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‘Nigeria is Africa’s biggest VAS market’


News » Technology/Innovation
Nigeria

July.23.2014

Ugo Okoye, is the chief executive officer of iConcepts, a mobile technology solutions provider. In this interview with BEN UZOR JR, he says VAS, if appropriate resources are channeled towards its development, can assist mobile operators offset the huge decline in voice revenues. Okoye is also of the view skewed revenue share model in favour of telecommunications operator is a fundamental drawback to the growth of the nations’ VAS industry. 

The company

iConcepts is a mobile technology and marketing firm. We basically provide Value Added Services (VAS) for mobile phone subscribers. We also provide mobile-based solution for business. We work with the network operators like MTN, Airtel, Globacom and Etisalat, to create unique content based services that subscribers can download or access anytime. It ranges from Ring Back Tones (RBT), mobile applications, to information, lifestyle and religious-based services. Some of the content is SMS, MMS, video, music and WAP. We have set up different platforms with the mobile operators, which allow customers to access these contents. We however share revenue with the mobile operators. On the business side, we provide mobile-based technology solutions to various industry verticals.

 One of our specialties is working with FMCG and manufacturing companies. We help them drive sales and build customer loyalty using mobile technology. One of our platforms is called ‘MCODE’, and it is an SMS shortcode based system that allows brands to reward their customer by allowing them participate in competition. Take an existing client like Coca-Cola for instance. A customer buys a bottle of coke and he or she finds a code under the crown. The customer can send that code to a shortcode number and become eligible to win prizes. We basically create these platforms using telecommunications services and technology, and we partner with these companies to enable them utilise them. So, we have two divisions in the business. One provides services to subscribers in partnership with the mobile operators, and the other focuses on industries. 

Dwindling voice revenues

 Well, it is quite interesting because we have been in the VAS industry for the past 10 years. We have seen the enormous growth in revenues from VAS. Mobile operators have realised that they cannot rely only on voice services for revenue. Initially, when the networks rolled out, 99 percent of operators’ revenues came from voice services. That has however slowly decline year-on-year and VAS is contributing over 10 percent of operators’ revenue. These things are happening because the industry is becoming highly competitive. There are a lot of mobile applications coming on stream such as smartphone messaging apps (Whatsapp, BBM, social networks). A lot of communications is no more happening just on voice especially at the youth segment of the market. Yes, voice revenue has started to dwindle. Network operators have also seen that smartphone penetration is on the rise. Telecoms networks see data as the new revenue stream. In view of this, mobile operators need to create more VAS services to drive data usage and adoption.

That’s the only way operators’ can find the much needed balance in their revenue stream. You have seen what’s happening with MTN, they have launched a music app. They have launched several apps into the market like Songstar and Afrinolly. There would be a huge wave of smartphone apps been developed in the next twelve months. So, we play in this space. VAS companies can partner with the mobile operators to create these products around data. So, whether it is video apps or music apps, VAS companies can build these services and launch them in strategic partnership with the network operators. We can together to build these apps, generate revenue and basically share it between ourselves.

 Challenges

 With any new industry been launched in a market like Nigeria, the main challenge is finding skilled manpower. One of our biggest challenges was finding software developers that had a really good understanding of how to create these products and services. We launched our company in 2004, and there were probably only 2 or 3 players in the VAS industry. Currently, there are over 50 companies in the sector. So, there has been enormous growth in the sector. There are a lot of new players coming into the market. Nigeria is the largest mobile market in Africa, and we are seeing not just local players but international companies come into the market. The pool talent has definitely expanded over the years. It is a lot easier to find developers that can help you build software. The cost of entry for subscribers was another challenge. Initially, when the industry started out, voice calls, SMS, SIM and handset were very expensive. VAS services were basically for the rich and wealthy.

 The low income earners would have found it difficult to use these services. We all know that the disposable income of Nigerians is considerably low. There are lots of subscribers that literary recharge their phone just to make a call. They never have airtime on their phone. The lack of understanding of how these services worked was another very critical challenge at the time. Over time, the industry has evolved. The Nigerian Communications Commission (NCC) is playing a major role in regulating the sector, and they have helped expand our industry. The commission has licensed VAS players and they are helping us expand our relationship with the mobile operators. I think the future is bright generally with VAS because Nigerians are curious and inquisitive about using these services. The youths that have grown up in the mobile world are very interested in using a lot of these services. With more smartphones out there, there would be more innovation with regard to creating new services.

 Market size

 If you look at it this way, there are about 127 million mobile lines but roughly 100 million phone users. If every subscriber spends $1 every single month, that’s about $100 million. It is a billion dollar industry, and VAS has considerably expanded because there’s a lot more people can do on their phones. It is a huge market, the potential is great. We basically need the operators to help grow this market significantly. They need to channel more resources to VAS. Operators still focus over 90 percent of their resources on voice. But this will slowly change. They need invest more in terms of manpower within the network operators on VAS itself. When we want to roll out new services, the VAS units in most of these networks are very small. So, it takes months to bring these new services to market. The time to rollout services is very long compared to other market in the world. This is a big challenge for us.

 Revenue share models

 Another challenge stalling the growth and development of the VAS industry is the revenue share model.  The revenue share models that exist between VAS providers and mobile networks are heavily skewed in the favour of the operator. We do not think this is fair because the mobile operators are merely providing a tunnel to deliver the content services to subscribers. We create the ideas, we build the technology and platforms, and we feel that the revenue share model should change to encourage innovation and build VAS companies that can expand beyond Africa. That way, we can basically provide more variety to subscribers. It is a potentially huge market, and comparable in Africa, Nigeria is definitely the biggest market on the continent.

 Regulation

 We’ve had conversations with the NCC in the past. The NCC basically said they usually do not get involved in commercial arrangement between network operators and their vendors. Now, VAS is a core element of the telecommunications sector, and the fact that NCC has licensed us; they can play an integral role in that area. What is the point of licensing VAS operators if they are not going to help us grow? We pay a percentage of revenue to the NCC every year, on the annual operating levy. If they want that to keep growing they must be actively involved in the commercial arrangement between the network operators and VAS players. Otherwise, the network operators will wake up one morning as they do and say the revenue share model has changed.

 It really stifles our business because if you have a two year plan based on a revenue share model, making significant investment along the way, and the network operator suddenly changes the rule of the game, in the case of Airtel and Globacom, it creates major problems for us. A VAS provider simply will not spend hard earned currency on products that he or she is only going to get 20 percent of the revenues. It just doesn’t make any sense.   We develop some of these products that we develop are in partnership with third-party content providers like music artiste. We need to have an industry working group were the regulator will play a critical role in how the mobile operators and VAS providers commercialise their agreements.

 Expansion

In terms of expansion plans, we need mobile operators to support us on a pan-African scale. The technologies are the same in every country. USSD, SMS, IVR, content based technologies, are the same in Nigeria as they are in South Africa. This allows us to deploy our solutions a lot more. So, we are working with the MTN Group, for example, were we can rollout our services across different territories in Africa. If we had revenue share model skewed in our favour, it allows us to expand and grow, hire more hands. As long as we can deliver content anywhere in Africa, it allows us to expand as quickly as possible. We have some operators that invest much more in content platform than others. Those operators doing this are able to increase their VAS portfolio much quicker. MTN is one of those leading networks. They have a platform called SDP were you can deliver content anywhere across Africa on the MTN network.  Part of our expansion plan is to open up offices wherever MTN operates. 

Article Credit: Businessdayonline

Updated 3 Years ago
 

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Tags:     iConcepts     Ugo Okoye     BEN UZOR JR     VAS     FMCG

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