OTT partnerships for ICT and telecoms in Africa

1. www.ovum.com
© Copyright Ovum 2015. All rights reserved.
Telco/OTT partnerships for affordable
Internet access
Matthew Howett, Practice Leader, Regulation & Policy
matthew.howett@ovum.com
16 April 2015, Victoria Falls, Zimbabwe

2. 2© Copyright Ovum 2015. All rights reserved.
The rise of the OTT
 Growing market maturity and decline of traditional voice
 Video traffic growth demanding significant investment
 Failing to invest isn’t an option, but sustaining it is difficult
 Total connection growth of 3.55%
CAGR (plateaus in 2015)
 Fixed -3.59%
 Mobile +4.68%
 Revenues fall -2.4% CAGR
 Fixed -5.87%
 Mobile -0.88%
 Volume growth not offsetting revenue
decline due to falling prices

3. 3© Copyright Ovum 2015. All rights reserved.
The impact of OTT on telcos
 We estimate $52bn revenues will be ‘lost’ to OTT VoIP globally in 2016
 Over $40bn SMS revenues lost to OTT social messaging last year
 OTT players and the internet have loosened telcos’ customer gatekeeping
position
Telco SMS revenues lost to social messaging: 2010–16 ($m)Telco revenues lost to OTT VoIP: 2010–16 (US$bn)
$32.6bn
$54bn

4. 4© Copyright Ovum 2015. All rights reserved.
Partner
Compete
Protect
Wait and see
In fragmented markets ~ Where commoditized IP
proliferates ~ Against average paced innovation ~ Where
local is important ~Where no other sustainable position
in the ecosystem
Where dominant consumer brands exist ~ Against
market leading proprietary IP ~ Against fast paced
innovation ~ Where strategic fit is bad
Where there is known regulatory lag ~ Against strong
unregulated competition ~ Where no other sustainable
position in the ecosystem
Where there is too little market intelligence or resource
to act or where the appropriate opportunities have not
presented themselves.
Ovum’s OTT Response Strategy Framework

5. 5© Copyright Ovum 2015. All rights reserved.
Type 1: Unilateral bundling
• One party uses the other brand simply as a marketing tool
• Often no relationship between the two companies
• No direct investment
Type 2: Marketing
• Main purpose is to increase the marketing of each product
• Some level of cooperation between the two companies
• None-to-small investment
Type 3: Revenue agreement
• Either commercial agreement or revenue sharing
• Usually co-branded products
• Small-to-mid investment
Type 4: Joint venture / Strategic Partnership
• From an announced strategic agreement between the two parties up to
the creation of an independent joint-venture company
• Mid-to-significant investment
We have identified 4 types of partnership

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Partnerships around the world: categories
Partnerships by category Partnerships by geography
Source: Ovum Telco–OTT Partnerships Tracker: 4Q14

7. 7© Copyright Ovum 2015. All rights reserved.
Partnerships around the world: free versus paid
Category Free Paid Total
Gaming 11 12 23
Internet search 8 1 9
Messaging 23 38 62
Music services 10 61 71
Navigation/maps 1 0 1
Payments 2 0 2
Productivity 13 3 16
Social media 51 20 71
Video 3 35 38
VoIP 16 14 30
Total 138 185 323
Source: Ovum Telco–OTT Partnerships Tracker: 4Q14

8. 8© Copyright Ovum 2015. All rights reserved.
internet.org is probably the best known example of a
partnership offering internet access and services
India (Feb 2015)
Reliance customers in six Indian states (Tamil Nadu,
Mahararashtra, Andhra Pradesh, Gujarat, Kerala, and
Telangana) now have access to more than three dozen
services ranging from news, maternal health, travel, local
jobs, sports, communication, and local government
information.
Tanzania (Oct 2014)
Provides people with free
access to basic internet
services so they can browse
useful health, education,
finance, employment,
communication and local
information and services
without data charges.
Colombia (Jan 2015)
First time the Internet.org app
is available in Latin America,
and it’s also the first to include
government services as part
of the other free basic
services in the areas of
education, health,
communication, jobs, finance,
and local information.
Zambia (Jul 2014)
Airtel customers in
Zambia were the first to
access services in the
Internet.org Android app,
at internet.org, or within
the Facebook for Android
app.
Kenya (Nov 2014)
Ghana (Jan 2015)
The fifth country to
connect with Internet.org,
after Zambia, Tanzania,
Kenya and Colombia.
People use the internet
for free to find jobs, read
books, and stay
connected.

9. 9© Copyright Ovum 2015. All rights reserved.
2/3 of the world is not connected to the Internet. What
is stopping them?
Most of the unconnected are in the developing world, where only 32% of people
are online, compared with 78% in rich countries. Just 19% of people in Africa
were internet users in 2014. But why?
 Mobile networks are few and far between
 Networks can’t support large amounts of data
 Power sources are limited or costly
 Devices are too expensive
 Service plans are too expensive
 Content isn’t available in the local language
 People aren't sure what value the Internet will bring

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…But things are improving
 Affordability of smartphones is improving
 Increased supply, mid-tier focus, will soon overtake feature phones
 Service plans are evolving and new models being tried
 internet.org is a good example, but also carrier’s are evolving their tariffs
 Content is increasable available in the local language
 Strong cultural identities are being catered for, deals with local artists and
celebrities are being reached, local distribution is happening, Facebook transalted
 Telco/OTT partnerships are stopping the Internet being seen as an abstract
concept.
 Things such as Facebook are an entry point, which serves as a way in to take
consumers elsewhere on the Internet
 Mobile networks are improving coverage
 Innovative technologies being tested by Google and Facebook

11. 11© Copyright Ovum 2015. All rights reserved.
As a result of partnerships, some of those challenges
are being overcome
MAIN PROBLEM
CHARACTERISTICS
SOLUTION OR
PLATFORM
Obstacle to getting
online is mostly
economic
80-90% already have
2G/3G infrastructure
Urban, semi Urban
Build cell towers, small
cells or a big network of
Wi-Fi access point
Basic physical access to
communities is difficult
Deploying infrastructure
is uneconomic as well
as impractical
10% of the world
Rural and remote
Satellites, but expensive
and slow to develop
Medium density areas
Up to 20% of the world
Where some
connectivity already
exists but there are
gaps
Unmanned aerial
vehicles which can be
deployed quickly with
long endurance
Combination of
economic and
environmental factors

12. 12© Copyright Ovum 2015. All rights reserved.
But questions remain…
 Are the apps included in internet.org the right ones?
 They are mostly low bandwidth and not contentious, not things such as YouTube,
VoIP within Facebook and WhatsApp which would present real challenges for the
network. This risks creating a further digital divide.
 Who eventually owns the relationship with the end-user?
 In developed markets, OTTs have stolen the gatekeeping position of the telco.
internet.org believe it should be those deploying the network to become the face
 Does regulation prohibit Google and Facebook plans for balloons and drones?
 Some countries heavily restrict the use of such aircraft and time-wise these are
still some time away
 Let’s not forget the importance
 160m+ jobs, reduced child mortality, empowerment