Who will win in telcos, free-to-call apps battle?

Facebook and WhatsApp applications’ icons displayed on a smartphone in Rome. PHOTO | FILE  

By MBUGUA NJIHIA

In Summary

• The mobile operators have for years enjoyed tear-free returns on this, up and until OTT players came to be, spreading like wild fire riding on the growth of mobile data and smart enough phones.

There are many times in the running of a business, something new creeps up, catching you off guard and wreaking havoc on your prized cash cow.

Sometimes it’s just plain lack of preparedness and strategy. Mobile network operators have been privy to the imminent threat that is represented by OTT players, but have seemingly failed to adapt accordingly.

OTT is an acronym for “over the top” content and is applied to companies which use the Internet to deliver audio, video and other media; primarily on mobile or other such device.

And you know them well, WhatsApp, Facebook Messenger, Viber, WeChat and Mxit are the more familiar players in this market, but globally they are a horde.

Recently, the Airtel Africa CEO called for a regulation that would see OTT players pay to use the reach the consumers via the mobile network infrastructure, citing the heavy investment telcos have put into establishing their networks.

I doubt that the telcos will carry the day and their best bet is to look for ways to collaborate, to stem the bleeding that the OTT players are causing to their bottom line.

For perspective, one must look at SMS, the most profitable segment of a mobile network operator’s inventory.

Once a network has been deployed, scaling on voice requires heavy investment in additional infrastructure, but not so for plain-jane SMS, whose cost of delivery to the mobile operator is virtually zero, giving margins that other businesses can only dream of.

The mobile operators have for years enjoyed tear-free returns on this, up and until OTT players came to be, spreading like wild fire riding on the growth of mobile data and smart enough phones.

In the October-December 2014 report by the Communications Authority of Kenya, mobile operators terminated a total of 7.3 billion SMS messages that quarter, with Safaricom accounting for 96 per cent of the traffic.

The GSMA Association that represents the world’s telco’s tried to spearhead an OTT play that would be managed by the operators dubbed Joyn, but this has seem limited adoption and has zero visibility in the larger African market.

First, they came for SMS and now they are here for the voice which stood at 7.4 billion minutes for the same quarter under review. There is a way out for mobile network operators who will stop playing the role of a dump pipe.

Consumers are embracing mobile commerce and the operators, most of whom have a mobile money arm, have the access and control to the consumer wallet and can also still offer that second factor; authentication that online commerce needs to create more trust.

Many OTT players are yet to figure out the monetisation from their disruptive ways and smart telcos —especially those in emerging markets, can lead the way in creating symbiotic partnerships that will see a peaceful and highly profitable co-existence.

Mr Njihia is CEO of Symbiotic | www.mbuguanjihia.com | @mbuguanjihia