Dynamic pricing: Lowering tariff without compromising network quality

 Ben Uzor Jr

Nigeria’s telecommunications landscape has continued to record significant milestones after the successful liberation and deregulation of the sector in 2001. Due to resourcefulness and tenacity of mobile network operators to expand their networks across the country, the sector witnessed a quantum leap in the number of telecoms subscribers from less than 500, 000 active lines in 2000 to over 101 million active lines in 2012.

In spite of significant strides in telecoms, there have been numerous challenges, mainly revolving around tariff and quality of service. Overall, the advent of GSM in Nigeria has significantly advanced the lives of Nigerians individually and collectively, stimulating economic growth by facilitating cross-industry linkages and improving efficiency.

To tackle the various challenges that have often dampened the enthusiasm of mobile phone users, the GSM operators have rolled out numerous technological innovations and creative marketing solutions over the last 10 years. Considering that the issue of quality of service has to do with capacity, the operators have continuously invested in their networks with a view to expanding capacity in order to meet the demand for their services. The race has by no means come to an end; it hardly will in the next few years.

Millions of Nigerians still do not have access to telecoms services. A recent study conducted by MTN revealed that over 850 villages had never had access to any form of telecoms services. Besides, there is countless number of Nigerians anxiously waiting for the opportunity to have their first mobile phone. Aside from this, much more investment is required to enable the networks deliver first-rate quality of service.

Gbenga Adebayo, chairman of the Association of Licensed Telecommunication Operators of Nigeria (ALTON), noted that much may not be achieved in the march for best-in-class quality of service in the country unless more base stations were built to match the demand for service in the market.

According to Adebayo, at least 60,000 additional Base Transceiver Stations (BTS) were needed for rural inclusion, adding that protection of telecoms infrastructure must be given priority attention, otherwise street urchins will cause more harm than good.

Considering the challenging operating environment and other drawbacks which inhibits the base station or telecoms mast roll out, mobile network operators are tasked to look for immediate solutions to meet the yearnings of their teeming subscribers.

Apparently, the two principal needs of most subscribers in Nigeria’s telecoms market are tariff reduction and improved quality of service. These two, at the current level of infrastructural development in Nigeria, would appear to be mutually exclusive.

Without the industry growing its capacity to a level that it can conveniently accommodate the demand of the subscribers, reduction of tariffs will invariably continue to strain service quality. It is therefore no coincidence that most massive slashes in tariffs by telecom operators in Nigeria in the last few years have been consequently attended by a period of sub-par quality of service across the nation.

As a testament to the ingenuity of the operators and their quest to seek cutting-edge solutions designed specifically to address local challenges, they have introduced an innovative solution that seems to meet the two topmost quests of subscribers in this market all at once.

Dynamic Pricing

By dynamic pricing, it is possible for telecom operators to reduce tariff without necessarily experiencing network congestion. It is a solution that offers subscribers generous tariff discounts in areas where demand on network resources is low, and offer marginal or no tariff discounts in busy network areas.

That way, telecom subscribers in a busy or high traffic network area will be encouraged to defer their calls till they get to low traffic network areas where they can enjoy generous discounts. In a nutshell, the idea that this solution tries to sell to users is simple: If you are making calls during busy hours from a busy business area, you will end up paying more for your calls than you will if you delay the calls till you get to less busy locations.

With this message in mind, customers generally seek out low traffic areas to make their calls, thereby helping to reduce congestion in busy network areas. Consequently, this solution creatively avails subscribers the much desired tariff reduction, while creating an avenue to control the perennial issue of congestion in certain areas within the network.

Lanre Ajayi, National President of the Association of Telecommunication Companies of Nigeria (ATCON) told Business Day in an interview that Dynamic pricing will be beneficial to the telecoms market.

“We are operating a deregulated sector where operators can initiate and set tariff regimes. I also believe that any operator going down this path would have the necessary approval from the Nigerian Communications Commission. In all, it is a good development because it would give telecoms subscribers more alternatives in how they decide to manage their telecom spend.

“Besides, it would go a long way to address the issue of network congestion. The Nigerian telecoms industry is a very competitive one. Operators are continually looking for new ways to fight competition and thus improve revenue generation”, he stated.

Timothy Akinyemi, a telecoms engineer told Business Day that the solution is a feature of Next Generation Prepaid platform made possible by the technology backbone called Intelligent Network (IN).

According to Akinyemi, “This approach allows telecoms operators to handle 50 percent more traffic per BTS, helping them address the congestion of network.” In spite of what critics may say, telecoms operators in the country are sparing no resources to acquire top of the range technology and solutions to provide satisfactory service to their customers.

Indian perspective

Uninor is one telecom company that has taking advantage of dynamic pricing to garner marketshare in India’s highly competitive telecommunications market. Uninor is a joint venture between Norwegian telecommunications company Telenor and an Indian Real Estate company Unitech. The company was the first in the world to introduce a ‘Dynamic Pricing’ to mobile call charges.

Based traffic experienced by a wireless tower servicing any area a customer can receive discounts ranging from 5 percent to 60 percent. This particular service has been very well received in the market with Uninor commanding as many as 106 million subscribers. In 2011 alone Uninor added as many as 2.03 million subscribers. Off the total number of users Uninor currently has 40 percent of the subscribers under the ‘Dynamic Pricing’ Plan.

MTN’s story

MTN Nigeria has introduced this novel solution for the benefit of its subscribers. Indeed, MTN Nigeria with revenue of N273.33billion in 2012 is not the only operator which has introduced this solution.

A couple of others have previously introduced the solution under various names, and with various tariff discounts. However, MTN is introducing its own package with as much as 100 percent tariff discount, depending on where subscribers are making their calls.

Larry Annetts, chief marketing officer, MTN Nigeria, said: “MTN Zone is a product of our desire to continuously delight our customers and give them much more value for their money. The service offers attractive discounts to our customers depending on the prevailing discount rates available on the cell site from which they receive signal.”

MTN had previously run the service on a successful pilot phase in select locations in the country. MTN Zone was later fully developed and activated in Lagos, Rivers, Imo, Anambra, Ogun and Bayelsa States. The workings of the service are simple.

MTN customers are advised on an ongoing basis, the discounts available in the various locations they move into. This is usually done through a service called cell broadcast. Every customer is able to activate the cell broadcast facility on his or her phone by following a set of instructions provided by MTN. Once activated, the screen of the subscriber’s phone will subsequently display available discounts wherever he or she moves to.

The broadcast messages are updated and transmitted regularly to keep customers abreast of prevailing rates where ever they may go within the area of coverage of the service. One interesting feature of the service is the ability of customers to receive discounts for calls and short messages they send to friends, business partners and loved ones on other networks and even on international lines.

The service allows customers to have control over their spent on calls. They can decide to delay certain calls till they get to their homes or offices where they usually enjoy generous discounts on calls. The service comes as an added value to customers who are already enjoying some level of discounts on bouquets like Pulse and Family and Friends.

Wale Goodluck, corporate services executive, MTN said the introduction of MTN Zone is consistent with the resolve of the company to provide more value for every kobo spent by customers on the network. He said this resolve motivated the ongoing nationwide modernization and swapping-out of the network to provide more capacity and much improved quality of service.  The modernisation exercise is nearly half-way through and is expected to be concluded in a few months.

Samsung/Apple verdict: Winners and losers

Ben Uzor Jr

               

In a every battle, there is always a loser and a winner. Perhaps this fact of life played out here as the long-fought patent battle between Apple Inc. and Samsung has come to a conclusion. With the verdict largely unfavourable to Samsung, analysts expect that the new development would probably ripple across the entire smartphone industry. Apple and Samsung had accused each other of infringing on software patents. Apple’s allegations also included a few design patents. A California jury at the weekend found Samsung had infringed on the majority of the patents in question -- including software features like double-tap zooming and scrolling -- and recommended that Apple be awarded more than $1 billion in damages. On the design front, many Samsung devices were found to infringe on hardware style or icon setup.

In the words of Anderson Cooper: “anyone who has experienced a certain amount of loss in their life has empathy for those who have experienced loss.” I have experienced the loss of loved one but ironically it came at a time when everything was going on well. Indeed, I do empathise with Samsung because they have done tremendously well in seizing leadership position from Nokia in the competitive smartphone industry. Expectations are that Samsung will appeal the ruling, but as it stands currently, the verdict could significantly affect both smartphone users and other industry players. The question on the lips of every Samsung smartphone users is, what happens to my Samsung phone? Apple’s design and software claims involved scores of Samsung devices, including the Nexus S 4G and S II.

By virtue of the ruling, Apple could request an injunction against the Samsung devices that were found to have infringed on its patents. Interesting, this would also mean that Samsung could be compelled to take those gadgets off the market until they are changed. Just imagine how much Samsung will incur in losses as a result of this. However, Samsung smartphone user can look on the bright side. No one can pry the phone out of your hands even with an injunction. But it’s possible that your phone could receive a software update that changes the look and workability of the device. Michael Gartenburg, research director at Gartner, believes it could be a good thing for consumers in the long run because it would force Apple’s competitors to innovate. “Anyone who was even thinking about borrowing a technology or design from Apple will think twice about it now,” he said.

The Mesmerize, Galaxy Prevail and Infuse were among the handsets found to have infringed Apple’s patents. Other analysts point out that Apple could be the overall loser because the court case has helped boost Samsung’s profile. But more importantly, what happens to the Samsung Galaxy Tablet? This category offered one spot of good news for Samsung in this patent saga. The jury ruled that Samsung’s Galaxy Tablets did not infringe on Apple Inc’s design patents for the iPad. On the flip side, the ruling has some implication for Google Incorporated and Android? Samsung was unable to prove any of Apple’s patents invalid, which is the major point that could affect other smartphone industry heavy weights. Bolstered by an arsenal of significant patents now deemed valid in court, Apple Inc. could go on to sue other phone companies -- namely, Android maker Google and its hardware partners.

Some analysts believe this situation creates a big opportunity Nokia can take advantage of to reclaim its dominance in the smartphone segment. Samsung is the largest manufacturer of Android devices, and while the software does vary a bit across manufacturers, it’s largely similar. So smartphone makers could be sued for similar software infringements, and Google may have to tweak Android’s user interface. Taking a look at Google’s financials in the wake of the ruling, its shares were down about 1 percent in after-hours trading late Friday, last week while Apple’s stock jumped nearly 2 percent to a record high near $675. Will we see any changes to future phone and tablet hardware?

The verdict strengthened Apple’s design identity, and competitors may now be afraid to even toe the line of the iDevices’ “look and feel.” Chris Carani, an intellectual property attorney and design law expert at McAndrews, Held & Malloy, said the verdict could spark “a burst of creativity” in the design of future devices. Competitors won’t want to risk being slapped with a design infringement lawsuit, given that it costs so much money to roll out a new smartphone or tablet. “Competitors will have to go back to the drawing board, and give their designers more creative license,” Carani pointed out.

“They’ll have to create something very different as far as the visual experience, and that choice could be a great benefit for consumers.” What happens now? Does Samsung have to pay up? Before the verdict even came down, industry experts predicted that an appeal would be all but certain in this complex case. Samsung Corporation alluded strongly to that point in a statement after the verdict: “This is not the final word in this case or in battles being waged in courts and tribunals around the world, some of which have already rejected many of Apple’s claims.” The statement continued: “It is unfortunate that patent law can be manipulated to give one company a monopoly over rectangles with rounded corners.” On the other hand, Apple was excited with the ruling.

“The mountain of evidence presented during the trial showed that Samsung’s copying went far deeper than even we knew.” Samsung has to be sorely disappointed, but it has enough cash to handle the $1 billion ruling with relative ease: It earned $12 billion last year and has $14 billion in cash in the bank. If Samsung does choose to appeal, it’s unclear what timeline that move will follow. The case involved 109 pages of instructions, a fact that made headlines, although in a surprise move, the jury came back with a verdict after only three days.

Nokia, others strengthen capacity of women entrepreneurs

Ben Uzor Jr

Women entrepreneurs in Nigeria, shut out of the global market due to poor access to relevant information required to make effective decisions, drive profitability and growth of their businesses can now reach their full economic potential. The Cherie Blair Foundation for Women (CBFW), in strategic partnership with Nokia West Africa and MTN, has strengthened the capacity of women entrepreneurs through the introduction of a new information service that would provide essential business tips and practical advice on how to start and run a successful business to female entrepreneurs in the country via their mobile phones. However, the service dubbed ‘Business Women’ will be the latest addition to the Nokia Life service portfolio.

With Small and Medium Enterprises (SMEs) accounting for over 90 percent of Nigeria’s employment, industry watchers told Benuzorreports at the launch of the service that assisting more women in the country run successful and profitable businesses is a great way of empowering and enabling personal improvement that benefits not just the individual, but their children, family and society in general. Cherie Blair, founder of CBFW told journalists that women entrepreneurs are faced with significant barriers to scaling up their businesses, including access to affordable resources, marketing channels and training inputs.

According to Blair the new information service aims to address this imbalance by providing essential entrepreneurship tips, delivered via SMS to mobile phones with the Nokia Life service. Women entrepreneurs present at the launch of the service expressed optimism that the new information service would assist them in overcoming some of the social and economic barriers preventing women from reaching their economic potential. Research conducted by the CBFW, supported by the ExxonMobil showed that 93 percent of women entrepreneurs in Nigeria were willing to use value added mobile service to address the core challenges they face in their business.

75 percent of them felt that addressing these challenges would lead to a significant increase in value of their business. “Giving women the chance to become financially independent and make the most of their talents is the key to higher living standards for them and their families. “With the extensive reach of ‘Business Women’ through Nokia Life and content tailored especially for Nigeria women entrepreneurs, this new service has the potential to empower thousands of women business owners.”

Industry analysts however told Benuzorreports, that the introduction of the service was indeed a welcome development. According to them, while computers and the internet allow women to build entrepreneurial success, mobile phones have the most potential because their portability and ease of use make them a particularly friendly tool to support women’s business growth. James Rutherford, vice president of Nokia West Africa explained that by partnering with CBFW and MTN Group to make ‘Business Women’ service a reality was indicative of Nokia’s commitment towards connecting people to new opportunities, including making women a larger part of the next billion of people to be connected.

“Nokia Life is by far the world’s largest mobile information service suite helping consumers in emerging markets learn, live and share information better. The foundation invests in women entrepreneurs to build and expand their businesses, and in doing so, benefit not only them but also their families and communities. We are delighted to partner with the foundation to provide Nigerian women with the best information available to help their businesses.

Besides, the ‘Business Women’ service will be available for free, for the first six months, to Nokia Life users who are also currently subscribed to MTN Nigeria. The service does not require 3G or GPRS. “We are very concerned about gender empowerment, data and enriching lives. We recognise the power women bring to the table. We are also aware that by providing this application to the right people, it has the potential to enrich many people’s lives” Akinwale Goodluck, corporate service executive, MTN concluded.

Online retail expands as tech-savvy Nigerians seek bargain buy

Ben Uzor Jr

               

The constant growth of the formal retail sector in Nigeria, along with rising internet penetration in the country, is driving the expansion of online retailing. By global standards, the electronic commerce market in Nigeria is undersized, but figures of online sales have shown a steady increase over the last five years, as the one-time nervousness of Nigerian shoppers takes a backseat and a growing number of techno savvy consumers turn to the cyberspace for retail therapy and bargain hunting. This retail trend, according to a recent report by Euromonitor International, a global market research organisation, recorded a 25 percent growth in 2011 valued at N62.4billion, which is an additional N12.5billion to the N49.9billion recorded in 2010.

Pushing this retail segment most is online retailing, which recorded 25 percent growth during the period under review, while other non-store methods like direct selling and vending trailed behind. Foreign investors already see the opportunity in this market segment, as government and stakeholders in the internet access market step up investment in strengthening broadband internet infrastructure in the country. Investors see the opportunity and are already developing online retailing platforms selling a variety of items including books, mobile phones, electronics, toys and beauty products. There are host of online retail platforms such as DealDey, Tafoo Deals. Analysts expect heated competition in no distant time as stakeholders jostle to expand the scope of the market.

Only recently, a new online shopping destination was added to the growing list of online retail outlets were people can shop. The website is called Kasuwa.com. The website, however which is a venture from German commerce giant, Rocket Internet. Kasuwa.com, an online retailer in Nigeria announced, weekend that it has rebranded. It will begin operating under the new trade name JUMIA effective immediately to become part of the largest online stores across the African continent. Speaking about the reason for rebranding so soon after the initial launch, co-founder Tunde Kehinde said, “It has become necessary to accelerate growth and integrate more seamlessly with the rest of Africa, the new JUMIA is larger and better equipped to fulfill the growing demand for online shopping in Nigeria. The rebrand is the outcome of the overwhelming response to the online shop’s offerings in Nigeria.

We have since the launch, received and fulfilled thousands of orders and expect to have sold significantly higher number of items by end of the year.” At JUMIA.com, Nigerians can expect the latest mobile phones, laptops, electronics and home appliances. Additionally, there are over 20,000 book titles and an extensive catalogue of beauty, hair, baby and children’s products. JUMIA plans to soon add more categories to its wide selection, including fashion, shoes and accessories. JUMIA is indeed the largest general retailer of consumer goods online. “Being part of the largest online store in Africa, will allow us to better leverage our network to provide a wider selection of brands and products. Customers will also experience even better prices.

“We guarantee that customers will enjoy improved customer service and more value added features that will improve their shopping experience.” said co-founder Raphael Afaedor. To celebrate it’s launch, JUMIA is offering free delivery anywhere in the country and sponsoring a giveaway competition where customers who fill out their birthdays in their free accounts stand a chance to win a Samsung Galaxy S3. All the information for the competition is available on the new JUMIA website www.JUMIA.com.ng and on the Facebook Page www.facebook.com/JUMIA Nigeria.

Dormant mobile money operators slow cashless project

Ben Uzor Jr

The inability of some licensed mobile money operators to roll out financial services after acquiring licenses a year ago is slowing down the Central Bank of Nigeria’s (CBN) ‘Cashless Nigeria Project’ aimed at reducing the amount of physical cash circulating in the economy, and encouraging more electronic-based transactions. In line with its cashless policy, the apex bank had licensed 16 mobile money operators to provide financial services and assist in bridging the divide between the banked and unbanked segments of the population but a large number of them are yet to find their feet in the industry. According to market watchers who spoke with Business Day, issues revolving around access to requisite funding and technology constraints have conspired to hinder the take-off of these mobile money operators.

Out of the licensed 16 mobile money operators, BusinessDay learnt that, GTBank (in strategic partnership with MTN and Fortis), United Bank for Africa (UBA), Stanbic IBTC, Pagatech and E-transact Plc have resumed operations. Among those yet to roll out financial services are M-Kudi, Monetise, Paycom, Eartholeum, Moneybox, Parkway Projects , Chams and FETS. Analysts have expressed reservations about this worrisome situation, lamenting that it could hinder the fulfillment of the CBN’s 2020 target of  increasing the formal use of electronic transactions to 70 percent; from the current level of 36 percent of the adult population. With over 60 percent of the population having access to mobile phones, analysts argue that mobile money is a veritable tool to provide low-cost financial services, especially to the unbanked.

Despite the huge investments already channeled into the mobile money ecosystem by mobile money operators, poor awareness, according to industry analysts have slowed down penetration rate. Francis Efe, an m-payment enthusiast argues that the current situation was expected, even before they were granted licences, observing that not all licensed mobile money operators would survive. “Some of these mobile money operators will fall by the way side due to issues revolving around access to financing, technology, poor agency and distribution networks”, Efe said. Although there are some mobile money licensees who are rolling out innovative financial services and building agent networks, the process is rather slow.

Analysts at FBN Capital disclosed recently that mobile payment was still at a low level in Nigeria. According to the Nigerian Communications Commission (NCC), the number of active telecoms lines expanded by 12.5 percent year-on-year in May to 101.8 million. The value of electronic payment, according to industry analysts at FBN Capital reached N1.67 trillion in 2001, a 56 percent increase on the previous year. But more importantly, transactions on Automated Teller Machines (ATMs) accounted for N1.56 trillion of the total, and mobile payment was just N21 billion as against N7 billion in 2010. In January this year, the CBN disclosed that activities had since increased within the mobile money ecosystem and operators have recorded 35,971 transactions.

Chidi Umeano, head, shared services, CBN said the value of the 35,971 transactions was N227.92 million. “Sixteen mobile payment operators licensed in August 2011 recorded 35,971 transactions valued at N227.92m ($1.4m) in January 2012.” Sola Bickersteth, director, One Network, a mobile money industry development platform, strongly believes that the figure is an insignificant fraction of the huge sum of money that can be generated by mobile money operators if all the teething issues in the burgeoning industry are surmounted.

Multi-Links, MTS, Starcomms merger gives birth to CAPCOM

Ben Uzor Jr

A wind of change is blowing in Nigeria’s telecommunications market which has rekindled the hopes of Code Division Multiple Access (CDMA) operators, as Multi Links, Starcomms and MTS conclude merger arrangements that would produce a strong network operator to be known as CAPCOM. BusinessDay learnt that about $200 million has been injected by core investors into the new  firm, CAPCOM, fueling expectations  that the CDMA sector in Nigeria will be given a new lease of life. For sometime, CDMA operators – also known as Private Telephone Operators (PTOs) have found it difficult to survive the stiff competition in the nation’s vibrant telecoms market.

Low capitalisation, poor promotion of CDMA technology, subscribers’ preference for GSM telephony, and corporate governance issues, have seen the fortunes of these CDMA operators dwindle over time. Industry analysts told Business Day yesterday that this new development in the CDMA landscape would enable the sub-sector compete favourably in a GSM dominated telecoms market. It will be recalled that stakeholders have been clamouring for the resurrection of the CDMA sector through a bail-out. CDMAs had earlier complained about the issue of funding which dwarfed their network expansion capabilities, even with the Unified License granted them by the Nigerian Communication Commission (NCC).

As at today, only Visafone, itself a product of merger and acquisition involving Cellcom, ITN and Bourdex, can be said to be providing services on a particularly competitive scale. Starcomms, which at one time was the bride of the industry later experienced a decline in fortunes. With CAPCOM now in the offing, there is optimism that the CDMA sub-sector would bounce back, offering best-in-class telecoms services to Nigerians. The deal document published by industry practitioners’ website, IT & Telecom Digest, says the strategy of the investment is “to invest $50 million in the equity of CAPCOM, transferable into the ordinary shares of Starcomms PLC—a 10-year established Nigerian telecoms mobile CDMA operator, with spectrum in the 1900MHz range—alongside $150 million of equity derived from CAPCOM’s existing shareholders.

“To simultaneously consolidate Starcomms with two other Nigeria CDMA—Multi-Links and Cyancom, formerly MTS—creating a single national Long Term Evolution (LTE) Broadband operator with 20Mhz of bandwidth in the 1900Mhz frequency range, to build from an existing combined 2012 base of 160,000 data consumers each paying $24- $32 per month to a base of 2, 500, 000 data customers by 2016. “The $200 million investment funds the acquisition of Multi-Links and MTS; recapitalises Starcomms and provides it with sufficient capital and liquidity to finance its existing creditors and working capital; and permits it to expand its existing network through the introduction of 4G/LTE technology to become a major provider of Broadband services to Nigeria’s burgeoning consumers.”

IT & Telecom Digest further gathered that the emerging company has as its shareholders MBC, 53 percent shares; Middle East Capital Group, 25 percent shares while Helios Investment Partners holds 11 percent shares. Others said to hold shares in the company include Oldonyo Laro Estate 5 percent; Bridgehouse Capital Limited 3 percent; Asset Management Company of Nigeria 2 percent and Private Equity Investors 1 percent. This development portends a good omen for the CDMA sector in Nigeria and subscribers who dumped their land lines would dust them up and make good use of them once again. As a fall out of the new acquisition, the many known faces in the old Starcomms Plc board and management may no longer be seen.

As presented in the deal document, a new board of directors has been constituted to manage the affairs of the new company. Stefan Allesch-Taylor is being proposed as the Chairman. He is an experienced investor, Chief Executive/Chairman and co-founder of companies in the property, industrial, retail, technology and financial services sectors. Over the last ten years, he has created substantial value in a number of companies, both listed and privately owned, where he has been appointed to represent the interests of significant shareholders in seeking strategic changes in those businesses. Since 1993, he has been an advisor to a number of substantial international trusts and business leaders.