Here’s Why MTN, Other Telcos Are Promising You Airplanes

Of late, Nigerian telcos seem to be trying their hardest to outdo the rest in flamboyant gestures of largesse, in a bid to get your attention. They love you so much that they’ll do and give you anything – they’ll double your airtime, dash you free internet data and even give you an airplane for just recharging with N200.

While not necessarily taken in by these cloyingly random displays of affection, Nigerians are notorious lovers of freebies, and they can’t be bothered with whether the telcos motives are sincere or mercenary. I wasn’t either, until free airplanes became involved.

Marketing is a usual undertaking for most businesses, but in the Nigerian telecommunications sector it’s assumed an acrobatic aspect, no other industry comes close. As always, I have a few theories as to why.

Waning voice revenues and the impending battle for internet data dominance

It’s a global trend. Voice revenues are on their way down the toilet, in a way that I suspect that the above chart from the NCC website cannot even begin to capture, given its age. Data is killing voice, as people increasingly turn to the internet as their preferred medium for communication. More people Skyping, pinging, tweeting and WhatsApp-ing means less people making phone calls.

While the obvious market shift from voice to data isn’t likely to unseat the entrenched Nigerian players or cause any significant marketshare upheavals, it could still have remarkable implications for the telecoms playing field and present opportunities for differentiation and competition that weren’t there before. Etisalat, for instance, is aggressively touting it’s high speed 3G speeds  as one of it’s strongest value propositions for subscribers looking for alternatives to their current lackluster connectivity plans.

And unlike voice, data is hardly a mobile oligopoly, there are also the CDMA and Wireless broadband providers to consider. Things might not look too good for them at the moment, but the inevitable increase in demand for home and office internet connectivity with a resultant increase in market opportunity might be just the impetus they need to scale their operations beyond regional coverage and compete directly with mobile internet operators on relatively equal terms and service categories, nationwide.

Advertising revenue – the next mobile cash cow?

24 hour access to millions of people on the most engaged platform on the planet is one of the perks that come with being a telecoms company. Monetising them via advertising is a no-brainer, what’s the point of having millions of mobile subscribers if you can’t drown them in spammy SMS advertising?

MTN and Etisalat have both rolled out advertising products this year, and if the rest don’t follow, they’re silly. Advertising is mostly a volume business, however — so the competition for subscribers is also a competition for advertising eyeballs.

The battle for your pocket

I’ve said elsewhere that we’re slaves to our SIM cards, but I’ve had cause to rethink that particular assertion. If anything, it’s the telcos that lose sleep over subscriber loyalty, always having to keep a nervous eye on subscriber churn rates and dwindling ARPUs (average revenue per user).

At the beginning of the Nigerian telecommunications revolution, the cost of switching providers was so high as to be impractical for most people. The cost of SIM cards used to be in the five-figure range in the early 2000s. A decade later, give or take a few years, SIM cards now cost as much as a bottle of LaCasera. In fact, they’re often technically free, as telcos fall over themselves to poach each others’ subcribers with free SIMs pre-loaded with bonus airtime.

Once the financial penalty for deserting a telco became negligible, the dual, triple and quad SIM phone deluge came in to deliver the coup de grace.  What we have in Nigeria (and indeed, other African countries) right now is a full-fledged telco-polygamist culture — an individual owning as many SIM cards as there are network providers is now the the rule, rather than the exception.

Telco polygamy (or telepolygamy) no doubt works out for the subscribers, choice means that they are reasonably insulated from common operator screw-ups. Nigerian subscribers have become amazingly fickle too. In consummate polygamist style, they will often only go with the telco who’s more likely to show them a “good time” — better deals and freebies. InMobi research indicates that 55 percent of subcribers would gladly switch networks if a better deal came along, while there’s another 13 percent that’s actively looking to switch.

But for the telcos, the trouble with a telco-polygamist culture is that getting people to subscribe to your network is no longer enough — now you have to figure out how you’ll get them to spend money on YOUR network because the average subscriber now makes calls with his MTN, receives calls on his Glo and sends text messages with his Etisalat. So far, the only way the telcos know to keep in the good graces of their subscribers are free SIMs, price wars, elaborate pricing gimicks, and stunt marketing campaigns.

The mobile money land grab

In terms of reach and subscriber volume, the Telcos have succeeded where the banks have failed. While the figures for the percentage of people who own bank accounts hover between 20 – 38 percent, there are now over 100 million mobile subscriptions. This fact alone gives them potential starting leverage in mobile money that the banks can only dream of.

Much to their chagrin however, Nigerian telcos have been prevented from taking the lead in the mobile money initiative. But that hasn’t prevented them from brokering all sorts of deals with the banks and third parties who have obtained mobile money licenses.

Why the telcos are drooling over mobile money? A look at the impact of M-Pesa on Safaricom’s business to reveals the logic. The GSMA MMU reports that Safaricom’s M-Pesa revenues are growing steadily, now second only to voice. Ánd it gets better — 29% of Safaricom’s pre-paid airtime top-ups are now conducted electronically through M-PESA rather than through paper-based scratch cards, translating into significant cost savings. Mobile money services also tend to reinforce subscriber loyalty, reduce subscriber churn and shore up ARPU. What telco wouldn’t want that?

Like mobile advertising, mobile money is a volume business. The more subscribers you have, the more of a head-start you’ve got towards critical mass. And to him who has a lot, more will be given.

Please send me to the Moon

Now you have some idea about why the Telcos love throwing money and freebies at you with profligate abandon. Like me, I’m sure you can’t wait for the next marketing stunt. Of course we’re now past being impressed by airplanes, MTN’s made sure of that. Anything short of a space shuttle or an all expense paid trip to Moon would be utterly disappointing.

A trip to the moon isn’t ludicrous. It costs a measly $200,000 to book space tickets on Virgin Galactic. I imagine the size of the stunt doesn’t really matter. Afterall, wooing customers in a trillion naira industry via multi-million naira promos is definitely a cheaper alternative to investing in  better communications infrastructure and service delivery.

As always, further insights are appreciated.

Telecoms industry graphs via the NCC website. Parody poster by me.