MTN Adjusts African Approach to IoT

MTN's new IoT platform provides a more flexible way of addressing the sector.

Guy Zibi, Managing Director, Xalam Analytics

July 15, 2015

3 Min Read
MTN Adjusts African Approach to IoT

In early May, MTN formally launched what the company called "the first truly Pan-African Internet of Things (IoT) platform." While MTN has been offering M2M services for a few years, the launch marked an acceleration in the company's push into digital enterprise applications across its African markets.

MTN Group Ltd. 's push into IoT services is part of a broader diversification strategy designed to make the company less dependent on its core voice services and transform into what will be primarily a data-centric, digital platform business. Over the past three years, revenue at MTN's South African unit has stagnated, declining by an average of 1% each year under the impact of now pervasive stiff competition and regulatory pressure on mobile termination rates. Even the routinely successful Nigerian operation is facing challenges, with revenue growth slowing to an average of 3% over the past three years.

To adjust, MTN is accelerating its push into data services, which are growing by 7% and 28% in South Africa and Nigeria respectively, and already generated around 24% and 20% of revenue in the two countries in 2014. The other lever of diversified growth is the enterprise business; MTN aims for its enterprise unit, MTN Business, to generate around 20% of group revenues by 2018 from a level we currently estimate at less than 5% in Nigeria and South Africa (excluding enterprise mobile voice and broadband services).

African M2M has until now been mostly opportunistic; on the demand side, enterprises have had limited visibility on and interest in user cases beyond telemetry, point-of-sale apps and tracking. In the face of a relatively complex market consisting of a multiplicity of verticals, each with its production process and performance gaps, network operators have primarily focused on leveraging existing network connectivity platforms. This has worked to some extent; in South Africa, for example, we estimate the number of M2M connections at around 4 million in 2014, or around 5% of the country's SIM base. The ratios are lower in other African countries, with penetration ranging from non-existent to 2% of the SIM base.

From opportunistic M2M to a more flexible IoT model
The new MTN platform points to a new, more comprehensive approach. The first notable feature is that the ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) cloud-based platform is dedicated to IoT applications, mitigating any issues of service prioritization and establishing a service and technology roadmap that tracks IoT demand -- rather than an outgrowth of broader data services expansion.

The second notable feature is the (relatively) open platform approach. MTN has built in a service development kit into its platform, making it possible for developers to build IoT applications with pan-African reach on top of the platform -- and encouraging developers with a series of "Mind2Machine" challenges. In so doing, the company appears to eschew the traditional "do everything" telco mindset, in the process expanding its IoT ecosystem and putting itself in a position to drive growth at the connectivity and application layers.

We believe the approach bears watching, inasmuch for the potential of broadening the ecosystem and fostering a more creative IoT app development process on the continent as for its ability to generate revenue drivers for MTN that look beyond traditional M2M monetization models.

— Guy Zibi, Chief Analyst, Xalam Analytics, the Africa and Middle East research unit of Heavy Reading

This article is extracted from a Xalam Analytics Research Note. Full note available upon request at [email protected].

About the Author(s)

Guy Zibi

Managing Director, Xalam Analytics

Guy Zibi is Founder and Managing Director of Xalam Analytics, a research and analytics joint venture with Light Reading LLC focused on Africa/Middle East ICT and enterprise markets. Guy has more than a decade-long experience in researching and analyzing the business of technology in developed and developing economies around the world. He was previously Co-Founder and Managing Director with AfricaNext Investment Research, an Africa-focused telecom equity research firm, where he led financial analysis on African technology assets and managed projects around carrier due diligence, wholesale capacity markets and new carrier models. Guy is widely recognized as a foremost expert in TMT markets in growth economies. In prior years, Guy was Head of Pyramid Research's Global Consulting Practice and Director of EMEA Research. In those roles, Guy managed a team of consultants tasked with developing and executing the company's research into new technologies and innovative business models at a global level (Cloud, OTT, VoIP, enterprise, infrastructure bandwidth, mobile profitability in emerging markets). He also acted as the lead consultant for due diligence projects in Africa/Middle East on the buy and lending sides, spearheading financial and operational due diligence projects on the operations of fiber, mobile, fixed and Internet services providers in emerging markets.

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like