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The spread of 3G and 4G mobile networks in Africa and developing Asia, together with the growing adoption of low cost smartphones, is helping Facebook, YouTube, Netflix and other global online entertainment platforms gain traction in emerging markets. But some major international telcos, such as Vodafone and MTN, also have well-established and multi-faceted online entertainment offerings in Africa and developing Asia. How robust are these telcos’ entertainment services? Can they fend off the mounting challenge from global Internet players? What is working for Vodafone India and MTN and what needs a rethink?
Telcos and the entertainment opportunity
In most emerging markets, which are the focus of this report, mobile networks are fast becoming the primary distribution channel for entertainment content. Although television is popular all over the world, in much of sub-Saharan Africa and developing Asia, terrestrial television coverage is patchy, while cable TV is rare. Satellite television is broadly available, but fewer than half of households can afford to buy a television, meaning many people only watch TV in bars, cafes or in the houses of friends.
In Kenya, for example, only 28% of households have a television, according to the World Bank development indicators, while in Tanzania that figure is just 15%. In some major developing markets, television has a stronger grip – in Nigeria, 40% of households have a TV and 47% of households in India. For sub-Saharan Africa, as a whole, television penetration is about 25% and in South Asia, 36%.
For many people in these regions, purchasing a versatile smartphone, which can be used for communications, information access, commerce and entertainment, is a higher priority than acquiring a television. The advent of sub US$40 smartphones means more and more people can now afford mobile devices with decent screens capable of displaying multimedia and processors that can run apps and full Internet browsers. In India, 220 million smartphones were in use at the end of 2015, according to one estimate , while Ericsson has forecast that the number of smartphones in use in Sub-Saharan Africa will leap to 690 million in 2021 from 170 million at the end of 2015 (see Figure 1).
Figure 1: Predicted smartphone growth in developing regions
Source: Ericsson Mobility Report, November 2015
In emerging markets, most Internet users don’t own a television (see Figure 2) and many rely entirely on a smartphone for digital entertainment. Moreover, a scarcity of fixed line infrastructure means much of the entertainment content is delivered over mobile networks. Mobile trade group the GSMA estimates that 3G networks, which are typically fast enough to transmit reasonable video images, reach about three quarters of the planet’s people. Mobile network supplier Ericsson has forecast that mobile broadband networks (3G and/or 4G) will cover more than 90% of the world’s population by 2021.
Figure 2: Device ownership among Internet users in selected markets
The reliance on cellular infrastructure in developing countries has enabled mobile operators to take on a central role in the provision of online entertainment. The fact that many people rely almost solely on mobile networks for entertainment is presenting mobile operators with a major opportunity to boost their relevance and revenues. Given the capacity constraints on mobile networks and the implications for cellular tariffs, entertainment services need to be optimised to ensure that the costs of bandwidth don’t become prohibitive for consumers. Mobile operators’ understanding and real-time knowledge of their networks means they are in a good position to both manage the optimisation and package connectivity and content (regulation permitting) into one service bundle with a predictable and transparent tariff.
Although the network effects and economies of scale and scope enjoyed by YouTube and Facebook mean that both these players have strong positions in much of developing Asia, Latin America, the Middle East and Africa, some emerging market telcos have also built a solid foundation in the fast growing online entertainment sector. In Africa and India, for example, the leading telcos enable third party content providers to reach new customers through the telcos’ dedicated entertainment platforms, including web portals, individual apps and app stores selling music, TV and games. In return for supporting content offerings with their brands, networks, messaging, billing and payment systems, these telcos typically earn commission and capture valuable behavioural data.
- Executive Summary
- Telcos and the entertainment opportunity
- Roles in the online entertainment value chain
- Further disruption ahead
- Vodafone India faces up to new competition
- The land-grab in India’s online entertainment market
- Vodafone India combines content and connectivity
- Takeaways – greater differentiation required
- Music Gives MTN an Edge
- Takeaways – music could be a springboard
- Figure 1: Predicted smartphone growth in developing regions
- Figure 2: Device ownership among Internet users in selected markets
- Figure 3: How the key roles in online content are changing
- Figure 4: How future-proof are telcos’ entertainment portfolios?
- Figure 5: Vodafone India curates a wide range of infotainment content
- Figure 6: Smartphone adoption in India will more than double in the next five years
- Figure 7: Vodafone Mobile TV enables customers to subscribe to channels
- Figure 8: The new Vodafone Play app combines TV, films and music
- Figure 9: Vodafone India offers an app that makes it easy to track data usage
- Figure 10: Vodafone’s Mobile TV app hasn’t attracted a strong following
- Figure 11: Competitive and regulatory pressures are pushing down prices
- Figure 12: In 3G, Vodafone India has kept pace with market leader Airtel
- Figure 13: Vodafone India’s growth in data traffic compared with that of other telcos
- Figure 14: Vodafone’s performance in India this decade
- Figure 15: MTN’s Telco 2.0 strategy is focused on digital services
- Figure 16: MTN’s growing array of digital services
- Figure 17: MTN Play has been localised for each of MTN’s operations
- Figure 18: The Ugandan version of MTN Play caters for local tastes
- Figure 19: MTN bundles in some data traffic with each music plan
- Figure 20: MTN’s digital services are particularly strong in Nigeria
- Figure 21: MTN tops a list of most admired brands in Africa in 2015