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In the latest instalment of MEF’s video series supported by Mahindra Comviva, we look at how operators in developing markets are managing the transition to new value added services. Manny Teixeira, group head of digital media and services at MTN, talks to us about the next phase…

Africa has begun its transition away from the feature phone to the smartphone.

According Analysys Mason’s Middle East and Africa regional research programme, the region’s smartphone sales will grow at a CAGR of 10.8 per cent between 2015 and 2020, from 63 million units to 105 million units. Smartphones will account for 62.4 per cent of all handset sales in the SSA region in 2020.

Is this an opportunity or a challenge for the region’s operators? Obviously it’s both. For those involved in VAS and content, the switch to smartphones changes everything. The traditional core products – text-based alerts – are cannibalised. Simultaneously, new options based on richer propositions present themselves too.

The big question is how to build rich new services in a specific African context – services that factor in the cost and availability of data, and that offer flexible ways to pay.

MTN is one of the giants of the region. It has 230 million subscribers, and its base is in South Africa, where it has around 30 million customers. South Africa’s advanced market offers an example of where the whole continent might go – giving MTN the chance to test new services and business models.

 Operators and the industry in general traditionally saw the portal as the end point. I think we are now moving toward thinking where we re more of a marketplace.

A good example is Music+, its streaming music services built around local artists and offering flexible payment options tailored for African music fans. It’s been a huge success.

In the second edition of MEF Executive Insights series, we talked to Manny Teixeira, group head of digital media and services at MTN, about building the next generation of content services for Africa…

How would you describe the state of the VAS market now?

I think what’s happening in developing markets and in Africa in particular is that as the smartphone and data access becomes more prominent, the stuff that was driving VAS – text alerts and news headlines and so on – is available free on any device. So consumers are looking for services of genuine value that you can’t access easily.

As operators we have to move away (from the old products) to video and gaming, and also to things like education and health. We have to work out how we can add value and deliver them in a way that’s affordable and accessible.

One of the successful new services is Music+. What is the story behind it?

If you look at Nigeria for example, it has strong music industry, but monetisation was always a challenge, mainly because of piracy. We put in place the Music+ platform starting with ringback tones initially but then moving to streaming.

It allows an artist to provide tracks to the platform that we could monetise and provide some protection against piracy. We built a specific billing mechanism that lets these artists to extract some extra value from their efforts and hard work.

The other key difference that works for us in an African context is the ability to make it affordable. So rather than the tradition model of $10 for a 30 day subscription, we can offer three and seven day tariffs with micro-billing that people can come in and out of. They still get the benefit of the music but less commitment.

It’s now become a primary way for local artists get their music out there and monetise it. Music+ has 3.5m subscribers and is immensely success. We will replicate it across Africa territorially and in terms of video and gaming etc.

Another side effect of the smartphone can be to reduce the power of the operator portal. Is that true for MTN?

Operators and the industry in general traditionally saw the portal as the end point. I think we are now moving toward thinking where we re more of a marketplace. So rather than being an end point in itself, it’s more of a meeting point for a consumer on one end and a supplier on the other.

It’s where we can allow them to transact using our access channels and our transaction platforms. So rather than trying to control the whole store, we want to be a meeting point. Thats where our thinking is heading towards.

Clearly, billing is one of the USPs an operator has in this ‘marketplace’ idea…

In an Africa context the lack of a credit card means that while there might be value in certain services, there’s not always an easy way of distributing them.

Our benefit is the ability to bill and get money loaded. (We can do that) with airtime, but airtime is generally an expensive medium as you move to app downloads. So we focus on the mobile wallet that lets you effectively carry a quasi credit card that you can pay with.

So for example we invested in Jumia – Africa’s largest online store – and you can use the wallet to pay for purchases via that channel. It’s an ancillary service that core to our network but we will make it more widely available and allow third party interactions via that platform.

You mentioned services beyond entertainment like health and education. How will you approach them?

We default to entertainment because in an African context, the phone is the primary entertainment. But things like health, education, agriculture and employment, that ecosystem is something we haven’t wrapped our our heads around entirely.

There’s a social good aspect and a commercial reality to it. How do you do both? We are good network people, but I’m not sure we’ve evolved our thinking enough to participate in these areas yet.

But I go back to my earlier point about being a marketplace. We’ll have to rely on partners to come to us and say they can use our 230 million customers and our billing systems to deliver solutions that add value for the consumers, the network
and the business.

This Executive Insights Video Series is supported by Mahindra Comviva to look at network operator’s views on the drivers and trends of  The Business of Tomorrows.