New technologies to save telcos from $386b exposure to OTT

Telecommunications operators in Nigeria and other African countries have been urged to invest in disruptive technologies to curb the growing influence of Over the Top (OTT) platforms on their businesses.

For the past five years, the increase in uptake of mobile VoIP services provided by apps such as Google, Facebook, Skype, Viber, Wechat, WhatsApp, and many others, have eroded revenues and profitability of telecoms operators.

The telecommunications industry in Nigeria, Africa’s largest economy, is projected to lose a total of N109trillion ($386billion) in voice revenue to the growing usage of OTT Internet voice applications by 2018.

United Kingdom-based research and analytics company, Ovum, stated in a report that “the $386billion loss will accrue over a period of six years – between 2012 and 2018 – from Nigerian customers using OTT voice applications.”

Checks by The Guardian showed that the rise of the OTT players, who provide voice and Short Message Services, is currently eating deep into the voice revenue of telecommunications companies in the country by more than 50 per cent.

However, to curtail this growing influence, SAP has recommended major investments in disruptive technologies by telecommunications operators.

Telco Industry Lead at SAP Africa, Mariam Abdullahi, in a paper titled: ‘Emerging Technologies: new revenue opportunities for African Telcos,’ noted that despite operators attracting an increased number of customers, the amount each of these customers spend, is decreasing.

She revealed that WhatsApp and its more than 900 million active users around the world, leverage telco infrastructure to send 30 billion messages per day at no cost.

The SAP chief noted that these OTT players have created loyal customer bases, as they provide valuable services at low costs, all leveraging the infrastructure that telcos built.

“I would argue that a far better route to the continued success and growth of the African telco industry is not to look back at missed opportunities, but to rather look ahead to the emerging technologies that will shape the business and consumer landscape across the African continent. And there’s no bigger or better emerging opportunity than the Internet of Things (IoT).”

According to her, with a projected 50 billion things connected by 2020, the IoT is set to become one of the most significant technological innovations in history. She added, “General Electric estimates that investment into the Industrial Internet of Things will reach $60-trillion over the next 15 years, while McKinsey predicts the IoT market will attain a compound annual growth rate of 32.6 per cent by 2020.”

Surviving, Abdullahi said telcos should look specifically at implementing four key components to drive an effective innovation process. These are: innovation strategy that highlights how the telco wants to take advantage of emerging technologies such as IoT; an understanding of the business models that would best support their customers’ objectives and approach to business; and an accurate and central system of records. There is also a need for a team of experts to ensure all components in the innovation engine work together seamlessly and effectively.