ncc pyramid+impact mobile services nigeria

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The Im act of Mobile Services in Ni eria:The Im act of Mobile Services in Ni eria:How Mobile Technologies Are Transforming

Economic and Social Activities

Abuja, Nigeria

March 16, 2010



Mobile Services in NigeriaMobile Services in Nigeria

Table of Contents

Executive Summary

The transformational role of mobile services

Evolution of the industry worldwide

Development of Nigeria’s Mobile Market

Relevance of mobile industry in overall Nigerian economy Overview of mobile applications in social and economic activities across emerging

markets

’

The value of mobile services in daily lives

Financial impact on individuals

Impact on rural population

Example of local social initiatives

Pyramid Perspective

2




Mobile communications are having a positive impact in Nigeria by attracting investmentand developing various commercial activities…

Executive Summary

Pyramid analyzed mobile adoption trends, examples of mobile applications as well as theperspectives of key players and 1,500 Nigerian end users. The top five conclusions of our study are asfollows:

1. Mobile services have ample reach in Nigeria and will continue to post rapid growth.

Mobile subscriptions surpassed 72.6m at YE2009 resulting in a penetration rate of 50% ofthe populat on.

Pyramid projects subscriptions will surpass 128m by 2014, creating a substantial user basefor the development of the mobile applications market.

2. The mobile industry is having a positive economic impact by generating substantialinvestment in infrastructure and employing a significant number of Nigerians.

During the past decade, approximately $16bn has been invested in projects related to.

There are as many as 3m jobs directly and indirectly related to mobile services in the

country.

3




…Nigerian end users agree that mobile services have favorably influenced every aspect oftheir lives

Executive Summary

3. Nigerian end users agree that mobile services have positively influenced every aspect of, , ,

business opportunities, lower transaction costs and enhancing social interaction.

4. Around the world, Pyramid has identified numerous examples of initiatives using public andpr vate fund ng that leverage mob le serv ces n soc al programs, mprove the operat on ofvarious vertical industries and foster connectivity in remote areas.

5. The future develo ment of the mobile market in Ni eria will be driven b collaboration

among industry players, the local government and international organizations. End users inNigeria value mobile services greatly and are frequent users of this platform, yet the availabilityof specific mobile data-based applications is still limited. Developing a set of tools andinformation s stems will re uire close collaboration amon local and international entitiestelecom vendors and operators can play a key role in importing successful initiatives to Nigeria.

4




Table of Contents

Executive Summary




Relevance of mobile industry in overall Nigerian economy Overview of mobile applications in social and economic activities across emerging

markets

’





Pyramid Perspective

5



Mobile Services in Nigeria

The evolution of the mobile services market around the world is driven by advances in theareas of access networks, devices and applications

Transformational Role of Mobile Services

Wider Availability of High Speed NetworksWider Availability of High Speed Networks Versatile and Affordable DevicesVersatile and Affordable Devices

Key Aspects:

•Intense competition among vendors brings device

prices downwards

Key Aspects:

•Declining prices for connectivity services

•

•Improvement in key features (size, definition, batterylife, camera, etc)

•Wider availability of embedded modules (WiMax, 3G)

MOBILEMOBILE

•Evolution towards 3G and beyond

•Shared access and coverage of rural population

•Governments and NGOs supporting programs to

MARKETMARKET

Variety of ApplicationsVariety of Applications

connect schools, medical centers, etc ey spec s:

•Development of User-Generated Content (UGC)

•Virtual communities and cloud computing•Chan in atterns in entertainment drive advertisininvestment towards mobile platforms

Source: Pyramid Research

6




The global telecom market continues to grow at rapid pace, particularly in the area ofmobile services with subscriptions surpassing 4.5bn in 2009 and very important potential


going forward in the area of mobile broadband (ie. Internet) services

Global access lines by type, 2008Global access lines by type, 2008--20142014 Subscription CAGR,Subscription CAGR, 20092009--20142014

9

10

Pay-TV 1%

VoIP 20%

Fixed circuit-switched voice -3%

5

6

7

8

s l i n e s ( b n )

o e roa an

Mobile voice/messaging 6%

Fixed broadband 11%

0

1

23

A c c e

2008 2009 2010 2011 2012 2013 2014

7

,




Pyramid forecasts that over 55% of mobile subscriptions in the world will be using 3G+in the next three years


Mobile subscriptions by technological generation, Global, 2005Mobile subscriptions by technological generation, Global, 2005--20142014

8

,




In Nigeria, the mobile industry has developed over the past decade driven by a successfulliberalization program and the overall potential of the market


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Milestones in licensing and concessions awarded by the NCCMilestones in licensing and concessions awarded by the NCC

•New telecom

policy was

enacted.

•December:

•February:

Digital mobile

licenses

were

•June:First national long‐distance

license was

offered to

•Telecommunications Act 2003 was

enacted.

•October/ November:Three

national

long‐distance

•November:Two national long‐distance

operator

licenses

•February:NCC

introduced

unified

access

•January:A national carrier license was

awarded to

•September:Gateway

Telecoms

Integrated

Services’

•May:NCC awarded

licenses in

the 2.3GHz

band to four

Auctions for GSM

licenses.

MTN, Mtel and Econet Wireless

(later

Vmobile,

Wireless.

•September:Fourth GSM

operator licenses

became

operative.

ecame

operative.censes.

These were

granted to 13

companies in

total, includin

rest a e

Satellite TV

Systems

•March:

nat ona

long‐distance

license

became

operative.

operators, but discussions are still ongoing to

finalize the

Celtel and

now Zain).

national carrier license

awarded to

GloMobile.

All

operators

had

introduced

per‐second

billing.

MTN, Zain,

Multi‐Links

and

Starcomms. The earliest

3G

UMTS

licenses to

MTN, Zain, GloMobile

and Alheri

•October:Etisalat launched

services

issue

•November:Nitel’s

national carrier and

operat ve

date for the

licenses was

July 2006.

Engineering

•July:

NCC awarded

fixed‐

nternat ona

gateway

license

became

operative.

u y:Transcorp

buys 75%

stake in Nitel

wireless licenses

9

,




Pyramid estimates that the Nigerian mobile services market has grown from 422,000 in2001 to roughly 73m at the end of 2009


Mobile subscriptions Subscription penetration

•In terms of the mobilepenetration, growth in Nigeria’s

Evolution of mobile subscriptions Nigeria, 2001Evolution of mobile subscriptions Nigeria, 2001--20092009

40%

45%

50%

60

70

80

P

e n e

l i o n

s )

exponential, from just 0.33% of thepopulation in 2001 to 48.7% in2009.

20%

25%

30%

35%

40

50

t r a t i o n o f

p o p u l b

s c r i p t i o n s ( m i l

•Intense competition, theproliferation of prepaid plans, low-cost handsets and the rapidexpansion of mobile networks to

5%

10%

15%

10

20

t i o

n

M o b i l e s u

the main drivers of growth inmobile subscriptions.

•The ex ansion of covera e to

2001 2002 2003 2004 2005 2006 2007 2008 2009

underserved areas by the smallerCDMA operators has also led toincreased competition, bringingoverall communication prices

•

Going forward, due to intense competition and constant innovationfrom mobile service providers, a greater number of people will seeown.

va ue n an e n a pos on o use mo e serv ces. yram pro ec sthat Nigeria’s mobile subscriptions will surpass 128m by 2014, creatinga substantial user base for the development of the mobile applicationsmarket.

,

10




The availability of prepaid services has been a key driver of the expansion of Nigeria’smobile market; data services are only beginning to take off


Mobile market indicators, Nigeria, 2001Mobile market indicators, Nigeria, 2001--20092009

2001 2002 2003 2004 2005 2006 2007 2008 2009

Subscription penetration of 0.3% 1.2% 2.4% 7.2% 13.8% 20.9% 28.2% 43.1% 48.7%population

User penetration of population 0.3% 1.1% 2.2% 6.5% 12.0% 17.4% 23.3% 34.5% 37.8%

percentage of total

99.9% 99.8% 99.6% 99.6% 99.5% 99.5% 99.5% 99.2% 99.1%

ARPS (US$) $48.21 $47.56 $41.55 $29.94 $17.80 $13.65 $12.12 $11.26 $7.66

Data ARPS as percentage of total ARPS

0.5% 0.7% 0.9% 1.1% 2.0% 3.0% 3.5% 5.7% 8.3%

Monthly minutes

of

use

(MOU)

223 162 136 119 89 70 53 51 46

Annual churn rate 2.0% 8.7% 18.5% 18.6% 26.8% 27.9% 48.4% 44.0% 41.8%

,

11




In US-dollar based revenue terms, the Nigerian mobile services market expanded at one ofthe fastest rates in Africa for the past decade and is the second largest in the region


Size of the mobile market, nominal GDP per capita and mobile service revenueSize of the mobile market, nominal GDP per capita and mobile service revenueCAGR, 2001CAGR, 2001--2009, Select African markets2009, Select African markets

Algeria

$3,101

Nigeria

$6,23570%

80%

1 - 2 0 0 9

Ghana$1,093

Senegal$716

40%

50%

60%

n u e C A G R

2 0 0

$826

Cote d'Ivoire$1 165

Kenya$1,072

Morocco

$9,993Tunisia

$1,395

20%

30%

e s e r v i c e r e v e

$4,742 $3,048

0%

10%

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000

M o b i l

per cap a

,

12




The explosion of the mobile industry in Nigeria has resulted in a series of positive effectsacross the economy ranging from investment in networks to the creation of employment


Mobile services have multiple positive effects in an economy, most notably in emerging markets. Theireconomic benefits extend be ond the investment that network o erators allocate to license fees taxesand network equipment and include the following factors:

End user spend money on mobile telecom services and devices allows a new industry toflourish

Telecom operator spending on marketing, distribution, maintenance, training, support andnetwork enhancements create important benefits for all involved in the value chain

Mobile operators create employment, both direct and indirectly, and invest in thedevelopment of the labor force.

Mobile services have a wide economic impact in a country, since they enable end users toconduct their daily business in a more effective manner, reducing the time and cost oftransactions, improving access to markets, commoditizing information and generally allowing

businesses to operate more efficiently.

13




According to Pyramid’s estimates, the annual revenue from mobile services representsbetween 2% and 7% of African countries’ Nominal GDP; in Nigeria this ratio is close to 4%


Ratio of mobile services revenue to total GDP, select countries, 2009Ratio of mobile services revenue to total GDP, select countries, 2009

DRC

Ghana

Nigeria

Cote d'Ivoire

Senegal

South Africa

Tanzania

Cameroon

Algeria

Botswana

Kenya

0% 1% 2% 3% 4% 5% 6% 7%

Mobile services revenue as percentage of GDP

,

14




Mobile operators also contribute to the economy by directly and indirectly creating jobs toprovide and distribute their services; in Nigeria, we estimate there are as many as 3m


jobs related to this industry

There are several groups of jobs, whichcan be divided into two subgroups, that Employment related to mobile sector In Nigeria, 2009Employment related to mobile sector In Nigeria, 2009gravitate around mobile services:

The top category of indirect employment

encompasses equipment sales,infrastructure deployment, advertising,marketing and public relations as well assecurity — workers involved in theprotection of base stations. Reportedly, in

,

security guards.

At the base of the pyramid, there are,

distributors, retailers, phone boothoperators as well as street vendors. The

so-called mini call centers consist ofsimply one or a few mobile phones andairtime bought in bulk from the operator.Call center operators allow other peopleto use the phone for a fee and quiteoften will take a message, also for a fee.

,

15

T f ti l R l f M bil S i




In addition, the sale of airtime and SIM cards has driven various forms of entrepreneurship


Distribution on the streets andDistribution on the streets and MTN andMTN and GloGlo points of sale, Nigeriapoints of sale, Nigeria

ource: yram esearc ,

16

M bil S i i Ni iM bil S i i Ni i Transformational Role of Mobile Services




In terms of capital investments, mobile operators in Nigeria have worked on infrastructuredeployments, network rollouts, upgrades and expansions; the investment related to


mobile services, for the past decade, adds up to approximately US$16bn

Private investment by telecom operators in Nigeria, 2001Private investment by telecom operators in Nigeria, 2001--20082008

Pyramid Research estimates that capital investments in mobile networks and operations have accounted

for 80% of total telecommunications foreign capital investments (a total of more than $12bn by the

As of March 2010, the NCC reported $18bn in telecom sector CAPEX, $16bn of which is invested bymobile operators.

,

17

Mobile Services in NigeriaMobile Services in Nigeria Transformational Role of Mobile Services




Mobile networks in Nigeria are in constant evolution; operators such as MTN, Zain and Glo,have undergone a technological migration from 2G to 2.5G and are working towards 3G


Breakdown by Mobile Technology, NigeriaBreakdown by Mobile Technology, Nigeria, 2003, 2003--20142014

80%

90%

100%

l s

40%

50%

60%

70%

o t a l T e r m i n a

3G+

2.5G

0%

10%

20%

30%

%

o f

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Note: For the purposes of this exhibit, the following categories apply:•2G = GSM, TDMA, and CDMA One technologies

. , , ,•3G+ r= CDMA 200, UMTS, HSPA, Mobile WiMAX, and LTE technologies

,

18

Mobile Services in Nigeria Transformational Role of Mobile Services




Additional areas where mobile services can have an important impact include rural connectivityprojects, education, health, finance, agriculture, transport and entertainment applications


Vertical Nigeria International

Rural Connectivity Millennium Village Pampaida-extend telephony services to

India: Gramjioti PilotProgram- provide mobile

hard to reach rural areas broadband connectivity tovillages and towns aroundChennai in India

ura onnec v y ura e ep ony rogram-train and support localvillagers to provide mobilebased pay-phone services

gan a: age one- ra nand support local villagers toprovide mobile based pay-phone services

Education Ladybird Mobile ReadingProgram- support classroomactivities through mobilebased educational exercises

South Africa: Dr. Math-leverage the MXit mobilesocial platform to providetutoring services

HealthMy Question, My Answer- SMSand phone operator based

Uganda: Text to Change- SMSbased interactive quiz and

program covering theHIV/AIDS topic

HIV/AIDS topic

19

Mobile Services in Nigeria Transformational Role of Mobile Services




Additional areas where mobile services can have an important impact include rural connectivityprojects, education, health, finance, agriculture, transport and entertainment applications


Vertical Nigeria International

Finance Moneybox Africa- mobilecommerce application to

Kenya: Safaricom M-Pesa- SMSbased mobile payment and

virtually store and movemoney, make payments andenable other mobile basedfinancial transactions

money transfer platform

gr cu ure assava rowers ro ec -disseminates marketinformation in conjunctionwith information points andtrade agents

gan a: rameen ar eInformation- disseminatesmarket information throughSMS, supported by CommunityKnowledge Workers

Transport Hot FM Abuja TrafficMonitoring- Collects trafficinformation sent by listenersthrough SMS and mobile calls.

United States: OnStar- GSMbased in-vehicle security andinformation service

EntertainmentDSTV and MTN Mobile TVService- broadcasts content

South Africa: Mxit: WAP basedinstant messaging and social

20





Table of Contents

Executive Summary




Relevance of mobile industry in overall Nigerian economy

Overview of mobile applications in social and economic activities across emergingmarkets

’

The value of mobile services in daily lives Financial impact on individuals



Pyramid Perspective

21

Mobile Services in NigeriaMobile Services in Nigeria Nigerian End Users’ Perception of Mobile Services



gg

During 2009, Pyramid conducted a survey of over 1,500 mobile end users in Nigeria toanalyze the impact of mobile services in their daily lives

The sample group of our survey is representative ofNigerian society, including a combination of femaleand male participants. The research was designedto nc u e mo e users v ng n erent parts othe country, with 70% of interviewees living inurban areas and 30% living in rural areas in thefollowing regions and cities: Lagos, Abuja, Kano,Akure Kaduna Ibadan Jos Aba and Enu u. Interms of age groups, we focused the study on the16-69-year-old population.

Pyramid developed a questionnaire comprisingmostly closed-end questions. The main topics

covered in our interviews were as follows: Determinants of mobile ownership

Drivers of usage Perceived changes in patterns and benefits of

economic activity among mobile phone users

Purpose and pattern of mobile phone usage,including:

Work-related activities

Entertainment and access to

Perceived changes in work practices andnetworks of social contacts among mobilephone users

n orma on

Access to health, education, financialand logistics/transportationinformation and services

a a was co ec e v a a com na on o p one- ase anface-to-face interviews in households and high-trafficpedestrian areas.

ource: yram esearc

22




gg

60% of interviewees agreed that mobile services have positively influenced every aspectof their lives including 35% who claim that a mobile phone has “dramatically improved allaspects of their lives”

Q. What option best describes the impact of mobile services in yourQ. What option best describes the impact of mobile services in yourdaily life? Nigeria, 2009daily life? Nigeria, 2009

80%

90%

100%Having a mobile phone hasnegatively impacted my life

Neutral

40%

50%

60%

e s p o n d e n

t s

Having a mobile phone has madesome of my daily tasks easier

Having a mobile phone hasimproved most aspects of my life

10%

20%

30% R

Having a mobile phone hasdramatically improved all aspectsof my life

0%

Male Female

, ,

23




Furthermore, more than 80% of our sample has seen financial gains from using mobileservices throu h a combination of savin on communications ex enses and eneratinadditional income by way of staying connected

. Have ou seen a ositive financial im act on our life from the use. Have ou seen a ositive financial im act on our life from the useof mobile services? Nigeria, 2009of mobile services? Nigeria, 2009

70%

80%

90%

100%

No financial benefit

Benefited from savings in

40%

50%

60%

R e s p o n d e n t s

telecom and other areas

Benefited from additionalincome

0%

10%

20%Benefited both fromsavings and additionalincome

Metropolitan South East North

, ,

24




End users from different age groups point out the positive financial impact of using amobile phone ranges from increased opportunities to find jobs to savings in transportation

Age 46-69 Age 36-45

Age 26-35 Age 16-25

and better access to information

Q. What type of financial benefits do you derive from mobile phone use? Nigeria, 2009Q. What type of financial benefits do you derive from mobile phone use? Nigeria, 2009

Lower travel or entertainment ex enses

Lower cost than alternative comms

Better access to financial information

Make and r eceive payments

Better access to market information

Time savings in travel

Communicate with clients

Better ability to find jobs

0% 10% 20% 30% 40% 50%

Increased ability to sell

Mobile phone u sers deriving benefit

Source: Pyramid Research survey of 1,500 mobile service users in Nigeria, 2009

25




Nigerians also rely on mobile services to conduct activities related to education, healthand entertainment activities

Q. For which of the following activitiesQ. For which of the following activitiesdo you leverage your mobile phone?do you leverage your mobile phone?Ni eria 2009Ni eria 2009

Most commonly mentioned uses bycategory:

Job opportunity

Age 46-69 Age 36-45

Age 26-35 Age 16-25EDUCATION

•Communicating with teachers and

collea ues

Education

•Downloading information to mobile phone

EMERGENCY/HEALTH

Emergency or other health se rvices

Transportation & logistics •Calling friends, family and emergency

services

•Communicating withdoctor/nurse/hospital

-

Entertainment & information ENTERTAINMENT

•

Listening to music/radio

0% 20% 40% 60% 80% 100%

Mobile phone u sers engaging in activity

•

•Taking/sending pictures


26




In the area of work related activities, mobile services are leveraged by individuals living inboth rural and urban areas

Q. For which of the following activities do you leverage your mobile phone?Q. For which of the following activities do you leverage your mobile phone?

Nigeria, 2009Nigeria, 2009

Mobile as modem for PC Internet access

Rural

Urban

Email access

Personal organiser (calendar, alarms, contacts)

Improve customer service, relationships

Accessing information

Speaking to colleagues

Increase ability to sell by speaking to potential clients

0% 10% 20% 30% 40% 50%

Respondents reporting usage


27

Mobile Services in NigeriaMobile Services in Nigeria Example of Social Initiatives



In fact, for individuals based out of remote areas, mobile services are often the sole mediaof communication and a source of added income

Rural Telephony Project startup package and aRural Telephony Project startup package and aphone lady on the outskirts ofphone lady on the outskirts of SulejaSuleja, a city of, a city of

Key Aspects of the Rural Telephony Project inNigeria

The program is a cooperation between the GrowingBusinesses Foundation (GBF), a Nigerian NGO, MTNFoundation (MTNF), which is the CSR arm of MTN

Ni eria the International Finance Cor oration IFCand a group of small communal microfinanceinstitutions (MFIs).

A startup package, provided by MTNF, includes loansthat range between N14,200 and N21,400 ($95 and

, epen ng on op ona ma er a n e pac age,

payable over a six-month period, and carry a 15%annual interest rate.

The startup packages include a Nokia phone, an MTNSIM card, an o tional antenna to boost the wirelesssignal, a solar charger, subsidized MTN airtime,promotional material. The promotional material iscomprised of a table, an umbrella, chairs, banners

showcasing call rates, a hat and a T-shirt. o a e, e pro ram as ene e , one a es

in rural and semirural Nigeria. These beneficiariesoperate in 21 of the country’s 36 states.

Source: Pyramid Research, 2009

28


E i i i i j i Ni i ill h l i i l

Example of Social Initiatives



Existing connectivity projects in Nigeria illustrate the complex organizational structurebehind social initiatives

Rural telephony program partners and their role, 2004Rural telephony program partners and their role, 2004--June 2009June 2009

29

,




Table of Contents

Executive Summary




Relevance of mobile industry in overall Nigerian economy

verv ew o mo e app ca ons n soc a an econom c ac v es across emerg ngmarkets

’



Common uses of mobile services



Pyramid Perspective

30

Mobile Services in NigeriaMobile Services in Nigeria Pyramid Perspective



Going forward, Nigerian end users expect to see a wider variety of data-based applicationsin the market; in the agriculture sector, for instance, we identified interest in acombination of information and transactional services

.. What new mobile a lications would ou like to use in the future?What new mobile a lications would ou like to use in the future?

Mone transfers over mobile hone

Nigeria’s rural usersNigeria’s rural users

Education-related applications from

government

Agriculture-related information

y o pay or ranspor a on ees

with my mobile phone

Local information (weather, news)

Percentage of rural respondents reporting use


31


Overall the future development of the mobile market in Nigeria will be driven by

Pyramid Perspective



Overall, the future development of the mobile market in Nigeria will be driven bycollaboration among industry players, the local government and international organizations

Key Strategic Aspects to Develop Social Initiatives Leveraging Mobile TechnologiesKey Strategic Aspects to Develop Social Initiatives Leveraging Mobile Technologies

•Developing a set of tools and informationsystems will require close collaboration

•Learn from initiatives established in

Organize

Local Players to Launch

Programs / Facilitate

among local and international entities

•Telecom vendors and operators can play akey role in importing successful initiativesto Nigeria

•Attract internationals players(Multilateral organizations, NGOs,private app developers)

Government

•Government agencies may facilitatedatabases of critical info (weather,agriculture, education) to start theprogram

•Secure the collaboration of localindustry players (incentives, funds,grants)

towardsself-sustainability

involvement in the

promotion of theNigerian mobile market

Monitor , operate and

•Set clear goals for participants

•Ensure applications are available to alarge share of users•Secure addition of new partners to

application + VAS

•Promote enhancements

•Develop VAS

32


THANK YOUTHANK YOU



THANK YOU.THANK YOU.

Gabriela Baez

Managing Director

Email: [email protected]

Badii Kechiche

Sr. Analyst

.

PYRAMID RESEARCH UK

- -

Fax: +44-20-7560 4485

Tel.: + 1 617 871 1900

Fax: + 1 617 871 1933

33

ncc pyramid+impact mobile services nigeria

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