Abdelkader Dali, managing director of Sofrecom Middle East, comments on the main challenges that telcos are facing when monetising 4G and what will be the right formula to solve it.
Operators in Saudi Arabia and the UAE were the first in the region to launch 4G in 2011. Today all mobile operators in the Gulf Cooperation Council bloc have launched 4G and more than 80% of 23 Middle East countries have done so.
But if 4G data represents a real opportunity for revenue growth in the region, operators are facing major challenges to monetise 4G data. Developing 4G services, boosting data consumption, offering affordable (but profitable) pricing and providing best-in-class 4G user experience are the four main challenges that telcos are facing.
Rather than being presented as a new technology, 4G should be presented as a new range of innovative content services. Especially in the region, where the population is mainly young and technophile, operators must go on strengthening their data-savvy content services (blockbusters, TV shows, foreign soccer championships…), develop original Arabic language mobile content, as demand is exploding and find a way to develop new and innovative services (Internet of Things, Connected Cars, Home…). 2G was text, 3G has been smartphones & pictures, 4G will be smartphones, tablets and entertainment. This can be supported by partnerships with successful OTT (Over-the-top) players providing music, video, TV or social contents. For instance, some operators offer access to ‘OSN Play’ – a regional video-on-demand (VoD) and OTT service – to their 4G subscribers with a free trial. Making disruptive partnerships with OTT actors is one of the most successful strategies adopted by many operators in the region.
Additionally, operators must take advantage of 4G to develop their knowledge of data customers and habits to further develop 4G relevant services. Knowing better customers is a key issue especially in some Middle East countries, where prepaid still represents more than 70% of the subscriber base.
Second challenge: boost 4G data usage. First of all, operators should continue to encourage smartphones equipment and speeding up penetration by having an aggressive pricing strategy. On this, the region is very diverse —in countries such as Iraq, Yemen or Syria, smartphones account for only 10% of devices while it represents 80% in Qatar or UAE, one of the highest smartphone adoption rates in the world. To solve this issue, some operators offer device subsidies on high-end smartphones and data access bundles to attract the mid-value segment. On the low-end segment, operators attract customers with entry-level 4G-enabled devices bundled with voice, messaging and data with one week’s free 4G data access for a new prepaid subscription. Secondly, operators should start positioning on the connected cars & home markets as 4G networks enable new usages.
When facing the third challenge, the question of affordability versus profitability is still an equation to be solved by operators. On the one hand they are investing heavily in 4G networks and on the other hand they are still looking for the most appropriate pricing approach. So far, three types of pricing strategies inspired by other markets, exist in the region: 4G offers more expensive than 3G (premium), 4G with no extra cost and even 4G less expensive than 3G.
To stay competitive, successful 4G operators have chosen to bundle more value with 4G subscriptions. By doing this, they have been able to differentiate themselves based on content and migrate subscribers to higher-cost monthly plans.
Last but not least, 4G relies on a strong breakthrough in speed and the promise of better user experience. For operators, having a better user experience is heavily linked to network capability and quality. In such a context, network and customer satisfaction tests are even more important in the 4G world than in 3G. Operators in the region invested US $75 billion, according to the GSMA, in the region over the last 6 years on improving network coverage, increasing network capacity and on deploying higher speed mobile broadband. 4G, as any new technology, requires continuous network assessments, new processes, follow up of main QoS and new customer experience KPIs in order to provide a differentiated user experience.
4G strategies are evolving as competitive pressure is increasing and some operators are well positioned. Successful monetisation strategies will need a focus on offering differentiated services with flexible and usage-friendly pricing models, retaining the most valuable clients and managing effectively the customer experience KPIs.