there.

In December, the UK's NatWest bank gave these members of our large Polish migrant community a new option - send money to Poland from the ‘Polish Welcome Account' via a mobile money transfer service. Maybe it's a pity that this service was not launched sooner. My feeling is that the number of Poles working in the UK is set to fall rather than rise. That said, a Banking Times article of 23rd December indicates that Polish migrant workers send an estimated £1 billion a year to their homeland.

Migrant workers sending money home via mobile remittance services could be one of the m-financial services applications with the best prospects. Of these, I would guess that the new international version of Safaricom's M-Pesa services may become one of the most widely known.
M-Pesa, developed in partnership with Vodafone, has just netted another award at Mobile World Congress. Receiving the awards, Safaricom CEO Michael Joseph said: “We are very proud of the M-Pesa service. It continues to impact positively on the millions of Kenyans who have no access to banking services."

Now, in addition to Safaricom subscribers being able to transfer money and make payments within their home country, they can now take advantage of an international money transfer service between Kenya and the UK. According to a Global Mobile Daily article back in December, users of the service will be able to send money from Western Union agents in the UK to subscribers to Safaricom's M-Pesa mobile money transfer service.

Hot off the press today is news of further investment in an MVNO set up specifically to leverage the demand for international remittance services for migrant workers. Japan's Sumitomo Corporation today announced its involvment in Malaysia's first-ever MVNO, Merchantrade Asia Sdn Bhd, whose focus is prepaid mobile and remittance services targeting foreign workers, from Bangladesh, Indonesia, Nepal, the Philippines, Vietnam, India and Sri Lanka. The press release indicates that in Malaysia there are over 2 million foreign workers in various industries such as construction, plantation, manufacturing and service sector.

Merchantrade launched its mobile service in mid 2007 and as of January 2009, it has 94,000 active subscribers, according to the press relase, which continues: "as for the remittance service, Merchantrade obtained the license to operate remittance business from Central Bank of Malaysia in 2007. One of the pioneer non-bank organizations to receive license to operate remittance business in Malaysia, Merchantrade outbound remittance transaction numbers is growing aggressively. Such remittance service is in line of the global efforts targeting to secure the transparency on the personal remittance."

All of the above suggests that Mark Newman is not too far wide of the Mark in tipping mobile financial services in emerging markets as a bright spot in a tough 2009.

Cellcos banking on m-financial services in tough 2009?