The case for pan-African roaming
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 popularize 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 commoditization 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 popularized 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.
Paul Merry is a senior analyst in operator strategies at Informa Telecoms & Media. For more information, visit http://www.informatandm.com