Taking too long to test the waters

In a recent public letter, some large MNOs made the claim that “[d]igital platforms are profiting from “hyperscaling” business models at little cost while network operators shoulder the required investments in connectivity.” The letter implies that digital platforms have rolled out their platforms at a relatively insignificant cost. It also implies that MNOs are unable to build their own applications to compete against digital platforms because of some unspecified “blockage”. 

In fact, nothing stops telcos from investing in other parts of the Internet value chain. Some of these investments, such as mobile money, have been hugely successful, while others have failed. Telcos have also invested in content providers, such as AT&T in Warner Media. Generally, it is easier to invest in the content or online service segments of the Internet value chain than in the connectivity segment, where market access via spectrum licenses is tightly controlled by the state.

One social platform that has recently been in the news is MTNs Ayoba, which is South African slang for “cool”, “okay”, or “all right”. Ayoba is a chat, voice and story sharing platform. Users can message and send video clips to each other like WhatsApp. Ayoba is part of MTN’s overall strategy to become a tech company rather than just a mobile operator. It’s not clear how much MTN is investing in Ayoba but the app was launched in 2019. Ayoba currently has 10.5 million users and is targeting 100 million by 2025.

Ayoba also demonstrates that launching a social platform is not as easy as the MNOs seem to think. For example, you can’t make voice over IP (VoIP) calls within Ayoba. Instead, Ayoba charges standard rates for voice calls: 

You can see why MTN decided to go this route: Ayoba doesn’t cannibalise its existing voice revenue stream. However, what is the benefit for users outside of the MTN ecosystem to download and use Ayoba when there are so many better and cheaper alternatives? It looks like MTN is testing out the waters, except the Ayoba is already more than three years old. If MTN wants to genuinely compete in this space, it needs to provide a compelling use case. One place to start would be to offer VoIP calls! At the moment, Ayoba just looks like it’s playing around and is not really serious. As MTN has discovered, it’s not quite as easy to play in this space as MNOs think.

Other news from around Africa 

• Econet struggling with inflation and tariffs in Zimbabwe: The regulator does not allow Econet to increase its tariffs according to its costs. This is one of the problems when there isn’t sufficient competition in the sector. 
• Nigeria to hold second 3.5GHz auction: The NCC is planning to hold a second auction for 3.5GHz spectrum on the 19th of December at a reserve price of USD273.6 million and a bidder does not have to hold a service licence. These massive reserve prices make no sense. 
• Price increases in Malawi: Voice and data prices have increased by 20%. Airtel has said that the 25% devaluation of the currency in May has led to a significant increase in their operating costs.