Telco data networks in Africa: Enablers of value added services or just cheap access to over the top (OTT) providers' applications

Telco data networks in Africa: Enablers of value added services or just cheap access to OTT applications?
Zwana Unicom June 2011 _______________________________________________________

Background
African mobile voice revenues to peak in 2012 *
Downward pressure on interconnect prices (e.g. leading to presidential intervention in Kenya in June 2011)
African mobile data revenues will rise from $4.45bn in 2009 to $10.64bn in 2014 *
IP has changed the game for telcos as they move from voice-centric to data-centric
Customers turn to OTT applications like Skype to meet their needs
_______________________________________________________ * Informa

Challenges
With 600 million users, Microsoft Skype is now a major player in the telco space
Skype users made 207 billion minutes of voice and video calls in 2010, approximately 50% of which was international, most of which bypassed the PSTN.
Skype international traffic is growing at more than 2x that of international phone traffic.
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Challenges (contd.)
Although Skype’ volumes are small compared to total telco minutes, calls made by Skype users all used up telco bandwidth without bringing the telcos any revenue.
As an example, KPN, which has a 48% market share in the Netherlands has blamed the increasing use of OTT applications for a 8.1% drop in Dutch service revenue in April 2011 , resulting in a profit warning and plans to axe 20% to 25% of the company's workforce in the Netherlands between 2011 and 2015.
African operators face drop in voice and SMS revenues as users turn to VoIP
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“ Demand for international communications remains strong, but ever more people are discovering that they can communicate without the services of a telco.”
TeleGeography Analyst Stephan Beckert
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Challenges (contd.)
Operators’ battles are not just with traditional competitors anymore but also with OTT providers:
mVoIP can kill mobile operators’ roaming charge cash cow
VoIP user can talk for 22,222 minutes before exceeding a 5 GB data cap – there are only about 43,000 minutes in a month*
Demand for mobile broadband will outstrip supply as bandwidth improves and users use more bandwidth accessing VoIP and Video services from OTT providers
_______________________________________________________ * In-Stat

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Challenges (contd.)
Android’s share of the smartphone market now exceeds Apple’s
Fortunately for operators, smartphones still have a small share of the market
But smartphone usage in developing regions like Africa will increase with cheap Chinese smartphone imports and Android’s share increasing even more
Android data usage per user has already overtaken that of iPhones
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_______________________________________________________ Above figures refer to US

Challenges (contd.)
As data usage increases, operators CAPEX and OPEX costs increase substantially threatening profits
The situation is now so acute that some commentators predict that typical operators will reach the end of profitability by 2015 if continued erosion of traditional revenues continues and nothing emerges to replace them.
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_______________________________________________________ Source: Capgemini: Mobile Broadband in Europe: Profitability Challenge or Next Growth Engine? 2009 Note: CAPEX does not take into account sunk costs in setting up a 3G network and spectrum costs

_______________________________________________________ Source: Capgemini: Mobile Broadband in Europe: Profitability Challenge or Next Growth Engine? 2009

Challenges (contd.)
Telcos/ISPs can’t prevent their users from accessing the services of OTT providers *
And they can’t charge users extra for accessing such services either*
So Telco and ISP clients will access more and more OTT applications from more and more OTT startups
So operators will lose control of their clients
While paying for the bandwidth they use!
_______________________________________________________ * The Dutch Parliament voted to approve net neutrality legislation on 22/6/2011. This sets a precedent for other countries.

“ Do (you) want to continue providing just commercial products or do (you) want to move up higher in the value chain in order to compete against companies such as Facebook or Skype?”
Dr Ulrich Hammerschmidt
VP Innovation Projects
Deutsche Telekom ICSS *
_______________________________________________________ * CommuniGate Systems’ Executive Summit, Bodrum, Turkey 2010

Operators’ Strengths
Relationships with their customers
Brand
Billing
Subscriber information
The ability to do complex things at great scale
Expertise in voice
Their control of the network and QoS
Ownership of numbering pools
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The Way Forward for Operators
Leverage your strengths
Encourage MVNOs on your networks by taking advantage of non-telco niche brands in your market
Provide New Generation telco services to your own clients
Become an OTT provider yourself!
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The Way Forward (contd.)
Target the SME/SOHO market through SaaS/’Cloud Computing’ offerings :
Gartner estimates that 20% of businesses will own no IT assets by 2012
Quick time to value with minimum capital outlay
Meet the needs of SME/SOHO Generation Y/Millennial employees
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How?
Provide ‘BlackBerry like’ services to your business users who don’t use BlackBerry devices using from CommuniGate Systems
Provide nomadic ‘2 nd phone number’ services using
Visit CommuniGate Systems at www.communigate.com or Zwana Unicom at www.zwana.net for further information
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About CommuniGate Systems
Based on open standards, CommuniGate Systems ( www.communigate.com ) provides industry leading, world class Unified Communication products
Since 1991, CommuniGate Systems has powered the worlds' leading telecommunication companies, including Verizon, British Telecom, Deutsche Telecom, Softbank BB and Tele2
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About Zwana Unicom
Distributor for Sub Saharan Africa for CommuniGate Systems
Provides hosted white label and OTT ‘2 nd phone number’ services through associate 1toGo ( www.1togo.net )
Visit our website www.zwana.net for more information.
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Acknowledgements
Scott Stonham, VP Marketing, CommuniGate Systems, “Operators can retake the initiative and get back in the game”, 2011
https://www.communigate.com/external/ads/FierceWireless/April2011/HDCloudTelephony/
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Telco data networks in Africa: Enablers of value added services or just cheap access to over the top (OTT) providers' applications

by 1toGo Mobile / Zwana Unicom

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Telco data networks in Africa: Enablers of value added services or just cheap access to over the top (OTT) providers’ applications Webinar Transcript