WhatsApp has Changed the South African Mobile Industry Overnight

WhatsAppThe introduction of Voice Calling features on WhatsApp will change the focus of Mobile Network Operators (MNOs) with sudden and brute force. As an Over-The-Top (OTT) service provider, WhatsApp has the financial, technical and social clout of Facebook supporting it, as well as a significant user base. MNOs have anticipated this step change in the telecommunications industry whereby voice revenues are challenged and ultimately replaced by data-based services. This is the key reason why MTN, Vodacom, and Cell C have all proposed higher rates with ICASA for VoIP-related data traffic even though each has also indicated that they won’t apply the rates in South Africa.

“WhatsApp has already achieved ubiquitous status in South Africa as the instant messenger of choice, beating Blackberry Messenger and WeChat in terms of popularity,” says Lehlohonolo Mokenela, ICT Industry Analyst at Frost & Sullivan. WhatsApp is usually the primary or secondary OTT installed on South African mobile phones, creating a strong network effect for users wishing to make VoIP calls with their data instead of voice minutes. MNOs know that OTT providers control access to the customer and will look to increase the average revenue per user (ARPU) by moving from instant messaging to voice and video calls, but they are still looking for an effective response to counter the change from voice to VoIP calls.

The next challenge for OTTs will be the additional services that they add to their portfolio. “Facebook Messenger got a former PayPal executive David Marcus to lead the charge and there have already been screenshots of mobile payments enabled via this platform. Other OTTs like ttrumpet, in the early stages of its life cycle, adopt a platform approach and are offering enterprise an OTT application that uses communication technology as the core. It adds additional functionality on top of the OTT services to fulfill various enterprise needs,” continues Mokenela.

The enterprise angle is crucial in that, while a consumer focus creates popularity, it does not ensure financial sustainability for the OTT. Revenues tend to be inconsistent while costs tend to increase as the viral popularity of OTTs creates the need for additional computing and bandwidth capacity for the service provider. Frost & Sullivan have explored the opportunity for OTTs in the enterprise market – as this is historically where companies been able to achieve consistent revenue flows. A good example of this is Google which provides online search functionality to consumers for free, but its main revenue source is from enterprises that advertise with it. Facebook also only achieved its success by creating an advertising platform for Enterprises to access its vast user base.

“WhatsApp and other consumer-focused OTT providers will need to find an enterprise offering to achieve sustainability,” highlights Alistair Petersen, Director of Growth Implementation Solutions at Frost & Sullivan. In a white paper titled “The Escalating Opportunity for OTT Services in the Enterprise Market,” which is due to be released next week, Frost & Sullivan have evaluated the various applications for these services and established some insightful models that illustrate the potential strategies that MNOs can employ in partnership with OTTs.

MNOs have lost their chance to downgrade their data networks as consumers demand faster mobile broadband connectivity for a number of possible applications. The threat to MNO voice revenues is now a reality and their response cannot be to implement higher data charges for VoIP without risking a market backlash. In a world that is now driven by OTT service providers, MNOs need to adapt their approach and shift towards embracing OTTs rather than shunning them.

Frost & Sullivan recently hosted a webinar on the emergence of Over-the-Top (OTT) providers and the potential opportunities for growth in the enterprise market. To receive a copy of the presentation and a link to the audio recording, or for more information on our upcoming white paper kindly email Edyta Grabowska, Corporate Communications, at edyta.grabowska@frost.com.