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2018 Broadband Trends in Africa

Broadband is being increasingly considered as a necessity for future socio-economic development, with some parties viewing it as a basic human right. Essentially, without broadband connectivity, the digital divide in the social and business spheres (between businesses / households / individuals who have access to broadband vs. those that do not) will continue to widen to the point where the have nots will be left out of mainstream development altogether.

This presents a significant problem in many countries in Africa which have limited financial resources for telecommunications infrastructure builds on the one hand and continue to experience relatively low levels of socio-economic development on the other hand. Private sector telecoms infrastructure operators tend to build where they can generate a reasonable return on their investment (ROI) while large segments of the population and many small / micro businesses struggle cannot afford proper broadband connectivity or sufficient quantity of broadband services.

Implementation of Polices and Programmes

To remedy this situation, a number of national governments have been developing and implementing policies and programmes to build out broadband infrastructure as widely as possible and to decrease the prices of broadband services to a point where ultimately can afford them in sufficient quantity. To achieve this, they need to involve private sector operators while remaining mindful of the fact that private entities need to remain profitable to maintain sustainable operations.

While most countries in Africa now have access to good quality and adequate bandwidth on international, national long-haul and metro infrastructure (albeit in some markets still expensive), the constraint is now focused on broadband access infrastructure. In some regions of the continent inland backbone networks also need to be improved, although a number of projects are underway to address this.

Although broadband penetration has shown steady growth over the past several years, penetration levels of fixed broadband remain very low at approximately 7% of households on the continent, while mobile broadband has demonstrated a notable decline in growth and plateauing of the penetration rate. These trends are illustrated below.

Note: For the purposes of this analysis mobile 3G is considered a broadband service, although in many instances speeds achieved on a 3G connection would not be reflective of a good quality broadband service.

The Challenge

The challenge to higher fixed broadband penetration is the speed of deployment of fixed broadband infrastructure, to a large degree dictated by sales opportunities. A barrier to entry into the mobile broadband market is often still the price of a 3G or 4G phone. Mobile operators typically pursue a strategy of making lower cost handsets available as much as possible to lower this barrier.

Additionally, mobile broadband coverage (even 3G) is still not available across parts of the continent, particularly in rural / remote areas. Build-out of 4G infrastructure in sub-1GHz spectrum holds promise of providing coverage in such areas but in many markets 4G is still at an early stage of deployment, focusing on the larger urban environment.

Broadband Access Technologies

A range of broadband access technologies is used by operators in Africa to provide services, although the vast majority of connections is wireless and most of the connections are mobile.

The map provides an indication of key broadband technologies deployed. Most of the markets have seen implementation of multiple technologies, with various fixed wireless access (FWA) present in all markets. However, the geographic footprint of these technologies, in particular fixed technologies, remains very limited in most of the markets.

The mix of technologies used for the delivery of broadband services is changing. Older FWA technologies such as pre-WiMAX and WiMAX are being replaced with fixed LTE / LTE-A, while historical copper lines (where they exist) are gradually giving way to fibre (FTTH and FTTB), although on a very limited scale at present, with the exception of a few countries.

In the mobile space, the focus will be on 4G infrastructure footprint build-out far more extensive than currently, with 5G hovering on the distant horizon.

Only South Africa has begun to pilot 5G technology, with first commercial services expected to be offered in the second half of 2019. However, wider 5G implementation is also a couple / few years away in that market.

Broadband Adoption will grow

As the use cases for true broadband connectivity grow, so will adoption of broadband across the consumer and business markets in Africa. This will be aided by decreasing prices of broadband connectivity (in time, all of the connectivity will become commoditised) and government-led initiatives aimed at wider broadband availability.

Broader socio-economic development, supported by good GDP growth in many countries in Africa, will also contribute to making broadband services more affordable and increasingly indispensable to sustain this development.
The opportunity for expansion of broadband penetration is there, as evidenced, for instance by the total mobile penetration rate (80% in mid-2018 for Africa) vs. mobile broadband penetration of 53% at the same time.

There is room for growth

Fixed broadband adoption will need to compete with mobile broadband, certainly in the consumer / residential market and in the micro / small company market.

However, certain drivers such as migration to cloud services and accessing online content in large quantities will create a demand for fixed broadband services.

It would also be sensible for operators in Africa to consider moving to a more open access network environment in the fixed wireline space, where wholesale infrastructure operators would host a number of retail service providers on their networks to stimulate service-based competition.

2016 Adoption of Mobile VoIP

A leading indicator that signals the adoption of mobile VoIP is the adoption by mobile subscribers of social networking/instant messaging OTT services. The precursor to OTT service adoption is the strategic drive by mobile operators to increase smartphone penetration combined with an effective data pricing strategy. Mobile VoIP OTT usage leads to traditional mobile revenue disruption along with disruption of the national interconnect market. Mobile operators can choose to either defend against this trend, or embrace this trend and build products that incorporate mobile VoIP.

Introduction

Analysis of information published in Deloitte’s Global Mobile Consumer Survey 2016 provides insight into the adoption of various OTT services across different markets, and over different time periods. We have extracted information pertaining to the adoption of mobile VoIP, social network (SN) usage and instant messaging (IM) for 13 countries located in Europe (EU), Latin America (LATAM) and Sub-Sahara Africa (SSA).

From this data we created the following two charts that provide useful market observations.

Chart 1: Relationship between mobile VoIP and social networking / instant messaging services

The following country (and region grouping) chart provides some interesting insights into the adoption of mobile VoIP and the adoption of social networking / instant messaging. The chart shows the plot of mobile subscriber adoption of social networking / instant messaging plotted against the adoption of mobile VoIP.

From this chart, the following observations can be made:

  • In all countries, there is a higher adoption of social networking / instant messaging when compared to mobile VoIP; and
  • Based on the country groups, we see a different adoption across the regions. Surprisingly, the EU countries show a much lower mobile VoIP adoption.

2016 Mobile VoIP AdoptionThe difference in developed (EU) vs developing country (LATAM, SSA) adoption of mobile VoIP OTT service can be driven by the following factors:

  • From a disposable income level perspective, the lower price of VoIP (to circuit switched) may not be as attractive / make much difference in developed markets vs developing markets;
  • The price differential between mobile VoIP (using mobile data) and circuit switched calls may be much smaller in developed markets vs developing markets therefore there is less economic incentive to use mobile VoIP; and
  • There are other factors such as (1) the difference in age distribution between developed and developing countries, younger mobile users adopt new services at a faster rate, (2) the difference in prepaid vs postpaid mobile services in developed vs developing countries, postpaid will have less incentive to use mobile VoIP given the bundling of minutes in postpaid plans, that can play a role in the markets.

Chart 2: 2013 to 2016 Adoption trend of mobile VoIP service

The following country chart shows the mobile subscriber adoption of mobile VoIP plotted over the period 2013 to 2016 for four countries.

The following observations can be made:

  • There was significant growth in mobile VoIP adoption in Brazil and Mexico over a single year. Brazil grew by 343% from 2013 to 2014 while Mexico grew by 294% from 2014 to 2015; and
  • This large jump was not seen in the two EU countries: Sweden and the UK.

2016 Adoption Trend in Mobile VoIPIt is quite possible that Sweden and the UK have not reached a critical market tipping point with the social network / instant messaging adoption that, once passed, would drive rapid adoption of mobile VoIP.

Drawing out market observations

While the base is small, the data does suggest the following interesting market observations:

#1: The 2016 adoption of mobile VoIP varies significantly between the EU countries (low) and Latin America countries (high adoption), with Sub-Sahara Africa (SSA) countries found between the two regional groupings.

  • Therefore, developed country adoption of mobile VoIP cannot readily be used as a proxy for the adoption in developing countries.

#2: Social network / instant messaging adoption is a leading indicator and a proxy for mobile VoIP adoption.

  • Therefore, the higher the adoption of these services, the higher the adoption of mobile VoIP can be expected.

#3: Over a three year period, the rate of adoption of mobile VoIP in Latin America (Brazil and Mexico) is significantly higher than that seen in Sweden and the UK. Various reasons can exist that drive this adoption. For example, this is possibly driven by the perception of higher prices in developing markets, or that the adoption of social networking/instant messaging has reached a critical market tipping point that accelerates mobile VoIP adoption.

  • Therefore, based on the data mobile VoIP will see faster adoption in developing countries.

So what does this mean?

The market drive to lower mobile data pricing coupled with the aggressive growth in smartphone adoption will see wider uptake of OTT services. Within the OTT bouquet, the growing adoption of social networking/instant messaging services, as shown, will lead to higher mobile VoIP adoption.

We ascribe this linked adoption to social networking/instant messaging OTT services driving the following behaviour:

  1. Grow greater awareness of mobile VoIP availability among social networking/instant messaging users, thus educating users on the use of mobile VoIP; and
  2. Grow usage of mobile VoIP on the social networking/instant messaging platforms where such a service is offered.

Intuitively mobile operators recognise the competitive threat posed by mobile VoIP to traditional mobile services. Through the analysis presented here, we are now beginning to understand the complexity of the OTT threat to traditional mobile services.

Interrogating the Cell C Subscriber Numbers

The Blue Label Telecoms Circular (18/10/2016) shows that Cell C subscriber numbers are significantly lower when reported against the industry standard of a 90 day active subscriber definition. Using this new information and applying the 90 day definition to the historically published subscriber numbers shows that Cell C has not performed as well as it has claimed. Over the last five years, the mobile operator’s SIM market share has hovered around the 15% mark. This despite the various subscriber acquisition strategies undertaken by it.

Subscriber Reporting Overview

Mobile operators have settled on a 90-day revenue-generating subscriber definition for reporting active mobile subscriber numbers. The 90-day says that a subscriber is defined as active, if on that SIM there is a revenue generating event over a continuous 90-day window. The 120-day definition extends the 90-day window to 120 days. Cell C has reported their subscribers on a 120-day definition, whereas the rest of the mobile operators have reported their subscribers against a 90-day definition.

The 90-day is defined as the 90RGS subscriber, while the 120-day is defined as the 120RGS subscriber.

Why is reporting subscriber numbers against a common definition important?

The analysis of the market and individual operator performances relies upon using subscriber numbers reported against a standard definition (or as close to a such a definition as possible). For example, the reported subscriber numbers are one of the KPI’s used to assess the market and individual operator performance over time. The analysis, however, requires that the information used is based on a standard definition. When an operator does not adhere to this principle, then that KPI analysis can lead to the wrong assessment of that operator’s performance, and can provide the wrong view about the market dynamics.

Cell C Historical Subscriber Reporting

Historically, there was always a suspicion that Cell C reported their subscriber numbers on a 120RGS basis while the rest of the mobile operators used the 90RGS definition. In the Blue Label Telecoms Circular (BLT-Circular), Cell C was reported to have over 25 million subscribers (page 11). However, on page 14 of the BLT-Circular, Cell C was reported to have 12.7 million subscribers. This large difference in subscriber numbers triggered an investigation into these numbers. It emerged that the 25 million was based on a 120RGS definition, whereas the 12.7 million was based on the 90RGS definition.

Cell C is not the only operator to have used a different subscriber definition.

From 2005 to 2012, Vodacom reported its prepaid subscriber base on a 210-day RGS. This was changed to a 90RGS in March 2012. The percentage difference between the 90RGS and 210RGS increased from around 9.6% (March 2005) to 21% by March 2012.

It was expected that Cell C would have a similar overstate factor when comparing the 90RGS and 120RGS subscriber bases. The information revealed in the BLT-Circular showed that there is a large difference between the two sets of Cell C subscriber numbers (90RGS vs 120RGS).

Reviewing Cell C Historical Subscriber Numbers

The large difference in the 90RGS and 120RGS subscribers required a comprehensive review and reassessment of Cell C’s historical subscriber numbers. Given that Cell C has not declared its historical numbers against the 90RGS definition, we needed to revisit all of the previously published Cell C subscriber numbers, in order to better understand the operator’s performance.

We analysed the published numbers and drew out the following observations:

  • The large overstatement of Cell C subscribers is found in their reported prepaid subscriber base:
    • At June 2016, the 120RGS subscriber base is overstated by 115%, when the base is compared against a 90RGS subscriber definition.
    • Analysing the reported Cell C numbers shows that the impact of the overstatement becomes more apparent from March 2012 onward. Based on a 90RGS definition, the Cell C subscriber numbers were overstated by around 80%. This is similar to our estimate of Cell C’s churn over this period.
  • The postpaid base (postpaid+hybrid) reported subscriber numbers are consistent with historically reported numbers:
    • Therefore, we conclude that there is most likely a very small overstatement of the postpaid base.

SA Network SIM Market Share

The challenge in undertaking a historical correction of the published Cell C subscriber numbers, is deciding on the correction factor to align the 120RGS subscriber base to the 90RGS subscriber base. The following chart shows the network SIM market share trend over the past five years.

2016 A Mobile Operator Network SIMs Market Share

Source: SA Telecoms Model, Sep 2016

Cell C has remained at around 15% market share. It has not achieved the subscriber growth that it has claimed, and the actual subscriber numbers now indicate that Cell C has not grown its market share as previously thought. The new data throws doubt on the success of Cell C’s strategy to grow its subscriber base.

What the chart does show is that Telkom Mobile is the only operator to have consistently grown its market share of SIMS.

Analysis Summary

  • Analysis of the newly revealed Cell C subscriber numbers, shows that Cell C’s 90-day defined subscriber base (for June 2016) is only 12.7 million and not the 25 million that it had communicated to the market. This is an overstatement by 95%.
  • Using the 25 million, 120-day definition, has enabled Cell C to claim that it has performed remarkably well over the past few years. Our view is that Cell C has used these subscriber numbers to validate its strategy.
  • However, the operator had not reported its subscriber base against the industry standard of 90RGS. Correcting the historical subscriber numbers to a 90RGS definition shows that Cell C has not been successful. Over the past five years, its SIM market share has remained at round 15%.
  • The significantly overstated Cell C subscriber numbers have hidden from the market the true challenges that Cell C has faced. The 90RGS numbers indicate that Cell C’s strategy has not been as successful as the operator would have the market believe.
  • What the overstatement has done, is to hide and obscure insight into the real winner in the market in terms of subscriber market share growth – namely, Telkom Mobile. Over the past five years, Telkom Mobile has been the only mobile operator to have grown its subscriber base, albeit off a low base.

Source:

This analyst note drew upon the information published in the Blue Label Telecoms Circular issued on 19 October 2016. This information was used to guide the rebasing of the historical subscriber numbers published by Cell C, to a 90-day subscriber definition (90RGS).

Blue Label Telecoms – Cell C Deal Update

In October 2016, Blue Label Telecoms announced that it had increased its offer to R5.5 bn for 45% equity in Cell C. In December 2015, the company offered R4 bn for 30% equity. The new offer does not change the fundamentals of the refinancing deal. We expect that the new deal will not bring any new added benefit to Cell C.

October 2016 Announcement

 In a SENS note (5/10/2016), Blue Label Telecoms announced that it had increased its proposed equity purchase in Cell C, and now offers to buy 45% for R5.5 billion. The acquisition will be made through its wholly owned subsidiary The Prepaid Company Proprietary Limited (“TPC”).  The R5.5 billion will be made up from the following cash sources:

  • R2.0 billion via a vendor consideration placement with NET1 UEPS Technologies Inc, through its South African subsidiary Net1 Applied Technologies South Africa Proprietary Limited, at a price of R16.96 per share, which represents a 10% discount to the 30 business day weighted average traded price; and
  • R3.5 billion from available cash and funding facilities.

New Refinancing Structure

Under the new deal, the equity structure will look as follows:

  • the subscription by TPC (The Prepaid Company Proprietary Limited) for shares comprising 45% of Cell C’s total issued share capital for a subscription consideration of R5.5 billion;
  • the subscription by MS10 (senior management of Cell C) for shares comprising 10% of Cell C’s total issued share capital;
  • the subscription by MS15 (Albanta Trading 109 Proprietary Limited) for shares comprising 15% of Cell C’s total issued share capital; and
  • the subscription by 3C (3C Telecommunications Proprietary Limited) for shares comprising 30% of Cell C’s total issued share capital, for a subscription consideration equal to an amount which will result in Cell C’s net borrowings being reduced to a maximum of R8.0 billion at the time of receipt by Cell C of the respective subscription considerations.

In the December 2015 deal announcement, Cell C staff were going to buy 29.42% equity, split in two tranches of 11.77% and 17.65%. Under the current deal, we assume that MS10 and MS15 refer to these two tranches of equity purchases for the Cell C Staff. The Cell staff will now own 25% equity in the operator.

Similarly, according to the December deal announcement, 3C was going to retain 35% equity. Under the new deal announcement, 3C will only retain 30% equity in Cell C.

The following diagram sets out the proposed new shareholding of Cell C:

Blue Label Telecoms - Cell C - October 2016.jpg

Source: Blue Label Telecoms SENS 5/10/2016

Deal impact on Cell C

This deal is about refinancing Cell C, reducing its long term borrowings to a maximum of R8 billion, while providing a strategy for the 3C Telecoms shareholders to reduce their risk and exposure through Cell C. The deal offers the opportunity for Cell C management and staff to participate at an equity level, while it provides Blue Label Telecoms an investment opportunity in an industry they understand.

The deal will improve Cell C’s profit after tax (PAT) margin by reducing interest payments. However, it will have no significant impact on the operator’s operational performance. The deal gives Cell C better access to future funding through Blue Label Telecoms.

Deal impact on the market

We don’t expect the deal to radically change Cell C’s strategy. Cell C has already embarked on an aggressive subscriber acquisition strategy.

The challenge for Cell C is that it has not translated its successful subscriber acquisition into revenue market share. Cell C has grown its market share, but its share of the mobile revenue has not grown in proportion to its subscriber growth.

Over the coming year, we expect Cell C to focus on growing its revenue market share by attracting the higher value customers to its network. Cell C is using new product innovation and pricing to draw in high value customers.

The Role of WiFi and Mobile Broadband

The WiFi relationships uncovered through preliminary analysis would suggest that mobile subscriber WiFi usage is far more prevalent than may at first appear. In the higher income countries, the greater use of WiFi by mobile subscribers would indicate that their per unit cost of broadband would be lower than that of their counterparts residing in lower income countries.

Introduction

In this post, we uncover relationships between mobile broadband, WiFi usage and fixed broadband adoption.

The information used in this analysis is sourced from OpenSignal (with permission), International Telecommunications Union (ITU, fixed broadband household penetration) and the World Bank (GDP per Capita, PPP). Specifically the data used in this post are taken from the following sources:

  • Global State of Mobile Networks (August 2016) Report, OpenSignal
  • 2015 ICT Statistics, ITU
  • World DataBank, dataset from World Bank

We typically use this type of analysis to draw inferences about market behaviour. They provide good departure points for robust discussion about what market factors drive consumer behaviour.

Fixed Broadband Household Penetration (2015) vs. GDP per Capita (2015)

This chart shows the country adoption of fixed broadband per household versus the GDP per Capita (PPP).

Over the years, we have seen this classical plot presented where we have explored the relationship between GDP per Capita (as a proxy for income) and the various telecommunications indicators. While we can raise various arguments for and against this type of a plot, it nevertheless does provide an indication of whether your country is inline, above or below your peer countries.

The Role of WiFi - Pic 1

Source: ITU 2015 Indicators, World Bank 2015 GDP per Capita (PPP), Africa Analysis, data plotted for the 93 countries presented in the OpenSignal report

Fixed Broadband Household Penetration vs. Average 3G/LTE Speed

The graphic shows the plot of the fixed broadband household penetration and the average 3G/LTE speeds.

The Role of WiFi - Pic 2

Source: Africa Analysis, OpenSignal (2016, data plotted for the 93 countries presented in the OpenSignal report), ITU 2015 Indicators

While there is some data scatter, we can make some interesting observations:

The higher the fixed broadband penetration, the higher the 3G/LTE speeds. The trend suggests that in the more broadband abundant markets, mobile operators have needed to increase the average speeds in order to compete against their fixed broadband counterparts.

In countries with lower fixed broadband penetration, the following reasons can be put forward to explain the observations:

  • Mobile operators are not under strong competitive pressure to increase the average 3G/LTE speeds. Perhaps mobile operators believe that consumers have very little broadband choice and, therefore, there is less pressure on the mobile operators to invest in their networks.
  • There is a lack of spectrum for LTE, thus mobile operators are limited to 3G.
  • In developing markets, where the mobile operators are deploying 3G, they may have the licence requirement to achieve a certain population coverage, and therefore, focus on extending reach before focusing on increasing the capacity to offer higher 3G/LTE speeds.

Fixed Broadband Household Penetration vs. Time Spent on WiFi

Intuitively, it makes sense that as the country’s fixed broadband penetration rises, so does the time spent by mobile subscribers on using WiFi.

The Role of WiFi - Pic 3

Source: Africa Analysis, ITU 2015 Indicators, OpenSignal (2016, data plotted for the 93 countries presented in the OpenSignal report)

Given that there is some data scatter, we can still make some interesting observations:

  • In the higher fixed broadband markets, more mobile subscribers will have access to WiFi at their homes, thus they would switch from mobile to fixed broadband when they are at home.
  • In addition, the availability of WiFi is driven by the greater availability of fixed broadband to serve as backhaul to the WiFi sites. Thus, we see the rise of more public WiFi sites.
    This observation can serve as a strong motivator for decisive mobile operator WiFi strategy.
  • At a country level, we would put forward that the greater use of WiFi will, in general, lower your cost of broadband access as WiFi is either used at rates ranging from no charge to at most price parity with fixed broadband.

This trend shows that as fixed broadband is deployed, mobile operators will experience more competition.

GDP per Capita vs. Average 3G/LTE Speed (Mbps)

The plot of GDP per Capita vs average 3G/LTE speed shows that the average speed increases as the country’s GDP per Capita increases.

The Role of WiFi - Pic 4

Source: Africa Analysis, ITU 2015 Indicators, OpenSignal (2016, data plotted for the 93 countries presented in the OpenSignal report ), World Bank (2015)

While there is some data scatter, we can make some interesting observations:

  • There is a wider spread of data points for the higher GDP per Capita (PPP) countries. Inspection of the data shows that there are fewer higher GDP per Capita countries where the average 3G/LTE speed was measured on the low side. Rather, these countries would be deemed to be poorly performing.
  • In the lower income countries, under GDP per Capita of USD20,000 (PPP), we can see a much less scattered and, more likely, a stronger relationship between GDP per Capita and the 3G/LTE average speed. This observation can be ascribed to various factors, but what it does show is that these countries are placed at a strategic competitive disadvantage regarding strategic capabilities to grow the country. This is based on the observation that broadband is critical to a country’s development.

In Summary

Analysis of the OpenSignal data does highlight interesting subscriber behaviour. When this data is combined with other 3rd party data (ITU and World Bank), we uncover interesting relationships.

  • In higher fixed broadband countries, mobile operators offer higher average 3G/LTE speeds. This is most likely driven by the need to compete against the higher fixed broadband speeds.
  • In the high income countries (as measured by GDP per Capita), subscribers have more broadband choice (mobile and fixed) regarding speed and availability. There is wider availability of good quality WiFi networks, both in and outside of the home. Therefore, subscribers spend more time on WiFi.

These relationships would suggest that WiFi usage is far more important than operators may want to admit to. The data does suggest that a more clearly articulated and executed WiFi strategy is called for.

 


OpenSignal is the leading source of insight into the coverage and performance of Mobile Operators worldwide. OpenSignal data is directly measured from consumer devices as opposed to traditional methods of simulating or approximating mobile experience. With over 15M downloads, the OpenSignal app represents the largest crowdsourced measurement of Mobile Networks. Operators across the globe use OpenSignal data for competitor benchmarking, network spend optimization, understanding true customer experience and more. OpenSignal also works with regulators and analysts globally and is backed by top tier investors including Qualcomm, Inc.


 

The impact of 4G on new Subscriber Acquisitions

The deployment of 4G is having a significant positive impact on subscriber behaviour. This is according to the 2016 Acquisition and Retention Study, a report published by Nokia.

4G, the fastest growing network technology

The report covers key findings regarding the impact of 4G on subscribers, such as:

  • 4G customers are happier. Happier with their mobile data speed. More satisfied with the consistency of their mobile data and as a result, use more data.
  • Globally, 38% of new sign-ups in the last 12 months have been for 4G and the pace is accelerating.

Yet, the research shows there are still barriers to overcome:

  • Mature markets are 2x more likely to use 4G than transition markets
  • 17% of consumers globally are not aware of the network they use
  • Over 30% of consumers in both mature and transition markets stated device incompatibility as the top reason for not yet using 4G
  • Many consumers still perceive 4G to be more expensive.

In South Africa, 15% of the subscribers believe they use the 4G network, while 78% believe that they only use the 3G network. The remaining 7% don’t know what network they use (3G or 4G).

Overall, 4G has a significant beneficial impact on subscriber behaviour:

Source: 2016 Acquisition and Retention Study

Nokia 2016 Acquisition and Retention Study
The Nokia 2016 Acquisition and Retention Study has been designed to help mobile operators understand current trends in consumer behaviour, in order to make more informed decisions when developing acquisition and retention strategies. The focus of this extensive study is to uncover the core drivers of customer retention by providing detailed and granular insights around consumer perceptions, causes of dissatisfaction and the likelihood to churn across several scenarios.

Drivers of Mobile Customer Retention

Cost and billing was the greatest driver of customer retention. That was in the past. Since 2014, consumers are attributing more importance to service. These are some of the key findings reported by Nokia in its recently completed 2016 Nokia Acquisition and Retention Study.

Drivers of customer retention

A positive customer experience has a direct impact on consumers’ likelihood to stay with their mobile operator. Sounds simple, right? Not quite:

  • Cost & Billing has the greatest impact on customer retention, but…
  • Since 2014, consumers attribute less importance to price and more to service
  • Customer care has 60% more impact on mobile subscriber loyalty than it did in 2014
  • Consumers expect a certain level of service and device expertise and after care to be offered by their operator.

In South Africa, customer care ranks higher, while cost & billing ranks lower than the survey averages across the various countries (developed and developing).

Drivers of Customer Retention Pic
Source: 2016 Acquisition and Retention Study

Nokia 2016 Acquisition and Retention Study
The Nokia 2016 Acquisition and Retention Study has been designed to help mobile operators understand current trends in consumer behaviour, in order to make more informed decisions when developing acquisition and retention strategies. The focus of this extensive study is to uncover the core drivers of customer retention by providing detailed and granular insights around consumer perceptions, causes of dissatisfaction and the likelihood to churn across several scenarios.

Mobile Data allowance, Voice and Messaging Trends

The adoption of smart phones and the associated consumption of data is creating significant changes to the revenue mix of mobile operators. The trend in consumer adoption of messaging and calling apps is reported in Nokia’s recently completed 2016 Nokia Acquisition and Retention Study.

Data allowance

Voice and SMS revenue has been declining steadily for many years, largely due to the emergence of data-consuming messaging and calling apps. Although the usage of these apps differs by market, most consumers globally still prefer to use traditional phone services for making calls.

  • Consumers avoid using apps on the mobile network for three main reasons: data allowance, cost and speed.
  • Within transition markets, purchasing an additional amount of once-off data remains the most popular option for consumers, at 44%. This is particularly pronounced in South Africa, at 61%, but less so among Mexican consumers, at 30 percent.
  • Consumers from South Africa (36%), Mexico (30%) and Brazil (32%) are willing to pay for access to Wi-Fi hotspots from their operators.

Voice and Messaging

  • Globally, the use of messaging apps is far more common than calling apps.
    • The use of messaging apps is particularly popular in transition markets where 86% of consumers claimed to use them. Furthermore, 47% of all consumers in transition markets use messaging apps more often than traditional SMS services.
    • The total number of consumers using voice apps is considerably lower than the use of messaging apps. 74% of consumers globally still rely solely on core operator services for making and receiving calls.
    • IInterestingly, 45% of consumers use these apps even more than their phone service. This is driven by markets such as Brazil (46%), Mexico (56%) and South Africa (50%).
  • Globally, 74% of consumers don’t use voice and calling apps. Only 8% of global consumers use these apps more than their phone service, and another 8% use voice and video apps as much as traditional phone services.
  • In South Africa, 9% of mobile users use calling apps more than traditional phone services.

The following chart shows the app usage in different types of markets:


Source: 2016 Acquisition and Retention Study

Nokia 2016 Acquisition and Retention Study
The Nokia 2016 Acquisition and Retention Study has been designed to help mobile operators understand current trends in consumer behaviour, in order to make more informed decisions when developing acquisition and retention strategies. The focus of this extensive study is to uncover the core drivers of customer retention by providing detailed and granular insights around consumer perceptions, causes of dissatisfaction and the likelihood to churn across several scenarios.

Choosing a Mobile Operator

Which mobile operator are you with? Over 40% of consumers rely on advice and recommendations made by family and friends when choosing their mobile operator. These are the findings from reported by Nokia in their recently completed their 2016 Nokia Acquisition and Retention study.

Reasons for Choosing a Mobile Operator

The study found that the key reasons are:

  • Being on the same network as friends and family is an important consideration
  • But price is still the main reason for 45% of global consumers when choosing their mobile operator
  • After price, the main reasons for choosing a mobile operator are network quality and network coverage
  • But many consumers are now considering factors such as customer care when selecting a new mobile provider.

Over the best price is the largest deciding factor in choosing an operator. This is also seen among non-4G and 4G users. Although among 4G users, best price and best network quality are rated higher than the non-4G users:

Reasons for choosing an operator

Source: 2016 Acquisition and Retention Study

Nokia 2016 Acquisition and Retention Study
The Nokia 2016 Acquisition and Retention Study has been designed to help mobile operators understand current trends in consumer behaviour, in order to make more informed decisions when developing acquisition and retention strategies. The focus of this extensive study is to uncover the core drivers of customer retention by providing detailed and granular insights around consumer perceptions, causes of dissatisfaction and the likelihood to churn across several scenarios.

Mobile Ads …. do consumers like them or loathe them?

Nokia recently completed 2016 Nokia Acquisition and Retention study shows what ads consumers would like to receive from their mobile operators.

Mobile advertising

Mobile ads… do consumers like them or loathe them? As it turns out, not as many consumers mind receiving mobile advertising as you might think, particularly if targeted to their needs. And for even better traction? Offer consumers a reward in return for receiving mobile advertising.

  • 47 percent of global consumers currently receive mobile ads from their operator – of which, only 4 percent prefer not to receive them
  • Consumer frustration occurs when targeted ads are just not relevant
  • 38 percent of consumers globally would be willing to receive more advertising in exchange for rewards or benefits.

Overall, consumers are more interested in receiving advertising content around device upgrades than any other type of mobile ads:

Mobile Ads Pic

Source: 2016 Acquisition and Retention Study

Nokia 2016 Acquisition and Retention Study
The Nokia 2016 Acquisition and Retention Study has been designed to help mobile operators understand current trends in consumer behaviour, in order to make more informed decisions when developing acquisition and retention strategies. The focus of this extensive study is to uncover the core drivers of customer retention by providing detailed and granular insights around consumer perceptions, causes of dissatisfaction and the likelihood to churn across several scenarios.