International Data Corporation (IDC) predicts that Nigeria and South Africa will fall from favor in the telco space on the African continent in 2014.
The IDC presented its annual predictions for the Middle East and Africa consumer telecommunications and media services market in 2014.
Historically, the IDC says, Nigeria and South Africa have been two of the most lucrative markets for companies looking to enter Africa.
“Nigeria has been favored for its high growth potential, while South Africa has been considered to have a sound and effective business environment.”
“However, Nigeria is plagued by numerous challenges, including poor infrastructure and ineffective private and public business systems, which combine to create a very challenging operating environment,” it said.
Those players that have braved the market, including MTN and Airtel, are starting to feel the effects of operating in this environment.
“Although the costs of doing business in Nigeria continue to rise, the government requires lower costs for foreign businesses operating in the country, as well as high service quality, which is particularly problematic for telcos given the government’s refusal to release the spectrum required to improve services,” the IDC opines.
“The current political instability creates additional market complexities,” it said.
South Africa, on the other hand, is more of an “unregulated oligopoly, and operators entering the market after 2005 have struggled”.
“In IDC’s opinion, they will continue to struggle to gain a notable foothold in the market, and there is no evidence to suggest that the status quo will change notably in the short term,” it said.
IDC’s Middle East and Africa consumer telecommunications and media services Top 10 predictions for 2014:
- The exponential increase in mobile data will force operators to rethink their network and data service strategies. In 2014, mobile data will remain a cash cow for regional telcos. However, the growing popularity of data-hungry applications and services, particularly video, will contribute to an exponential increase in data traffic and make network investment economics difficult to justify.
- The progressive regulatory environment will stimulate competition. The first era of market liberalization was marked by the opening of mobile markets to new operators, followed by progressive reforms to introduce new services (e.g., 3G) and/or the opening up of markets to competitors. Having done this, regional regulators will strive to improve the market dynamics in 2014, accelerating the development of new services in addition to increasing competition.
- Operator media transformation will continue; acquisitions are on the cards. Operators will aim to acquire content aggregators and platform developers in order to maximize their share of the communications and media market.
- Service evolution will force the importance of the customer experience. It is imperative for operators to understand consumer behavior and push products and services in line with their expectations. This will eventually help operators to counter declining service engagement cycles and improve customer experience.
- The focus will shift to designing smartphones that balance price and performance. Samsung and other established smartphone vendors will battle to maintain their large African market shares as new players (e.g., Techno and Huawei) provide similar smartphone offerings at a lower cost. Other Asian vendors, including Micromax, Intex, and QMobile, have also made plans to target Africa with their new smartphone models.
- Mobile payments will pass their growth-rate peak in Africa. IDC predicts that growth in mobile money transactions such as M-Pesa will slow in Africa due to regulatory inhibitors and the lack of maturity of these services. Innovative products such as M-Shwari, a new banking product for M-PESA customers that enables the user to deposit and borrow money via mobile phone and earn interest on the deposits made, will continue to spur mobile money growth on the African continent.
- Nigeria and South Africa Will Fall from Favor.
- Operators will play a broader role in the application development ecosystem. Globally, telecommunications operators are naturally well placed to target the opportunities offered by mobile apps due to their strong brands, established relationships with customers, ability to understand specific customer requirements in local markets, and capability to integrate billing.
- Digital disruption will offer opportunities and challenges. The digital revolution has disrupted many industries, including music and entertainment. However, monetizing digital opportunities and ensuring long-term end-user engagement will remain a challenge in 2014 and beyond for digital media players, as well as for telecommunications operators, as they continue to explore new revenue streams to justify large infrastructure investments.
- The regional OTT market will evolve, and business models will become clear. Currently, most OTT services are positioned as extensions of native services, available only to existing subscribers. However, this trend is changing fast. In defining an OTT strategy, regional telcos will have to decide whether they will compete with current OTT providers or collaborate with them. These telcos will continue to align business models to gain maximum benefits and focus on partnerships.