OTT – threat or opportunity for African Telcos?

Christoph Stork · Steve Esselaar · Chenai Chair · Safia Khan

Mobile broadband and declining smart phone prices have lead to a rapid increase in Internet use. Computer based Internet access was and still is the privilege of the few in Africa, mostly those with formal jobs, students and those that access it in Internet cafes (Stork et al 2013). Mobile Internet requires less skills than computer based access, it does not require electricity at home and is prepaid, all important conditions for use by low income groups in Africa. Mobile Internet is expensive for the poor at the same time as it is a cost saving tool. It is expensive when using the full Internet including media streaming. It is cheap when Over The Top (OTT) services are used instead of voice and text messages.

African operators have adopted various strategies to defend their revenues against OTT services such as Facebook, WhatsApp and Skype. One strategy is bundling voice, text and data together in top-up products.

The operator sets the price of the top-up so that it receives the desired ARPU and in exchange provides close to unlimited voice call and text messages. Another strategy is a regulatory one to prevent customers using OTTs in the first place. Some countries have banned Skype, for example, to protect international voice revenues. A third strategy is to use OTTs to gain market share. In markets with entrenched incumbents and high mobile termination charges, zero rated Facebook and WhatsApp may sway users to switch to a smaller operator.

This paper analyses quarterly prices for prepaid user baskets across 44 African countries and introduces alternative approaches to user baskets in order to measure and compare top-up bundles. Prepaid voice, prepaid data and top-ups are analysed together with postpaid offerings to demonstrate the various strategies operators in Africa have adopted and uses case studies to highlight which strategies have successfully defended or increased their revenues.

Keywords: Telecommunication Regulation, Mobile Broadband, Over The Top services, Mobile operators

* This is a working paper, not for citation.