Revenue growth: the big question

Revenue growth: the big question

In a previous post about Sub-Saharan Africa we wrote about the positive predictions to subscriber growth of Sub-Saharan Africa for the upcoming years. As GSMA’s latest report shows, Sub-Saharan Africa will meet the highest growth rate in the world.

On the other hand the same report doesn’t share the same optimism in terms of revenue growth. While mobile subscriber growth rate is estimated at 6.3% until 2020, prediction for growth rate in revenues is significant lower: 4% for the year 2017 and 2% for 2018 until 2020. The report notes: “Total mobile revenues in Sub-Saharan Africa reached $40 billion in 2016, an increase of 3.9% on the previous year. Revenue growth has been trending downwards since the start of this decade, driven by macroeconomic weakness in resource-rich markets such as Angola, Nigeria and South Africa and the growing uptake of IP-based services.”

Source: The Mobile Economy – Sub-Saharan Africa 2017 report

IP-based services are considered a major problem for mobile operators. Not only in Africa but globally and we have seen several attempts to regulate from operators to regulate the landscape. In Sub-Saharan Africa where the ARPU is relatively lower, the problem is even bigger. GSMA report predicts that “revenue growth will remain subdued for the remainder of this decade due to the increasing cannibalisation of traditional voice and messaging revenues as subscribers shift to alternative platforms. IP messaging has become the top use case among smartphone users across the region.” It also adds some statistics as “up to 90% of smartphone users in Nigeria, South Africa and Tanzania use at least one IP messaging service, such as WhatsApp, BBM or Facebook Messenger, regularly”. As we can understand this is having a material impact on revenue growth, with declining contribution from traditional voice and messaging services. And it is almost certain that rising smartphone adoption and mobile broadband penetration will continue to fuel the shift to these services.

The report suggests to the operators two main strategies as solutions to drive overall growth and ensure long-term sustainability of their operations: consolidation and revenue stream diversification. In Sub-Saharan markets with five or more providers consolidation is considered as the first necessary step. There fierce competition in order to gain market share has squeezed revenue and profit margin and consolidation can lead to sustainable structure and enhance operators’ ability to invest in network infrastructure.

In terms of revenue stream diversification, mobile operators are adopting new business models to increase the contribution of non-core communication services to overall revenues. Especially in the mobile money sector. Channel VAS has strategically placed itself in this field and can offer various choices not only in the fintech sector but a full family of financial services with no risk for the operators and can boost ARPU by a significant percentage. Additionally, we also offer a strong portfolio of mobile advertising services, content services, etc, allowing the operator to choose what’s best for it’s needs.

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