Why African Telecommunication Companies might lose out to Google and Others by 2018.

For several years, the Telecom industry has been the major driver of Growth and development in the African Economy considering its level of Contribution to Africa’s Overall GDP.

The Telecom companies enjoy so much attention because so much funds and expertise are required in setting up and running Telecom businesses which makes it a no go area for Small and medium businesses except backed by a consortium with strong financial backbone. These to some extent have given them the luxury of having very few competitions where a chunk of their profit is made from offering conventional voice, data and VAS. Since conventional Telecommunication architectures and structure might involve integration of several incompatible Hardware and Software products from different sources and manufacturers, achieving good quality of service have become a herculean task for these Telecommunication companies.

All this will soon change in Africa not later than 2017. Fortunately for Telecom Companies and interested startups, latest technologies like VOIP, SIP trunking, Telecom APIs, Soft-switches, Wi-Fi-Calling, Open sourced billing platforms, Network-Function-Virtualization (NFV), Software Defined Networks (SDN) etc can help reduce cost, maximize profit and increase efficiency.

It is very important for Telecom companies to note that, while these technologies are making telecom business cost-effective and more efficient, it is also handing out great powers to Startups to easily setup and run their Telecommunication companies more efficiently with less than 10% of conventionally required capital. Therefore making almost any qualified startup a strong competitor.

Based on findings in Nigeria, there are no indications of adoption of any of these technologies by Telecom Operators. The truth is that Telecom companies are making just about 60% of what they should be making if they maximize their infrastructures; they are also spending in excess of 60% because of their use of conventional technologies compared to available latest technologies. These deductively mean that they could save up to 60% on their infrastructural running cost if they adopt some modern telecommunication technologies.

Recently, Google, Twilio, Skype, Samsung and other tech companies have been working out Satellite and telecom solutions which indicate interests in the Telecom industry and even in the Cable TV business because of the high level of profitability in the business. One very strong advantage of these modern technologies is that they are cheaper and better. This has so much to do with progressive price drops that now accompany the disputable Moore’s Law.

The cost and requirements of running a Telecom business in Africa is progressively increasing and getting tougher respectively because conventional telecommunication technologies are expensive to maintain and competitions are becoming stiffer. According GSMA reports Africa is experiencing a great deal of drops in its ARPU, owing to reduction in tariffs and spread of GSM subscribers to low income earners. Another reason for the ARPU drop could be associated with Africans switching to the OTT options which are extremely cheap to use.

It is good news to know that the NCC; Nigerian Communication Commissions (regulatory body for telecommunications in Nigeria) have recently been giving a great deal of attention to VOIP and are opening the ground for healthy competitions, as they claim they do not regulate technologies meaning every approved company is free to deploy VOIP. However VOIP equipments will still require approval from NCC.

There are always arguments that technologies like VOIP, IoT etc might not succeed well in Africa owing to internet cost and speed. My answer always is if Skype, Viber, Whatsapp call and the host of them are widely adopted and used in Nigeria and Africa successfully, I do not see VOIP, IoT etc as any exception.

The telecommunications don’t really have the luxury of using open-sourced solutions, with their equipments, they pay a fortune for the conventional proprietary software, they often do not encourage raw capacity-building among staff and indigenous companies are consumers of the services of expatriates which make production cost very high.

Modern technologies have made it possible to achieve more by doing less at the least cost. In other words, modern disruptive technologies save cost and increases efficiency. It is either businesses innovatively adapt or die in the market. This has led so many tech companies to buy into the technology boom by building solutions with Africa being one of their main target markets.

The Telecom world has gone beyond talking about Closed User Group GSM lines, conventional voice, 3G and SMS which do not maximize Infrastructures profit-wise to generate higher revenue. The world has moved up to cost saving and high revenue spinning consumer/enterprise products and services like SIP trunking, WebRTC, User-designed Telecom Applications, Telecom APIs, etc.

Nowadays people both in the developed and developing world don’t need to come to a shop to get and register a new SIM to access Telco services or to even port their lines. All they require is internet access which could be from any ISP or Wi-Fi. A very good case study is Rebtel, Magic Jack which are generating revenues from customers all over the world (even from Nigeria/Africa) who make calls through their App, this has made them competitors to African Telecom companies because of their use of latest technologies their products and services.

My predictions for Nigeria/Africa is that by 2017 telecommunications businesses will be tensed by the influx of products of ‘remote’ competitors using modern and cost-effective technologies.

About 50% of African internet users will readily have access to free Wi-Fi by 2018.

VAS and Telecom applications will be democratized and there will be great increase in the number of Telecom application vendors not later than 2018 because most mobile/web developers will become Telecom Application developers.

VOIP providers and OTTs will start sharing up not less than 50% of Telecom revenue share on Voice.

The strong message to African Telecoms is for them to re-innovate and employ services of Chief Innovation Officers to help move to the next level and remain relevant in the market, and the message to interested startups is for them to get ready and position themselves because the African Telecom market status quo is about to be disrupted.

Author: David Alozie

David is an innovative entrepreneur with interest in ICT analysis as relates to Africa. He also has experience in Web, mobile app development and WEBRTC technology.He also led teams which held talks with organizations like AMD and DTK computers in respect to the Nigerian Market and has carried out several market research surveys on several ICT products in Nigeria. David is into National development through ICT empowerment trainings in several states of Nigeria