Posts Tagged ‘revenue models’

Alternate Approach to Voice Price Wars in Telecom Industry in Uganda

My colleagues at Styx Technology Group are looking at alternate approaches to telecos in Uganda to increase their ARPU (Average Revenue Per Unit) a metric for revenue from each customer, instead of the current price war tagged to 3/= per second (US$ 0.1 per minute).

  1. Accept that voice is now commodity, being pushed further out by VOIP for both regular users and business, due to the improving Internet connectivity both via fixed and mobile connections. There is no longer a competitive edge to having cheaper voice, the revenues are fixed and can only go lower
  2. Bundled services: Currently there are separate plans for voice, SMS and data, which have to be purchased daily or when needed. The monthly plans have a premium attached, so without looking at the numbers I suspect that a majority of the regular users purchase daily plans as and when is needed. The telecoms can create bundled plans (already existing for voice) to include SMS and data without the hefty premium. Additional incentives can be provided for further discounts when a user pays consistently for a plan for 6 months, without any breaks.
  3. Smartphone Device and Service Contracts: While these are being gotten rid of in the US and Europe, the market in Uganda is ripe for disruption, where smartphones are paid over 12 to 24 months, with bundled services. Obviously the argument here is the risk associated with lending in Uganda, but options include partnering with financial institutions can help reduce the risk profile, work through employers to deduct the costs of the contract directly at source.
  4. Multiple Smartphone Data Plans: This is similar to the device plans above, however this allows the owner of the plan to register additional devices for monthly fee to share the data. This has been common with unlimited plans, and would provide a new revenue stream.
  5. Extending Mobile Money Services: The best service to copy is PayWay with a wide range of devices, and platforms on which to use the service based on what infrastructure the agent has. I would like to be able to swipe my VISA card and transfer money to my account without having to go through the bank interface which tends to be down more often than not.
  6. Bulk Sales of Devices to Schools: The new underlapped customer base, sell more devices to schools get parents to pay part of the costs to push e-education services, why do kids still have to fill Advanced Level and University Level choices on paper forms that can be lost? With powerful tablets in the $50 to $100 range only the telecoms have the clout, network and drive to push this through.
  7. Custom Devices and Services: These are for data collection needs, surveys etc, which can be accessed through third parties but pushing the envelope on what is possible. The key here is flexibility of service, enabling channel partners build and innovate by creating custom services and plans to meet their specific needs.
The telecoms need to think of blue ocean strategies to create new markets, provide ability for others to leverage their platform investments for new revenue channels, leveraging the example of Amazon that has created a multi-billion dollar technology infrastructure business based on solving internal problems.
What do you think?

UPDATE: This blog post follows the same thinking as The Telecom Wars in Uganda – Round 5 – 2015 and Beyond on this blog too

Uganda Youth – Radical Change Needed

This cold February morning signaled the start of the rain season in Kampala, which after the blistering heat is a welcome change before the populace starts complaining about the floods, mud and wanton debris associated with rain storms.

That being said the morning was punctuated by an insightful article by Simon Kaheru titled “it’s no wonder some of these youths are unemployed”  where unemployed youths are exalting how they have no opportunities, but do not put skin in the game to actually work their way up the ladder.

The response from Mwine Edgar, An Open Letter to Simon Kaheru is a clear picture to the entitled nature that the new generation of youth have today, and their expectation for a silver spoon to be provided by the government and community.

Out of the blue was Paul Busharizi’s, The Unwholesome pressure we put our children under, which underpins the fact that the populace is pushing children through the education system into a white collar career yet there are alternate options.

Not all is doom and gloom, however there is need to change the orientation of the messages going out to the youth and their parents/guardians to set them up for success in the future:

  1. It is okay to have a blue collar job career – everybody in the country is targeting a white collar job, but that means you have to work and compete to get the job and keep it.
  2. Education is an enabler for a successful future and not the end all for life. While Bill Gates, Steve Jobs & Mark Zuckerberg did not complete their education, they are an exception rather than the rule.
  3. Wealth and riches require hard work, patience and time. Majority of the successful entrepreneurs that we admire have over 2 decades of working under their belts.
  4. You do not need alot to start your journey, start small and grow what you have, like the saying goes easy come – easy go.
  5. Get off your high horse and get a job, any job because that will give you the appreciation of what it takes to make money and keep it.

Your thoughts and additions are welcome …

Mobile Money will not die by 2020 but Evolve to Survive

Nicholas Kamazi has an interesting perspective in his article, 5 Reasons Mobile Money Is Going To Die By 2020, which I fundamentally disagree with. While he caters for challenges with Mobile Money (MM), he does not take into account who uses MM and why, which are the reasons for the pervasive nature. Rebutting each reason for the death of MM:

  1. Death of Feature phones:
    • Battery life: smartphones are no where near the battery life usage of feature phones, and in areas where there is little availability of electricity to charge the phones, this becomes a deal breaker
    • Cost: I do not see $35 dollar smartphones becoming that popular
    • Rugged: Feature phones can take alot of abuse, falls, drops, plus general wear and tear which current age smartphones cannot match
  2. Digital Currency: Africa in general and Uganda in particular, are cash economies. MM just allows people to move money from one place to another very quickly.
  3. Unnecessary Charges:
    • The cost of sending MM is usually less than transportation and time for moving to acutally deliver the money without the risk.
    • Most transactions are between UGX 50,000 to UGX 150,000 (US$20 to US$60) usually under urgent situations
    • Urgency of transfer – most transactions happen with a need for urgency for example school fees, social functions, emergencies of different nature. Which can happen at any time of day or night, until there is an option which is that flexible MM is here to stay
  4. Capital Investment:
    • MM is a defensive option for telecoms as their core business is getting eroded, and will evolve in order to remain relevant.
    • I do not see any startup having the size, and capabilities to compete with the telecoms in this market, Uganda in particular and Africa in general.
    • Even in Asia the agents are the key, however managing them is not an easy process so the incumbents will remain in play for the next 5-10 years.
  5. Business environment shift: the telecoms are here to stay, and MM will evolve along with the business environment.

Mobile Money is here to stay as it is:

  • Pervasive with 20,000+ agents and counting
  • With the telecoms opening up to 3rd parties for utility payments, diaspora remittances, merchant transactions
  • Rural-urban social dynamics which form the bulk of MM remittances within a country
  • Infrastructure challenges such as roads, railways which also provide a conducive environment for MM as an option for money transfer.

Your thoughts?

The Telecom Wars in Uganda – Round 5 – 2015 and Beyond

The telecom wars in Uganda just got a new lease in life, however looking forward the next round will claim some casualties. Why do I call this Round 5?

  1. Round 1 – Oct 21, 1998: MTN comes into Uganda, after a monopoly by Celtel (now Airtel) where simcards fell to the equivalent of US$30 with a monthly service fee of $10
  2. Round 2 – 2007 to 2009: Warid and Orange launch in Uganda, the Value Added Service Provider (VAS) boom, thanks to James Oloo Onyango for pointing this out
  3. Round 3 – 2009 to 2012: Mobile Money wars
  4. Round 4 – 2013 and 2014: Airtel acquires Warid telecom, Smart Telecom & Vodafone join the fray, MTN launches voice bundles

At this point each of the telcom companies operating in Uganda have voice bundles, data and internet plans plus mobile money platforms. With international calling plans falling towards zero, currently even cheaper than local network calls, social media/VOIP/Messaging applications cannibalizing SMS revenues, the battle for survival is ever-fierce with the any mis-step proving fatal.

Looking into my crystal ball, the next round is going to be fought along the following avenues:

  1. Mobile Money Partnerships – with banks, utilities, and other commercial players to entrench mobile money transfer deeper into the economics of the country.
  2. Service Partnerships – can be seen around data & internet services, so that the telecos are not reduced to dumb pipes. The agricultural, health and education sectors will see a new push for value added services via SMS in order to keep the users captive on a specific network.
  3. Personalized Bundles – combined voice, data and SMS bundles are not yet the rage, but they will gain prominence
  4. Family Bundles – with families having more than one phone, I see a push towards shared bundles to reduce the costs of new customer acquisition & increasing opportunity cost of switching. The impact of this tactic will be further complicated by the multi-sim phones that most consumers have.
  5. Smart device leasing plans – one I have called for, complicated by lack of a national ID, but I see success for whoever nails a working version of business model first.
  6. Business Customers: Majority of the telecom usage is personal, however business customers provide an interesting selling point with a knock on effect for smart devices, family or business plans and shared bundles. Most users are forced to use a service or network convenient to the bread winner or trend setter.
  7. Quality of Service: after all that is said and done, when the costs are almost at par, the quality of service for a specific provider will become a critical deciding factor both for business and personal use.

With all this opportunity also comes great peril, from the following:

  1. Niche players – ISPs for Internet and data as the capabilities for deploying metro-wide WIFI accelerate, informal money transfer services especially under Islamic banking
  2. Regulatory pitfalls and taxes – the impact of the recent 10% excise duty on mobile money fees is yet to be assessed
  3. Mobile Virtual Network Operators – are they friend or are they foe? Partner or competition if running atop of your infrastructure?
  4. Market saturation with falling revenues per customer – the telcos need to innovate to stay atop of the fast moving market that is to render them dumb pipes and their services commodity
  5. Number Portability – when this comes, it will disrupt the players as it abstracts the underlying providers.

How do you see the telecoms responding to these threats, please share in the comments below ….

UPDATE: Round 2 includes VAS providers who saw exponential growth in revenues at this time using SMS based solutions

Uganda National ID – Alternate Strategy?

I have been thinking – some would say that is a dangerous thing, well yes I have been thinking, just what an afternoon with no distractions can do for you. Well there is a general problem in my motherland Uganda, there is no National ID. Oh yes, there is no way of uniquely identifying each and every person in the country, even tracking the babies born or the deaths. Sad but true, how has this affected the populace, to some its a great thing not to be known but to others, its a great source of discomfort since everything is just too hard to do.

What is not helping are headlines like Government suspends national ID project again and with a budget now growing to the hundreds of millions of dollars, a question pops into my head. Are there no other options to get to the same place, are there no other ways? In the words of Benjamin Franklin “If everyone is thinking alike, then no one is thinking.”

So again with the Snowden revelations, and potential for mis-use, there is one fact that is evident, with no National ID, the progress we are making going forward is going to be very very painful. In the software development world, there is the concept of “technical debt”, which has very high interest rates in terms of cost of addition of new feature, slowing down progress as you move along.

The high-level strategies revolve around the following themes:

  1. Frugal Innovation – how to use very little to make alot of progress
  2. Customer Value – focus on ensuring that the 75% who see the value are immediately served, to act as a tipping point for the rest
  3. Relevance – ensuring that the implementation is relevant in today’s “environment”
  4. Accuracy and Trust – the data within the system must be trusted from the word go, it should be easy to spot and very inconsistencies

So here it is:

  1. Target population – above 18 years of age
  2. Implementing body: a government parastatal & accompanying bill which is setup to manage the process of issuing the National ID numbers as the single source of truth whose mandate is to provide the lowest common denominator for citizen registration
  3. Who gets National ID numbers first? The element of trust is very important, but the need is to start with as little as possible to continuously refine over time, so the starting issuance of National ID numbers has to start from those people who are known, by different systems so that their identities can easily be verified which include:
    • Passport
    • National Social Security Fund
    • Tax Identification Number
    • Driving License
    • Voter Registration
  4. Registration of Births and Deaths: this is a critical component of the National ID system as it identifies which IDs are no-longer in use
  5. Regional Offices to ensure that people applying for IDs do not have to travel to Kampala to do it
  6. Technology/Organization:
    • Provide a means of checking the status of application by visiting authorized centers which include regional offices, SMS requests (responses to be sent to the number registered on the application)
    • Access to online verification services for authorized usage
  7. Critical Success Factor: uptake which can only be driven by the network effect of being used by multiple players within the private and public sector as the lowest common denominator for accessing services

What do you think? Where are the gaps that I have not thought through? What other alternatives are there?

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