12 Apr 2012

Africa rising; the case for pan regional roaming in the African continent

By Paul Merry, Operator Strategies, Informa Telecoms & MediaApril 4, 2012 

A recent client request for analysis on the African roaming market brought up a number of interesting conclusions and insights on the continent: its approach to roaming and the future of this developing region.
The opportunity for roaming in Africa is tied to the available audience which is limited by factors that include the available audience for such services based on national expenditures and the GDP PPP of would-be roamers and travel patterns in the region. On the positive-side Africa’s roamers are biased toward enterprise users who generally have higher expendable incomes and greater resistance to price fluctuations (price inelastic).
This characteristic will result in the region seeing a CAGR of 13.37% between 2012 and 2016 according to our latest forecasts (www.informatandm.com/gmroaming) the largest growth of any region over this period albeit coming from a lower starting point.
One of the main challenges facing operators in Africa and beyond is customer perception of roaming. Issues range through a full gamut of customer emotion from fear of overspend (bill shock) to confusion regarding services (service and pricing transparency).  What is universal is the urge to be in control of the roaming experience.
In Africa a number of operators have sought to tackle this challenge. Safaricom offers a simplified roaming activation process whereby exactly the same services are available in the home network as when roaming while setup is simplified by removing the requirement for subscribers to migrate to any special roaming tariffs.
The operator also allows all its customers to roaming without the need to have roamed before. Although this is slightly more of revenue loss risk it does engender a greater comfort with the roaming process; an invaluable asset when attempting to encourage roaming use.
Indeed this open transparent and simplified approach touches upon many of the most important features required to popularise a service which had historically been perceived negatively i.e. roaming and Bill shock.
The need for transparency is particularly important with data services. Data is the next great opportunity for roaming as it is resistant to commoditisation and potentially a more attractive proposition than simple voice being more adaptable, having greater scope for service development and being something more than a communication platform. However historical approaches to data roaming have not taken on board the need for transparency. Whilst a number of African operators have migrated to zonal pricing, a mechanism that has greatly simplified tariff tracking for customers in the region, the majority sell data in terms of kilobytes and megabytes. This approach is almost universally derided by customers based on their inability to reconcile specific services with data consumed. A far simpler approach is to provide a data calculator that shows how specific services consume data in a customer’s data plan. Vodacom is one operator who has experimented with this approach in the region. Alternatively offering unlimited data plans that incorporate voice and SMS allowances is an option, but perhaps not the best one for Africa were customers have limited expendable income. In this case data limits and automatic shutdown of data roaming when thresholds are breached would be applicable. It is immensely important roaming operators implement such protocols in the African region early in the development of data roaming in order to avoid the legacy of bill shock.
In some quarters it has been argued that due to the lower average mobile spend of customers in Africa and the lack of cross regional and international travel there is little potential for roaming. However this argument misses a glaring point specifically that roaming is a two way revenue generating process. There is both outbound (revenue generated by the HLR owning operator when their customers roam to other regions) and inbound (revenue generated by interconnection with incoming roamers from their home networks) revenue opportunities. Although this is a lower opportunity that retail being based on wholesale relations it is nonetheless an opportunity. Analysis undertaken around the World Cup held in South Africa by the data exchange provider AICENT showed a marked increase in data roaming traffic in the region while specific matches were ongoing, in some cases growing by 300%. Consequently it would be in the best interests of roaming operators in the region to provide specific roaming price plans tied into both international and regional events. Such an approach would also create opportunities for customer segmentation along interest lines i.e. events geared to specific customer roaming segments. In this manner roaming can be popularised through association with popular large-scale and niche events.
There are a number of challenges to face in the African continent but the potential market for roaming is palpable. The voracious appetite for mobile services in the region will no doubt drive roaming take-up but regional operators can also encourage roaming trends as they occupy a pivotal position in the process
About the Author
Paul Merry

Paul Merry

Operator Strategies
Informa Telecoms & Media
Area of expertise: Operator converged service strategies, roaming pricing and implementation strategies, mobile transactions, future voice approaches and market outlook, operator segmentation strategies, MVNO market entrance strategies.
“If operators move to more flexible tariff structures, this will stimulate roaming traffic on their networks and thereby maximise an important revenue stream. With the right approach to inter-operator tariffs, everyone is a winner – the operators through increased revenue and businesses through affordable and transparent data roaming plans tailored for the latest range of mobile connected devices.”
Paul is a senior analyst in operator strategies. He is responsible for thought leadership in the converging mobile, roaming, enterprise and VoIP sector. His most recent work has covered strategy development within the roaming sector with specific concentration on segmentation, data and pricing strategies. Paul is a frequent speaker and chair at international conferences, as well as a regular press commentator.
Paul has been with Informa since 2002. He has 12 years experience in research as an analyst and strategist. He is a regular speaker and moderator at international conferences and is regularly quoted in the global business press. Paul’s research experience is diverse incorporating mass-media broadcast, marketing strategy and fixed telecoms experience enabling him to bring a broad analytical approach to his analysis of the cellular sector.
Prior to joining Informa Paul was a Billing and CRM consultant at PBI Media a full spectrum telecommunication research company and was tasked with developing the company’s BSS and OSS practice. Prior to this he was a Broadcast Strategist for ITV Plc formerly Granada Media undertaking research projects into viewing characteristics and socio-demographic analysis of advertising consumers.
Paul is currently studying for a Masters in Research at the University of London and holds a BSc (hons) degree from Bristol University.