Mobile services

Orange's Africa Targets in Doubt After Sales Slowdown

An opportunity for arbitrage
Most obviously, there is industry-wide concern that take-up of mobile Internet services deals a blow to African operators' bigger voice and text-messaging businesses. Most African mobile customers are still on prepaid deals, and only pay for services when they actually make calls or send texts. That makes the use of low-cost Internet telephony and messaging services a much bigger threat than in more developed markets, where smartphone customers typically pay a flat rate for a bundle of voice minutes, text messages and data megabytes. Research shows that consumers in a number of African markets have been able to save money by purchasing a low-cost data package and using services like WhatsApp or Viber instead of traditional telco offerings. (See Africa's Data Dilemma.)

Asked about such pressure in 2015, Orange downplayed any suggestion that usage of web services was cannibalizing mainstream sales to a significant degree. But Marc Rennard, a deputy CEO who was then responsible for the Africa business, did acknowledge there was some "pricing pressure" and even argued that telcos should be able to charge web companies for bandwidth usage -- a controversial practice that is opposed by regulatory authorities in some other parts of the world.

Quite possibly, the rising adoption of so-called "over-the-top" (OTT) services is starting to put more pressure on older revenue streams. But Orange would not comment when asked what impact OTT services are having. "There is no story to tell in this area," said the operator's spokesperson in comments emailed to Light Reading.

In some ways, Orange's African push seems anachronistic. Rapid expansion into emerging markets was all the rage during the mobile telecom boom, when few people owned phones and everybody wanted one. Most of those markets now look saturated. Growth depends largely on selling new services to existing customers, and the continent's idiosyncrasies could make that harder in Africa than elsewhere.

If Orange seems warier of discussing short-term growth targets than it was in 2015, it still insists that Africa is the place to be. "With a fast-growing demography and rapidly growing economies, Africa is without any doubt a certain bet for future growth," said the operator's spokesperson. "We remain confident that over the next 20 or 30 years Africa will see the highest level of growth in both population and the economy."

That Africa remains a "strategic priority" was made very clear in an announcement from Orange earlier today. Flagging its launch of the Orange brand in Burkina Faso, where it took over a business from India's Bharti Airtel in January last year, Orange said it would continue to focus on developing its mobile money and data businesses in west African markets, and expand an optical fiber network to meet growing connectivity demands from enterprise customers. All of that should lay the groundwork for the business transformation that lies ahead. Making it pay will be the next challenge. (See Eurobites: Deutsche Telekom Hosts NB-IoT Olympics.)

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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