QUARTERLY eBULLETINNews and insight from across Sub-Saharan Africa

FEATURING

DIGITAL CONTENT OPPORTUNITIESIN AFRICA – MAHINDRA COMVIVA

SECTOR INSIGHT:MOBILE PAYMENTS BY MONDATO

OPINION:DEVELOPING THE MOBILEECOSYSTEM IN AFRICA - APPSAFRICA

PLUS REGIONAL NEWS ROUND-UP

MEF AFRICA EDITION 2

FOREWORDRIMMA PERELMUTER, CEO, MEF

DIGITAL CONTENT OPPORTUNITIES IN AFRICAQ&A WITH ATUL MADAN, SENIOR VICE PRESIDENT AND HEAD OF THE MOBILE LIFESTYLE AND CUSTOMER CARE SOLUTIONS AT MAHINDRA COMVIVAMAHINDRA COMVIVA

REGIONAL NEWS ROUND UPFROM ACROSS SUB-SAHARAN AFRICA

THE AFRICAN MOBILE ECOSYSTEM HANDSETS,APPS AND MOBILE PAYMENTSTHOUGHTS AND ANALYSIS FROM JUDAH J. LEVINE,CEO AT MOBILE FINANCIAL SERVICES EXPERTS MONDATO

DEVELOPING THE MOBILE ECOSYSTEM IN AFRICAINSIGHTS FROM ANDREW FASSNIDGE, FOUNDER OF APPSAFRICA.COM

REGIONAL TRENDS & STATISTICS

MMAHINDRA COMVIVA

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3MEF AFRICA EDITION

s a continent that is closing in on its billionth mobile connection, Africa’s phenomenal growth is well charted. For example, in 2002 just eight per cent of the population of Ghana owned a mobile phone. Last year, that figure reached 83 per cent. With 54 countries, an entrepre-

neurial spirit and an insatiable mobile-first appetite, the opportunity for the mobile growth and innovation in Africa is unrivalled.

The Pan-African mobile ecosystem is diverse and complex. Whilst the Continent builds out infrastructure and smartphone penetration continues to grow, feature phones are still hitting critical mass and provide the immediate opportunity in the diverse local markets. I’m delighted to introduce the first MEF eBulletin on Africa which includes a comprehensive round-up of the news, industry analysis and insights on how the mobile ecosystem is taking hold in the region, leapfrogging fixed line internet access and delivering services that enrich consumers’ lives.

The obvious poster boy for mobile services in Africa is of course mobile money, which has grown to become an essential component in accelerating financial inclusion. MEF continues to champion mobile money as an active initiative to address industry issues and regulation and foster global partnerships between banks, technology providers, mobile operators and more besides. In the bulletin, MEF partner and financial services experts, Mondato provides a useful insight in to how mobile money has grown in the region.

The eBulletin also captures an essential guide to some of the big news stories and market data that are shaping the African mobile ecosystem. Andrew Fassnidge director and founder of Appsafrica.com takes a look at the drivers of the diverse apps ecosystem and Mahindra Comviva’s Atul Madan, Senior Vice President and Head of Mobile Life Style & Customer Care Solutions discusses the digital ecosys-tem and the importance of localised content and services in the region.

MEF Africa was established in 2012 supported by Vodacom to create an interna-tional and pan-African platform for our global members doing business in Sub-Sa-haran Africa, as well as to support local members to access global insights, regional analytics and tools to accelerate their mobile business and grow global partnerships.

If you would like to join MEF Africa and help shape how the complex African ecosystem is formed, then please contact the MEF team to learn more.

RIMMA PERELMUTERCEO, MEF

FOREWORD

A

4MEF AFRICA EDITION

frica is a mobile first continent, currently pushing its billionth mobile connection. In many of its constituent countries, it is also witnessing the roll-out of faster mobile networks and, alongside the critical mass of feature phones, an increasing availability of cheaper

smartphones. As a consequence, content providers and stores are gearing up to maximize the pan-African mobile opportunity.

With different speeds of acceleration, the ecosystem is complex. There is no one size fits all solution. MEF caught up with Atul Madan, Mahindra Comviva’s Senior Vice President and Head of Mobile Life Style & Customer Care Solutions to preview the launch of the Mooditt Digital Content Store, to discuss the broader opportunity for content and services in Africa.

HOW DO MOBILE USERS IN AFRICAN COUNTRIES TRADITIONALLY ACCESS MOBILE CONTENT?

Historically, content on mobile in African countries was consumed through voice and text channels, however, a rapid shift to mobile broadband is underway which positions mobile data at the heart of new digital ecosystem.

It is driving innovation and the development of new services in areas such as digital content, social networking (Facebook is gaining traction - South Africa has 7.3 million daily active users, Nigeria, 7.1 million and Kenya 2.2 million) and online commerce

According to a recent report by McKinsey, the portion of GDP derived from online commerce in Africa could increase to at least 5 per cent or 6 per cent by 2025, matching that of leading economies such as Sweden, Taiwan and the UK. Africa is now witnessing new and vibrant ecosystems based on mobile broadband networks, feature phones, smartphones and tablets.

WHAT ARE THE MAIN CHANNELS CONTENT DISTRIBUTION?

There are four main channels in the region: Broadcast (TV and Radio) Online (search engines and social networks in particular) Mobile Network Operators whom handle the hosting and distribution of content from content aggregator to end-user where categories such as ring-back tones, music on demand and karaoke apps. For example, Comviva’s Karaoke App, launched in 14 countries in Africa for the music talent show - Trace Music Star - is very popular. And the fourth channel for content distribution is via OTT providers.

A

DIGITAL CONTENTOPPORTUNITIES IN AFRICA

– BLENDING LOCAL AND INTERNATIONAL CONTENT STRATEGIES

WHAT KINDS OF CONTENT ARE POPULAR?

Music dominates in most African markets. Globally it is the subscription model for services like Deezer and Spotify that is gaining traction. Whereas Apple Music will only have a minor impact on

African markets since the cost of Apple devices (and therefore its ecosystem) is prohibitive.

In 2014, the music industry’s global digital revenues increased by 6.9 per cent to $8.85

billion - for the first time deriving the same proportion of revenues from digital

channels as physical format sales (46 per cent each).

Whilst Africa is a little way off, the digital music horizon is approaching. Take two of Sub-Saharan Africa's bigger economies, Nigeria and Kenya where PricewaterhouseCoopers has

forecast consumer spending on recorded music revenues to hit $43

million and $19 million respectively this year. South Africa is also seeing digital

music revenues grow steadily. The arrival of services such as Deezer, rara, and Simfy

accounting for a growing share of a healthy music market.

Video-on-demand is also a key driver for mobile data use and growth. At the end of 2013, the African VoD market started to heat up. Whilst today only around 6 per cent of Africa’s web traffic is video, the continent is expected to be the fastest new adopter of video applications in the world in the years to come – whether that’s via online, via satellite or mobile.

It‘s also hugely important to add local content to the mix. The availability of content that is both local language and locally relevant will play a vital role in the adoption of mobile internet.

However, the majority of content is currently in English and is largely focused on data-heavy smartphone apps. Smartphone penetration is still low and English is not the primary language for the majority of mobile users. In order to reach the widest audience, content needs to be available on as many devices as possible (not just smartphones) in languages that users understand, as well as being relevant to their local needs and interests.

Q&A WITH ATUL MADANSENIOR VICE PRESIDENT AND HEAD OF THE MOBILE

LIFESTYLE AND CUSTOMER CARE SOLUTIONS AT

“IN ORDER TOREACH THE WIDEST

AUDIENCE, CONTENT NEEDS TO BE AVAILABLE ON AS

MANY DEVICES AS POSSIBLE - NOT JUST SMARTPHONES - IN LANGUAGES THAT USERS UNDERSTAND, AS WELL AS BEING RELEVANT TO THEIR

LOCAL NEEDS AND INTERESTS.”

5MEF AFRICA EDITION

One trial that Mahindra Comviva ran with a leading mobile operator in Nigeria and 3000 local artists showed that

the local factor contributed between 70 and 80 per cent of all music sold.

Other areas of popular content include football – an African passion and religious

content, which contributes to between 15 and 20 per cent of all content sold.

WHAT ARE THE CHALLENGES FOR CONTENT DISCOVERY?

Typically content markets are fragmented, comprising of many different channels and consumer options. This will shake out over time. There is also a lack of direct

communication to consumers via the many distribution channels.

Recommendations based on previous choices or updates to popular content, is

lacking somewhat. Our experience indicates that 48 per cent more content is

consumed if it is personalized through communication and recommendation.

WHAT ARE THE MAIN CHALLENGES FOR CONTENT PAYMENTS? Traditionally users pay for mobile content through operator billing. Content subscribers have also started making content purchases using their debit/ credit cards. African consumers are habituated to making mobile payments in this way for both digital and physical goods.

There are of course challenges when it comes to payments for digital content. Variables like the availability of cross-border remittance and currency fluctuations can create barriers.

HOW DO YOU SEE CONTENT RETAILING EVOLVING IN AFRICAN COUNTRIES?

The Mooditt Digital Store serves as a market place for content publishers and content buyers. Companies will easily be able to publish digital content be that music, video, audio, text, images, eBooks and more besides, to a channel that is directly open to the content buyers; anyone from mobile network operators, TV channels, radio broadcasters or even direct to end consumers.

HOW ARE YOU TACKLING THE COMPLEX CHALLENGES OF CONTENT DISCOVERY AND DISTRIBUTION IN AFRICAN

COUNTRIES?

We make it easy for the providers. In other words, we take care of all the intermediated activities, for example

commercial arrangements, content publishing and revenue enhancements. The Mooditt Digital Store enables content providers to distribute and monetize their content across various channels and across borders, helping them to focus on their core business - content creation.

Other features include a recommendation layer for personal and direct communication with consumers and analytics tools to monitor consumer behavior.

The content market is still fragmented and that makes it difficult for distribution channels to access to the right content. While the leaders in the content industry can afford to create dedicated channels, small time artists and independent content creators find it very challenging. Africa is a very diverse and complex region and greater acceleration depends on the interplay between several areas; the roll-out of mobile broadband, feature phones and lower price smartphones, simplified content discovery and distribution, offering a broad catalogue of content and services that also capture local tastes, languages and culture and giving content producers and publishers the tools to monetize their own content.

Understanding these factors is the key to developing a sustainable digital ecosystem and unlocking future revenues.

“WHILE THE LEADERS IN THE

CONTENT INDUSTRY CAN AFFORD TO

CREATE DEDICATED CHANNELS, SMALL TIME ARTISTS AND INDEPENDENT

CONTENT CREATORS FIND IT VERY

CHALLENGING.”

“TYPICALLY CONTENT

MARKETS ARE FRAGMENTED,

COMPRISING OF MANY DIFFERENT

CHANNELS AND CONSUMER

OPTIONS. THIS WILL SHAKE OUT

OVER TIME.”

6MEF AFRICA EDITION

MXIT CLOSES DOWN TO SWITCH FOCUS TO ITS CHARITABLE ARM

END OF AN ERA FOR SOUTH AFRICA’S PIONEERING MOBILE SOCIAL NETWORK

It’s been coming for a long time, and now it’s finally happened: Mxit is no more. South Africa’s Mxit confirmed the closure last month and says it will now focus on

Reach, its charitable arm. The news marks the end of what was once a world-leading social network built specifically for the mobile phone.

Mxit launched in 2005 as one of the world’s first mobile IM services. As such it bypassed SMS and allowed users to use a GPRS data connection to send ‘free’ messages. By 2009, it had 5 million users in multiple countries. And the service itself had expanded. It set up an ad platform and was serving 12m by 2008. It also launched complementary services like Mxit music to showcase unsigned local artists.

Needless to say, Mxit was enthusiastically embraced by younger users and helped to drive down South Africa’s data tariffs. By the end of 2010, it had 27 million registered users.

But as so often, meteoric success brought with it the seeds of Mxit’s downfall. The service was built for Nokia-era feature phones running J2ME. Mxit didn’t react fast enough to the smartphone revolution - or to the host of rival services that ran on the emerging devices: WhatsApp, Facebook, BBM.

By 2011, the alarm bells were ringing and a new CEO, Alan Knott-Craig Jr, took charge. He couldn’t reverse the slide and departed in 2012. By July 2015, Mxit revealed it had just 1.5m users.

So few were surprised when the closure was confirmed last month. In a statement, the company said its focus and its staff would be transferred to Reach — its charitable arm. Reach funds projects that aim to improve health and education through mobile channels. It says it more than 500 000 learners access educational apps on the platform every month.

REGIONAL NEWS ROUND UPFROM ACROSS SUB-SAHARAN AFRICA

KENYA AND RWANDA EASE THE TRANSFER OF MOBILE MONEY

MTN RWANDA AND SAFARICOM AGREE LANDMARK DEAL

Mobile money users in East Africa suddenly have a much quicker way to make transfers via their phones without converting currencies. MTN Rwanda and Safaricom Kenya have confirmed that users of MTN Mobile Money and M-Pesa can now send each other money in just a few short steps.

To send money to Uganda or Kenya, MTN Rwanda customers dial *830# and follow prompts on screen. After sending they will receive a confirmation message that the

transaction has gone through.

This comes a few months after MTN and Vodafone (which owns Safaricom) made an agreement that paved the way for this service. The region’s two biggest mobile money

operators made it possible for MTN Mobile Money customers in Uganda, Rwanda and Zambia to send cash to M-Pesa customers in Kenya, Tanzania, DRC and Mozambique.

Betty Mwangi, director of financial services at Safaricom, said: “This initiative will not only be of benefit to the customers who may need to send money between the two countries, but will also provide a reliable and afforda-

ble way for businesses to transact, thereby helping grow the East African economy.”

7MEF AFRICA EDITION

PAGA COMPLETES $13 MILLION SERIES B ROUND

BIG VOTE OF CONFIDENCE FOR NIGERIA’S DIGITAL PAYMENTS SECTOR

Despite its size and resources, Nigeria has failed to establish a viable mobile money marketplace. This is because banks have not permitted a single operator (like Safaricom in Kenya) to launch a single service capable of reaching critical mass.

As a result, multiple services have launched and none has achieved any kind of network effect.

Paga was one. But the firm recognised the shortcomings of the approach and pivoted to provide a more all-encompassing digital payments platform. Thus, its users can send and receive cash via mobile and redeem it through agents. But business owners can also integrate Paga on websites. A bit like PayPal.

Today, the company has 9000 agents and has handled transactions worth over one billion dollars via 17 million transactions from 3.4 million registered users.

That success has been rewarded with a $13 million series B round led by Adlevo Capital, Omidyar Network, Acumen Fund, Capricorn Investment Group and Goodwell West Africa.

Tayo Oviosu, founder of Paga, said: “Through our agent network today, we already offer more physical service points than all the bank branches in Nigeria put together, so we are actively working on partnerships with banks to offer our agent network for use by their customers.”

Folabi Esan, managing partner at Adlevo Capital, said: “Paga’s sustained leading position in a competitive market is a testament to the strength of their team – and I think there’s even more to come as they unlock other areas of the business. I’m confident in Paga’s ability to drive growth of their sector in the coming years and continue to have a significant positive impact on the Nigerian economy.”

MOBILE CONTRIBUTED $100 BILLION TO SUB-SAHARAN AFRICA LAST YEAR

MAKING IT THE WORLD’S FASTEST GROWING MOBILE REGION

A new study says 5.7 per cent of Sub-Saharan Africa’s GDP came from mobile in 2014. The GSMA’s ‘Mobile Economy – Sub-Saharan Africa 2015’ report said mobile made a $102 billion economic contribution to the region and that mobile operators directly contributed $31 billion. It expects this economic contribution to rise as operators roll out new mobile broadband networks and services. This should push the overall mobile contribution to $166 billion by 2020. That’s eight per cent of expected GDP.

All of this is helping Sub-Saharan Africa to become the world’s fastest growing mobile region by subscriber base. There will be 386 million unique mobile subs by the end of this year, equivalent to 41 per cent of the region’s population.

But this base will grow 13 per cent a year to pass half a billion (518 million) by 2020. That’s one in two (49 per cent) of the region’s population connected. The report reckons 57 per cent of these subs will have mobile broadband (3G/4G) access.

Currently, commercial 3G networks have been launched in 41 countries across Sub-Saharan Africa, while 4G networks have been launched in 23 countries.

In 2014, mobile directly employed around two million people in Sub-Saharan Africa, and 2.4 million more indirectly, with estimates that the industry will grow to support more than 6 million jobs by 2020.

XIAOMI STARTS SELLING PHONES IN AFRICA

CHINESE SMARTPHONE MAKER STARTS WITH SOUTH AFRICA, KENYA AND NIGERIA

Xiaomi desperately wants to sell phones outside of its core Asia Pacific base. Earlier this year, it targeted Brazil. Now, it’s into Africa.

However, the Chinese smartphone maker won’t go it alone. For the first time it will team up with a partner distributor, the Mobile in Africa Group, which has a network in 14 countries on the continent. It will mostly sell online.

The handsets will be the Mi4 and Redmi 2, which have helped to make Xiaomi the third largest smartphone brand in the world after Apple and Samsung. The devices will cost the equivalent of $320and $160 respectively.

The firm hopes African sales will help it to hit 100 million phones sold in 2015. It sold 35 million phones in the first half of the year.

“We see Africa as the next frontier for smartphone growth and we are excited to be partnering with MIA Group to offer consumers in these three countries our high-quality smartphones at amazing prices,” Raymond Tian, Xiaomi’s global strategy director.

TAYO OVIOSU

8MEF AFRICA EDITION

STANDARD CHARTERED AND AIRTEL BRING MOBILE WALLETS TO GHANA’S CORPORATES

STRAIGHT2BANK SERVICE ROLLS OUT IN GHANA

Tier 1 bank Standard Chartered has partnered with operator Airtel Ghana Limited to bring mobile money services to Ghanaians. It’s Straight2Bank mobile wallet has already been launched in Kenya, Nigeria, Tanzania, Zambia, Pakistan, Bangladesh, the Philippines, Thailand, Indonesia and Vietnam.

Now, it’s coming to corporate clients in Ghana. They can use the Straight2Bank electronic banking platform to make payments directly into an individual’s Airtel Money mobile wallet. This mitigates the risks of fraud and theft associated with cash payments.

Airtel Money has a national distribution of over 13,000 registered agents, 500 merchant outlets, 80 Airtel Money shops, seven Partner banks and over 215 ATMs nation-wide. It has more than 2 million customers.

Kweku Bedu-Addo, CEO at Standard Chartered Bank West Africa, said: “We are proud to be the first bank to introduce

mobile wallet services to Ghanaian companies. Mobile wallets not only bring operational and cost efficiencies to our clients, but also mean individuals receive their funds through secure channels – another way we are supporting Ghana’s Central Bank to foster a cash-lite economy.”

INNOVECTIVES LIMITED BRINGS MOBILE POINT OF SALE (MPOS) TO NIGERIA

LAUNCHES SMARTPESA CARD READER AND APP

mPOS has been a major growth market in mature economies, thanks to pioneers such as iZettle, Square and Payleven. Less so in emerging regions because of the relatively low penetration of bank cards.

However, that may be changing. Innovectives Limited has just launched its SmartPesa card reader and app in Nigeria. The reader lets merchants accept chip & PIN and mag-stripe credit card payments using a mobile phone or tablet.

Innovectives says card ownership rates in Nigeria are rising 20 per cent a year, and that mobile POPS offers a low cost alternative to traditional dedicated card reading terminals. SmartPesa costs from

$40 per unit.

Emmanuel Agha, CEO of SmartPesa, said: “mPoS works with existing banks not against them. As such, it does not have associated problems that plague proprietary mobile money solutions such as opening special accounts, reliance on customer behavioural changes and unclear legal/regula-tory frameworks.”

He added that SmartPesa is not just for payments. It can perform functions traditionally handled at bank branches or ATMs such as balance enquiries, cheque deposits, and transfers. The system is compatible with over 97 per cent of current smartphones, including most low cost devices.

Innovectives says the solution conforms to PCI-DSS guidelines and will be rolled out nationally with partner banks and card payment schemes shortly.

FACEBOOK WILL BEAM THE INTERNET TO AFRICANS VIA SATELLITE

GOING INTO SPACE WITH EUTELSAT

Facebook has signed a multi-yearagreement with Eutelsat and

Spacecomto beam web access across

Africa by satellite.

The partners will send the AMOS-6 satellite into space with a

view to going live in the second half of 2016. Apparently the vehicle is configured with high gain spot

beams covering large parts of West, East and Southern

Africa.

Obviously, there’s a practical advantage to using satellite rather than cable when it comes to connecting people in low density rural areas. And it suits Facebook, which wants to ensure the next billion mobile web users gravitate to its services.

That process started two years ago, when Facebook unveiled Internet.org, a collaborate effort to explore ways to connect these users while keeping costs down.

“Facebook’s mission is to connect the world and we believe that satellites will play an important role in addressing the significant barriers that exist in connecting the people of Africa,” said Chris Daniels, VP of Internet.org. “We are looking forward to partnering with Eutelsat on this project and investigating new ways to use satellites to connect people in the most remote areas of the world more efficiently.”

GETTING THE NEXT BILLION ONLINE

Firefox OS from Mozilla continues its journey in 2015 with the KLIF smartphone announced for Africa. The device launched in 14 countries in the region and, partnering with Orange, gave first-time smartphone buyers their first smartphone experience including in:

SENEGALMADAGASCARTUNISIABOTSWANACAMEROONMAURITIUSNIGERMALICOTE D'IVOIREKENYAGUINEA BISSAUCENTRAL AFRICAN REPUBLICVANUATUGUINEA CONAKRY

9MEF AFRICA EDITION

Riedwaan Hassiem, executive head of enterprise technical product delivery at Vodacom South Africa, says: “Never before has the time and opportunity been so accessible and available to Africa to

accelerate growth of epic propor-tions in all spheres of life, due to the explosion of broadband services across the continent.”

It’s common knowledge that Africa lags other continents when it comes to internet access, though it is growing at a faster rate than any other regions.

This gap has brought many new entrants into the market. In Septem-ber 2015, for example, Smile Communications raised $365 million. The network launched Africa’s first 4G LTE services in Tanzania and Uganda in 2012. It has imminent launch plans for Nigeria and the Democratic Republic of Congo.

TECH HUBS ACROSS AFRICA

117 OF THEM - FROM TUNISIA TO MOZAMBIQUE

A post of Pulse.com reveals the vibrant nature of Africa’s digital sector.

It publishes a map that identifies over 100 tech hubs across 31 countries. It’s the result of a project carried out for the Botswana Innova-tion Hub, iHub in Kenya and BongoHive in Zambia.

The study concludes that tech hubs vary a lot, with some acting

as fully-fledged ICT business incubators, and others merely offering co-working spaces. Meanwhile some are funded by commercial partners, such as the Nokia Greenhouse Nairobior, while others begin life in universities, like the iLab at Strathmore in Kenya. There are also government backed centres such as the Botswana Innovation Hub.

The top five countries in terms of numbers of hubs are Kenya, Uganda, Ghana, Nigeria and South Africa.

NIGERIA HAS 97M MOBILE INTERNET USERS

UP TWO MILLION IN A MONTH

The Nigerian Communications Commission (NCC) has confirmed the on-going rise of mobile internet use by Nigerian phone users.

It said the total reached 97.21 million on 30 September, up from the 95.37 million at the end of August. Among the operators MTN has the largest share at 41.84 million. It added 423,448 new mobile internet subscribers in September. Next is Globacom with 21.89 million, then Airtel Nigeria with 17.73 million and Etisalat with 15.59 million.

The market is really all about GSM since CDMA operators Multi-Links and Visafone had a joint total of 151,816 internet users on their networks in September between them.

24 AFRICAN COUNTRIES NOW OFFER 4G

INDUSTRY HOPES HALF OF THE CONTINENT WILL HAVE ACCESS BY 2018

Africa’s mobile subscribers are slowly being offered high speed mobile internet, but it will be 2018 before 50 per cent of the popula-tion can access it.

An announcement ahead of the LTE Africa 2015 conference confirmed 24 African countries now offer LTE (4G). Earlier this year, market analyst Ovum reported that 34 mobile networks are running 4G services, up from 22 at mid 2014. It predicts there will be 11 million LTE subscriptions at the end of this year.

MEF AFRICA EDITION 10

ust as mobile phones helped Africa and other developing economies leapfrog the widespread use of fixed-line phones and jump straight into the connect-ed era, similarly the rapidly falling cost of smart-phones (really hand-held computers with high-speed

data functionality) means that the feature phone era in emerging markets may be short-lived.

Consider the case of Myanmar, where feature phones apparently do not even work on Ooredoo’s U900 network.

Combined with a young and growing population, the result is the development of an app ecosystem in which within a relatively short space of time a majority of mobile-phone owners will only have ever known smartphones. Moreover, for a great number (proba-bly a majority) of these consumers, smartphone apps will be their initial introduction to a wide range of digital services.

Payment for such services, however, remains a pinch point. Across most of sub-Saharan Africa, credit and debit card ownership levels remain extremely low, although an increasing number of mobile money deployments offer a companion payment card. Nevertheless, Africa is crying out for a “killer” mobile payment platform that works both offline and online and will allow African consumers to fully take advantage of their digital wallets.

In the meantime, however, alternatives still exist for app developers and digital content merchants that both revolve MNOs’ own payment and airtime infrastructure.

Direct carrier billing (DCB), notably, allows vendors to have the charge added to the customer’s phone bill, or more commonly in markets where pre-paid dominates have it deducted from the user’s airtime balance, while Premium SMS remains an option that works with both smart and feature phones. With the latter, however, MNOs have been known to take up to 80 per cent of revenues.

While this may represent the high mark of such revenue share arrangements, even at half of this level it can require extremely high volumes to make a service profitable in the already difficult app market. MNOs’ cut of carrier billing revenues tends to fall into the 25 - 40 per cent range.

J

THE AFRICAN MOBILE ECOSYSTEMHANDSETS, APPS AND

MOBILE PAYMENTS

THOUGHTS AND ANALYSIS FROM JUDAH J. LEVINE,CEO AT MOBILE FINANCIAL SERVICES EXPERTS MONDATO

Carrier billing can offer a much lower friction payment experience than using a payment card. UK-based carrier-billing provider Bango, for example, claims that app stores using carrier billing have a 300 –

400 per cent higher conversion rate in markets with relatively high levels of credit card penetration, and up to 1000 per cent

higher in markets where the penetration is low.

Carrier billing is not just attractive to consumers because it offers a payment

option when no convenient or ubiquitous alternative is otherwise

available, it also offers the convenience of “one-click” purchases (caveat emptor), and freedom from card security concerns.Carrier billing also often operates in a freer regulatory environment than pure play mobile money and traditional payment mechanisms. In many jurisdictions, carrier

billing falls under the eye of the telecoms regulator, rather than

the financial regulator, which is one of the reasons that carrier

billing has proliferated globally much more quickly than more traditional

mobile payment services that are often overseen by far more cautious regulators.

DCB is making a comeback in developed as well as developing markets, as merchants seek to expand the range

of payment options available to customers. In Southeast Asia, DCB service providers such as Coda and Bango are making inroads in young markets hungry for digital content, with Microsoft in particular making DCB available in its app store in a number of markets.Direct carrier billing is a relatively straightforward proposition in a post-paid mobile market, but the regulatory implications get a little more unclear when it comes to deductions from an airtime balance. While this seems seductively simple, and superficially the same as adding the cost to a post-paid bill, pre-pay is actually a very different proposition.

“THE NEED REMAINS IN MOST AFRICAN MARKETS

FOR AN EASY AND RESPONSIVE MOBILE

PAYMENT SYSTEM THAT CATERS TO AFRICAN

CONSUMERS’ NEEDS IN BOTH THE DIGITAL AND

ANALOGUE REALMS”

11MEF AFRICA EDITION

At the risk of stating the obvious, airtime is not money. The weight-less and transportable nature of airtime is what makes its use as a substitute (digital) currency feasible, when for other commodities it would be impractical. And that is what worries some regulators.

The potential problems associated with airtime as a currency are masked by the natural practice of expressing a mobile phone balance in a fiat currency, whether it is dollars, shillings, pounds, rand, euro or cedi. If we conceptualize phone credit not in dollars, but in an imaginary Airtime Currency Unit, (ACUs for short), the issue becomes apparent.

When a customer purchases 10 ACUs, they pay $10 (or perhaps more, depending on the business model and whether airtime is subject to a sales tax), but up the value chain the MNO may only receive, say, $7 for the 10 ACUs they have just sold the consumer once commission and applicable taxes have been deducted. If they then allow the consumer to use ACUs to purchase $10 worth of goods or services, the MNO is thereby subsidizing the consumer’s purchase and the fiat currency involved.

Some business models overcome this issue by adding a significant premium on top of the purchase price where airtime is used to make a transaction, such as mHits in Namibia, which allows the purchase of “emergency” electrici-ty top-ups via mobile phone, whereby $10 of electricity can be purchased for $20 worth of airtime. This pricing structure supports the business model, but raises questions such as were the product taxable, should the consumer pay tax on $10 or $20?

The fiscal and monetary policy issues involved are complex, as highlighted by the American IRS decision to treat another virtual currency, bitcoin, as property.

Not all jurisdictions permit the use of airtime for the purchase of non-mobile content, and what we might call the “exchange risk” for MNOs means that its uses may be limited to digital content or the deduction of small cumulative amounts (such as with some mobile insurance products), or indeed as a premium service, as is the case with mHits in Namibia.

Nonetheless, the fact that carrier billing and airtime deductions remain attractive options for mobile app payments just serves to highlight the need that remains in most African markets for an easy and responsive mobile payment system that caters to African consumers’ needs in both the digital and analogue realms. Progress is being made in that direction, and whoever manages to come up with that “killer app” really will revolutionize the mobile market in Africa.

12MEF AFRICA EDITION

here has been amazing growth in mobile internet access over the past few years and Africa is now primed to take advantage of the social and economic opportunities that mobile can bring to people across the continent. While connectivity is on the rise some

challenges still remain for development, adoption and growth of the mobile ecosystem.

AFFORDABILITYThe race to offer cheaper smartphones in

Africa has dramatically increased with the launch of the Android One program in Africa and introduction of Mozilla’s Cloud FX, however the price of devices is only one part of the

solution to get mass adoption of usage and services.

Over 80% of mobile users in Africa do not use data which is a huge challenge in bringing mass populations online in Africa. Affordability is holding back internet penetration with only 23% of mobile phones connected to the internet in Africa by the end of this year according to the Internet Society. In Ghana for example only 17% are using the internet in urban areas mainly due to the fact that it is too expensive (Alliance for Affordable Internet).

A lot more needs to be done to get cheaper phones to market while also ensuring they can actually be used, by making data more affordable for everyone.

MOBILE PAYMENTSWith the majority of Africans unbanked, mobile

money and payments are critical and one of the biggest hurdles for adoption of services across

Africa. Mobile money adoption in Kenya flourished with a dominant MNO led rollout by Safaricom of MPesa which now boasts over 20M subscribers. That level of adoption has

not been replicated widely elsewhere. In Nigeria for example the adoption has been much

slower with Paga a leading local mobile payments provider having only 2M subscribers to date.

In the early days of ecommerce in Nigeria, the two leading platforms, Jumia and Konga, experimented with electronic payment but they did not record appreciable results. Their major break for them came when they bought decided to introduce pay-on-delivery feature that allows online shoppers to order goods and only pay for such at the point of delivery.

New innovations including Bitcoin are gaining traction in Africa, for example BitPesa which utilises Bitcoin to reduce cost of international remittances. Bitcoin is nonetheless still in its infancy, and remains a novel concept which stands some way off widespread adoption among local populations in Africa and has already seen some casualties.

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DEVELOPING THE MOBILEECOSYSTEM IN AFRICA

INSIGHTS FROM ANDREW FASSNIDGE,FOUNDER OF APPSAFRICA.COM

Problems however drive new innovative solutions and this year the Appsafrica.com fintech finalists VCPay, SimbaPay, Verifone, Mergims, Masterpass and LipaPlus are all striving to drive adoption of payments and remittances using mobile. As the acceptance of cashless electronic payment improves, growth will dramatically increase for mobile based services and the ecosystem as a whole.

EDUCATIONOnly 12 per cent of Africans have access to any

sort of tertiary education, and almost none of it is in software development. Education is critical for the continued growth mobile and tech start-ups in Africa. Many tech ventures in Africa bemoan the fact that local talent is

not yet sufficient to build scale large tech businesses on the continent. However great

strides have been made recently to build the next generation with digital skills who will form a

significant part of Africa’s future.

Cape Town-based Project codeX, a Social Impact finalist in the Appsafrica Innovation Awards runs programming courses with the aim of addressing the lack of trained developers in Africa. In Nigeria, Andela is tackling unemployment on the continent by training a generation of highly-skilled young developers. In Ghana and more recently Kenya, Meltwater Entrepreneurial School of Technology (MEST) provides training, investment and incubation to aspiring high tech entrepreneurs in Africa.

The iHUB in Kenya, the original pioneer of the innovation space in Africa along with other hubs, universities, investors and private sector companies across Africa are essential for the continued education, funding and growth in the mobile ecosystem across Africa.

Appsafrica.com is a pan African mobile and technology news site and advisory

service. Their annual Innovation Awards in Cape Town celebrate the enormous

growth in mobile, technology and entrepreneurship in Africa.

13MEF AFRICA EDITION

REGIONAL TRENDS & STATISTICS

“Africa as a market place continues to grow year on

year. A recent report by IDC claims that 47% of devices

sold in Africa during the 1st quarter of 2015 were

smartphones, with Android OS having an impressive

89% market share. The entrance of affordable smartphones alongside the continued sales of the

traditional feature phones allows creators and suppliers of mobile entertainment services, mHealth, educational

and Mobile Money applications to offer their services across a broader user base. 45.1% of all smartphones

shipped across Africa during the 1st quarter were priced below $100 USD and this jumps to 75% at under $200

USD. Two of Basebone’s key markets - Nigeria and South Africa – account for 14% and 12% market share –

creating exponential opportunities for advancing mobile content services across the region.”

JAMES MCNAB

MANAGING DIRECTOR AFRICA AT BASEBONE

SMARTPHONES OR FEATURE PHONES?

AFRICA IS CLOSING IN ON ITS BILLIONTH MOBILE CONNECTION ACCORDING TO THE LATEST

ERICSSON MOBILITY REPORT

A PEW RESEARCH CENTRE STUDY FOUND THAT OF THE SEVEN AFRICAN COUNTRIES SURVEYED,

TWO-THIRDS SAY THEY OWN A CELL PHONE (FEATURE PHONE OR LOWER). OWNERSHIP IS ESPECIALLY HIGH IN SOUTH AFRICA AND NIGERIA, WHERE ABOUT NINE-IN-TEN HAVE A CELL PHONE.

THE SAME STUDY INDICATED THAT A THIRD OF SOUTH AFRICANS (34%) AND ABOUT A QUARTER

OF NIGERIANS (27%) SAY THAT THEIR DEVICE IS A SMARTPHONE WHILST SMARTPHONE OWNERSHIP IS LESS COMMON IN THE OTHER NATIONS SURVEYED, AND IN TANZANIA AND UGANDA IT IS STILL IN THE SINGLE DIGITS.

WHILST ONLY 7% OF HOUSEHOLDS IN AFRICA HAVE A FIXED LINE INTERNET CONNECTION MORE THAN

65% HAVE ACCESS TO A MOBILE PHONE, THIS STUDY BY ERICSSON SUGGESTS THAT INTERNET USE ON MOBILE PHONES IS PREDICTED TO INCREASE 20-FOLD.

THE MOBILE AFRICA 2015 STUDY, CONDUCTED FROM GEOPOLL AND WORLD WIDE WORX,

SURVEYED FIVE OF AFRICA’S MAJOR MARKETS; SOUTH AFRICA, NIGERIA, KENYA, GHANA AND UGANDA FINDING THAT MOBILE INTERNET BROWSING NOW STANDS AT 40% ACROSS THESE MARKETS –GHANA: 51%, NIGERIA: 47%, SOUTH AFRICA: 40%, KENYA: 34%, UGANDA: 29%.

HANDSETS

AFRICANS REMAIN MORE LIKELY TO USE FEATURE PHONES COMPARED TO USERS GLOBALLY, BUT

THIS STUDY BY OPERA INDICATES THAT ANDROID DEVICES IN PARTICULAR, ARE A GROWING PART OF THE MOBILE LANDSCAPE. ANDROID USERS, WHO NOW COMPRISE ALMOST 30% OF THE TOTAL MOBILE POPULATION, USE THE MOBILE WEB TWICE AS MUCH AS FEATURE-PHONE USERS.

THE MOBILE AFRICA STUDY SHOWS NOKIA AS THE SINGLE BIGGEST PHONE BRAND IN THE MAJOR

AFRICAN MARKETS. HOWEVER, ITS MARKET SHARE IS WANING WITH 46% OWNING A NOKIA AS THEIR PREVIOUS PHONE AND ONLY 34% OWNING ONE NOW. AND ONLY HALF OF THOSE – 18% – INTEND BUYING A NOKIA NEXT.

SAMSUNG IS GAINING TRACTION. CURRENTLY OWNED BY 17% OF RESPONDENTS (UP

MARGINALLY FROM 14%). WHEN ASKED WHAT PHONE WILL BE BOUGHT NEXT, THE SAMSUNG SHOT UP TO 26% – MORE THAN A QUARTER OF PHONE USERS.

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14MEF AFRICA EDITION

REGIONAL TRENDS & STATISTICS

CONTENT AND SERVICES

THE MOBILE AFRICA STUDY ALSO REVEALED THE MOST COMMON PHONE ACTIVITY ACROSS THE

FIVE COUNTRIES SURVEYED:

MEF’S OWN MHEALTH AND WEARABLES REPORT 2015 SHOWED THAT SOUTH AFRICANS ARE

KEENEST ON HEALTH AND FITNESS APPS (22% VS THE GLOBAL AVERAGE OF 15%), WHILE MOBILE USERS IN NIGERIA ARE THE MOST LIKELY TO USE MEDICAL APPS (USAGE HAS MORE THAN DOUBLED IN A YEAR FROM 7-17%).

IN SOUTH AFRICA, 14.6M MOBILE OWNERS (39% OF ALL ADULTS) ONLY USE VOICE, SMS OR USSD,

BUT NO DATA - ENGAGEMENT IS A MATTER OF INTERACTIVE SMS, USSD AND IVR APPLICATIONS.

ACCORDING TO THE MOST RECENT FACEBOOK STATISTICS, 2.2 MILLION KENYANS USE

FACEBOOK EVERY DAY AND 4.5 MILLION EACH MONTH. IN COMPARISON, NIGERIA HAS 7.1 MILLION DAILY ACTIVE USERS AND 15 MILLION ARE ACTIVE ON THE SITE EACH MONTH – 100% OF WHICH ACCESS THE SERVICE VIA A MOBILE DEVICE.

MOBILE MONEY HAS BEEN AN UNRIVALLED SUCCESS AND IS CURRENTLY IN USE IN 36 OF THE

47 COUNTRIES IN SUB-SAHARAN AFRICA, AND IS USED PROMINENTLY THROUGHOUT EAST AFRICA. IN KENYA FOR EXAMPLE 58% OF ITS ADULT POPULATION HAVE A MOBILE MONEY ACCOUNTS, IN TURN HAVING A TRANSFORMATIVE EFFECT ON THE INFORMAL BUSINESS SECTOR, WHICH COMPRISES ABOUT 70% OF JOBS IN THE COUNTRY.

MTN MOBILE MONEY AGENTS IN GHANA NOW NUMBER 19,500 COMPARED TO 967 BANK

BRANCHES AND 1,316 ATMS. AND MOBILE MONEY SUBSCRIBERS TO THE MTN SERVICE HAVE GROWN FROM 5,000 IN 2009 TO ABOUT 4.8 MILLION AS OF THE END OF JULY.

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15MEF AFRICA EDITION

ABOUT MAHINDRA COMVIVA

Mahindra Comviva is the global leader in providing mobility solutions. It is a subsidiary of

Tech Mahindra and a part of the USD 16.5 billion Mahindra Group. With an extensive

portfolio spanning mobile finance, content, infotainment, messaging and mobile data

solutions, Mahindra Comviva enables service providers to enhance customer experience,

rationalize costs and accelerate revenue growth. Its mobility solutions are deployed by

over 130 mobile service providers and financial institutions in over 90 countries,

transforming the lives of over a billion people across the world.

For more information, please visit www.mahindracomviva.com

MEF MOBILE MONEY eBULLETIN #3 16MEF AFRICA EDITION

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