The document discusses how evolving business models in the mobile industry are being driven by over-the-top (OTT) applications. It notes that while voice traffic continues growing, data and OTT applications are driving increased network investment and now account for the majority of operator revenues. The summary also states that operator profitability depends on their ability to adapt to new opportunities while mitigating risks like regulatory changes, and that policymakers should focus on stimulating broadband network growth rather than protecting outdated models.

1. EVOLVING BUSINESS
MODELS ARE DRIVEN
BY OTT APPLICATIONS
Dr. Christoph Stork & Steve Esselaar
Research ICT Solutions
1st October 2019

2. 2
MNO Revenues
depend on many
factors
RIS
■ Economic factors: Demand for
mobile services as a function of
population, GDP, exchange
rates;
■ Regulatory environment: Market
structure shaped by the number
of Mobile Network Operators
(MNO), fairness of competition
and transparency and
predictability of regulations;
■ Operator strategies: Product
design, response to other
operators and own business
model.
Factors impacting operator revenues

3. 3RIS
Internet Value chain
■Social media and OTT use benefits all segments of the Internet Value Chain
■Each segment is subject to own laws, rules and regulations and regulatory bodies
■Each segments also comes with its own risks, investment requirements and profit
opportunities

4. 4
Evolving Business Models
■ The transition from a voice and SMS to
mobile Internet access-business model is
inevitable
■ MNOs will
■ become mobile Internet access
providers
■ no longer charge for Voice and SMS
■ have simplified billing and branding
■ Not only because of revenue trends but
also because this is where the last decade
of mobile network investment has gone into
■ 2.5G, 3G, 4G, 5G is all about data not voice
and SMS
RIS
Illustrative revenue trend
2000 2005 2010 2015 2020 2025
100%70%40%30%20%
30%
60%
70%
80%
100%
Voice + SMS Data

5. 5
Voice traffic is still growing
RIS
Minutes and MB on Airtel’s Africa network
30,000
60,000
90,000
120,000
Sep-12
Mar-13
Sep-13
Mar-14
Sep-14
Mar-15
Sep-15
Mar-16
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Dec-18
Minutes on the network
Total MBs on the network

6. 6
The general revenue trends are positive despite
growing numbers of OTT users and OTT traffic
RIS
MTN Revenue in percent of Q1 2013 revenues
0%
60%
120%
180%
240%
300%
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
Benin Guinea Bissau Guinea Ghana Ivory Coast Liberia
Nigeria South Africa Uganda 100 Percent Zambia Swaziland
Rwanda Botswana

7. 7
MNO revenues reflects a companies ability
to seize opportunities and mitigate risk
RIS
Revenue developments of MTN and Orange Guinea in percent of Q1 2014 revenues
0%
50%
100%
150%
200%
250%
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
Orange Guinea MTN Guinea

8. 8
Initial gold rush is over:
EBITDA margins will be more similar to other sectors
RIS
1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18 2H18
Benin 43% 40% 41% 31% 29% 23% 28% 10% 25% 23%
Botswana 55% 63% 55% 59% 43% 51% 54% 48% 62% 55%
Cameroon 42% 43% 38% 35% 38% 28% 31% 18% 19% 0%
Congo Brazzaville 42% 45% 44% 43% 46% 38% 40% 26% 34% 47%
Ghana 39% 36% 40% 41% 39% 43% 37% 43% 39% 36%
Guinea 26% 2% 10% -1% -15% -18% -1% 9% 5% 10%
Guinea-Bissau 24% 32% 37% 29% 28% 30% 35% 31% 34% 26%
Ivory Coast 38% 40% 37% 32% 36% 29% 35% 28% 27% 18%
Liberia 34% 14% 29% 17% 23% 8% -16% -2% 4% -25%
Nigeria 60% 57% 57% 49% 50% 41% 38% 40% 43% 44%
Rwanda 29% 28% 33% 29% 27% 30% 8% 10% 26% 32%
South Africa 33% 31% 36% 31% 31% 36% 35% 34% 35% 35%
Sudan 34% 34% 33% 36% 35% 29% 33% 37% 31% 39%
Swaziland 50% 58% 54% 52% 54% 54% 52% 46% 45% 41%
Uganda 38% 39% 37% 35% 35% 29% 32% 36% 32% 38%
Zambia 38% 42% 39% 36% 32% 32% 28% 36% 31% 31%
Regulatory impact
Stable
Up
Competition
Stable
Stable
Up
Stable
Regulatory impact

9. 9
Unintended consequences of regulatory
interventions: MTN invested less in broadband
infrastructure in Nigeria
■ 2016: Fine of 330 billion Naira (USD 1.67 billion)
■ December 2016 - June 2017: MTN lost 8.8 million subscribers (SIM registration)
■ 2015-2017: Central Bank alleges improper repatriation by MTN Nigeria of USD 8.1 billion
RIS
Data as % of voice revenues
Dec-17 Jun-18 Dec-18
MTN Nigeria Airtel Nigeria MTN Ghana
57%55%
50%
36%
31%
27%
19%20%
16%

10. 10
Conclusion
■General revenue trends are positive despite growing numbers
of OTT traffic
■Revenues and profitability are mainly the results of an
operators ability to seize revenue opportunities and mitigate
risk.
■OTTs stimulate broadband demand and network investment
■Policy-makers and regulators should be more concerned with
stimulating network investment into 3G+ and less with
attempting to protect out-dated business models of operators
RIS

11. 11
STEVE ESSELAAR
PARTNER, RIS
MBA
DR. CHRISTOPH STORK
PARTNER, RIS
PHD, ECONOMICS
www.researchictsolutions.com
+27 84 999 000 2
christoph@researchictsolutions.com
www.researchictsolutions.com
+1 778 865 5695
steve@researchictsolutions.com
Research ICT Solutions