Why telcos must treat Africa’s ‘app economy’ as engine for innovation

Africa’s mobile boom has reached a tipping point. As smartphones continue to become cheaper and more ubiquitous, Africa’s telecommunications industry needs to find new ways to stay relevant to customers. To compete in this new “app economy,” telcos will need to invest in gaining market share” through mobile applications, services, advertising and the customer data that powers them.

More than 80 percent of market-leading organisations globally already recognise that mobile is fundamentally changing the way they do business. By providing apps and services that directly support the devices and connectivity of their core businesses, Africa’s telcos can improve customer satisfaction, decrease the cost of customer service, and generate sizable efficiency dividends to their customer retention and employee productivity.

New economy, new rules

It should come as no surprise that Africa’s telcos have been able to benefit from rapid growth in mobile subscriptions. But traditional telco business models rely on high demand for voice and messaging services, which still comprise over 90 percent of mobile revenues in many markets in the region. Analysts estimate that data will make up almost 27 percent of telco service revenues in Africa by 2018. However, as the adoption of smart devices mobile data grows, telcos face increasing competition from over-the-top (OTT) providers offering free apps for messaging and VoIP calls. Telcos have no choice but to start innovating now to minimise the impact of the OTT services on their revenues.

The telco industry can benefit significantly from embracing this mobile disruption.In the African markets where 80 percent of consumers have no bank accounts, for example, telcos have already disrupted financial services providers with mobile money services. With their knowledge and control over mobile networks and infrastructure, telcos also occupy a prime position to facilitate the mobile transformations of other industries; from retailers adopting enterprise mobile solutions to manage back-end logistics, to governments seeking to offer the same ease of use and convenience that citizens already expect from the private sector.

For example, Surfline Communications in Ghana is using an IBM cloud solution to support critical back-end processes and a growing range of customer services delivered via the mobile device. Those efficiency and scalability gains are helping Surfline not only focus on mobile innovations for its own customers, but also support the infrastructural and implementation needs of Ghana’s businesses and government agencies as they start to invest more heavily in mobile services.

Adopting a mobile mindset

For most Africans, mobile device are the primary technology platform. African telcos would do well to consider the frictions experienced by prepaid customers, who account for 9 in every 10 Africans with a mobile device. Prepaid customers with medium to high spending –particularly those using smart devices – typically want flexibility in their service consumption. However, these same customers face the inconvenience of frequently topping up their accounts using vouchers, a legacy procedure that has not changed in the past 15 years. This can be transformed with a simple smartphone app which automatically tops-up a customer’s prepaid account from their mobile wallet, when it hits a certain threshold. It would save telcos the significant margins that typically go to retailer-middlemen selling prepaid credits; and create a new source of revenue for banks enabling direct access to bank accounts to top-up. Bharti Airtel, a leading Indian telco, offers customers an award-winning app built with IBM technology which lets them manage multiple services (and even add new ones).

This sort of service innovation requires the telco to work with other industries to ensure that the new service delivers the right functionality to customers. It also opens up the prospect of partnering with former competitors to both parties’ benefit – like OTT providers, who could benefit from prepaid users increased propensity to spend on data-related services. It also generates opportunities by measuring customer behaviours and individual preferences. More than 1 in every 2 executives surveyed by IBM’s Institute for Business Value, for example, see data and analytics as a prime driver for more customer-centric organisational behaviour.

Act local, think global

African telcos would do well to begin partnering with the disruptive start-ups that may currently be seen as competitors. Instead of seeking to compete against burgeoning communities of developers and entrepreneurs, they should consider offering them support through financial resources (like incubators), infrastructure, or access to new software. IBM, for example, runs workshops with local developers in the use of the IBM MobileFirst enterprise platform as well as its cloud development platform as a service, Bluemix. Telcos could partner with these nascent communities; and act as a broker connecting their innovations to larger enterprises, which will in turn need network support from telcos to activate and bring to scale.

Africa’s mobile adoption is a unique one, consisting of relatively low-cost devices that now act as the default means of Internet and information access for most citizens. As other parts of the world continue to pivot to mobile, Africa’s telcos have a valuable blank slate on which to develop new products and services (and even new business models, based on open software design and collaboration), with relevance to a range of other industries in the region and around the world. Africa’s telcos have a natural advantage to take the lead in mobile services innovation, thanks to their history of control over the device and the network.

(John Matogo is the University Relations Manager, IBM East Africa).