Karim Yaici, lead analyst for Analysys Mason, comments on the impact of OTTs and which strategies operators can follow to face them and include them in their business models.
A recent survey of mobile Internet users conducted by Analysys Mason in Morocco, Qatar, Saudi Arabia and the UAE, revealed a very high incidence of over-the-top (OTT) communications services. For some operators, we believe that OTT communications services will play a key role in stimulating mobile Internet usage as customers look to maximise the value of connectivity and the mobile device. However, these services also contribute to the substitution of operators’ own communication services and operators must ensure that they balance opportunities for revenue growth with potential erosion of legacy revenue streams.
OTT messaging services provide a clear value proposition to end users, with which operators cannot currently compete.
Analysys Mason conducted primary research in July and August 2014 with a sample of 8000 mobile Internet users across Morocco, Qatar, Saudi Arabia, and the UAE. The results show a high level of penetration of OTT services compared with international benchmarks, despite some of the services (e.g. Skype and Viber) being blocked over cellular networks in some of these markets.
The results showed that WhatsApp is the most popular OTT communications app in this survey, with 68% of respondents using the service; it has the highest penetration in Saudi Arabia.
Skype is the most popular VoIP app, with 44% of respondents using the service. Facebook has a very strong position in the OTT messaging market as Facebook messenger is used by 36% of respondents, and the company also owns WhatsApp. Usage of BBM continues to be strong in the MENA region, with nearly a quarter of respondents reported using the app, with the highest incidence in Saudi Arabia, and the lowest in Morocco.
The MENA region is already showing signs of SMS substitution as IP messaging services have become mass-market propositions. Operators such as Etisalat (UAE), inwi (Morocco) Mobily (Saudi Arabia) and Vodafone (Qatar) have already started partnered with OTT messaging players because of their brand strength, the richer communications experience they enable, and the opportunities to drive mobile data usage.
On the other hand, VoIP services do not significantly improve the user experience compared with traditional voice services: demand for the service is almost wholly because of pricing.
Unsurprisingly, operators are less keen to engage in partnerships with VoIP players, which are direct competitors.
A combination of approaches, including partnerships, may provide the most effective strategy to respond to the OTT threat.
We expect more mobile operators to consider marketing partnerships with OTT messaging providers in order to retain some competitiveness, but this model is unlikely to extend to providers of voice services. Operators can choose from a number of options, depending on their existing position and ambitions. These options are not mutually exclusive – a combination of approaches may provide the most effective strategy.
Tariff rebalancing. Operators could make voice and messaging more affordable, eventually moving towards unlimited plans to stimulate usage of legacy services. Operators could also rebalance their tariffs in favour of mobile data.
Partnering with a provider of alternative messaging services. The brand strength of the partner can be capitalised upon to drive adoption of operators’ data tariffs. Operators can also devise special tariffs that bundle access to those OTT services.
Launching proprietary OTT services that can be developed in-house or offered using a white-label service, but will require more resources than the partnership route. These services will likely target specific vulnerabilities or add value to important customer segments.