Pyramid Points - Prepaid Mobile in Africa: It’s Complicated

The proposed acquisition of Zain’s African assets by India’s Bharti has highlighted the often-muted yet well-established challenge of mobile operator profitability in Africa. African markets, the conventional wisdom goes, are highly profitable, with low penetration levels underpinning considerable upside potential. As Zain’s decision to sell its African business and the subsequent negative impact on Bharti’s share price suggest, the reality of mobile profitability in Africa and other emerging economies is more complicated.

A number of factors emerge as key drivers of profitability. Notably, because of the fluidity of the prepaid segment and the high churn inherent to prepaid, the ability to build scale quickly and leverage it effectively has become a critical part of profitability.

Moreover, successful prepaid operators – including the likes of Turkcell, Safaricom, Maroc Telecom and Grameenphone – have better-than-average churn performance and have superb performance on the data front. A number of additional traits of successful prepaid operators are indentified in Pyramid Research’s latest report, Prepaid Mobile Services: Using New Business Models to Boost Profits. The report also highlights the challenges faced by players like Zain (and Bharti) in emerging markets and outlines key catalysts to profit generation, based on an analysis of operator performance in a range of countries, including Russia, Turkey, Morocco and Kenya.

Bharti’s foray in Africa illustrates how alluring emerging markets remain, despite the challenges: With the right approach, a prepaid operator can be highly successful, and on that score, Bharti may well be what the doctor ordered. The company’s ability to put pressure on suppliers, its expertise in cutting costs and its innovation in generating profits from low-income population segments are all part of key attributes that will be needed in order to turn around Zain’s African operations.

Prepaid Mobile Services: Using New Business Models to Boost Profits
Research report published March 2010
This report examines the success of prepaid operators in developing markets. It identifies the characteristics of successful prepaid players and suggests a number of core drivers for their profitability. The report makes a number of observations on the impact of ARPS on profitability in a competitive prepaid market context as well as on the core strategies successful prepaid operators rely on to boost revenue. It also looks at the dynamics of the cost base and trends emerging in the management of network opex. In terms of the next phase, selling mobile broadband, the report details trends in pricing schemes and discusses the challenges operators will face with subsidies. Finally, it examines in-depth the operator models of four prepaid players: MTS Russia, Safaricom Kenya, Turkcell Turkey and Grameenphone Bangladesh.

Africa & Middle East Mobile Operator KPI Forecasts
Forecasts published quarterly
Our Mobile Operator Key Performance Indicators Forecast products provide a complete picture of wireline voice and data communications in each of 25 African & Middle Eastern markets. The Excel output includes five years of historical data and five years of market projections for metrics such as subscription totals, market shares, net and gross additions, prepaid and postpaid subscriptions, business subscriptions, data ARPS, aggregate ARPS, prepaid and postpaid MOU, churn and total service revenue — all broken down for the mobile operators in the respective markets. We believe our Mobile Operator KPI Forecasts are superior because they capture granular data gathered through extensive field research and use a thorough methodology consistently applied to all markets.

Mobile Internet Adoption: Content is the Catalyst
Telecom Insider published December 2009
Mobile online services remain an attractive but elusive opportunity in much of Africa and the Middle East. The low usage of traditional, PC-based Internet services leaves a void that will be largely filled by mobile handsets, and social networking will be a key application. Case studies cover Egypt, Nigeria, Senegal and South Africa.

Africa & Middle East Mobile Data Forecasts
Forecasts published quarterly
Our Mobile Data Forecast products provide complete pictures of demand trends for 17 geographical markets in Africa and the Middle East. The Excel output includes five years of historical data and five years of market projections for metrics such as penetration, mobile subscriptions (by type of package, by operator or MVNO and by network technology), users of specific data services (SMS, music, etc.), MOU, ARPS (by operator, by subscription type, by service, by application) and revenue (by messaging and non-messaging applications). The Forecasts are based on extensive field research and use a consistent methodology, aiming to capture the total spending on mobile data services in each market. Data from these Forecasts is available online for subscribers to our DataTracker service.