MTN BEEG SCANDAL: Telecoms game changer?

01 May

Of competitions, scandals and opportunity

Every business banks on publicity for its sustained customer growth. This is the bedrock for all advertising, Public Relations and effective marketing programs.

However, the challenge is when the publicity is not planned or positive. This is the dilemma MTN Zambia finds itself in. The second largest and fast growing Mobile Service Provider (MSP) has been adversely hit by negative publicity after a scandalous revelation about their last promotion dubbed “Let’s Go BEEG”. The Livingstone winner, it has been reported, was handed the prize with the aid of her male companion, an IT Specialist in MTN’s employ.

The nightmare and repercussions of this will test MTN’s planning as they seek to recover from this damaging story at a time they have pitted themselves strongly against market leaders Airtel.

A call to innovate

Conversely though, the scandal exposes yawning lapses in the sector that also need review.

Key among these is the aspect of innovation in the face of stiff competition. It is almost certain in Zambia that each month the MSP’s will roll out some competition. This is mostly along the lines of “send SMSes or topup! The more you do this, the higher the chances to win”.

This is an acquisition strategy with the intent of driving immediate subscriber numbers. I am of the view though that it is a tired method. It may well be the easiest(perhaps cheapest too) going by the frequency with which our three(3) MSPs use it. There must be other ways that can be employed and bigger more developed markets can provide pointers.

It therefore is imperative for our players in the sector to explore these and find more refreshing, cost effective and innovative ways to stimulate their subscriber and Average Revenue Per User (ARPU) performance. I am sure with the marketing teams in place, this is an avenue that is not beyond the players.

Product range and bundling

Additionally and as an extension on the above, bundling is a cost effective way that also ensures stickiness of customers. If one gets offers or incentives with voice, SMS, data and hardware in one package, they are likely to remain active on the network.

The trend in Zambia for a while has centred more on voice and text only. Even usage on these services is not where it should be.

Zambia can do better. The creativity on product range falls squarely on the MSPs. Government on the hand can coordinate with the players to understand their cost structure so as to facilitate measures to manage these costs better.

Ball watching regulators?

Measures have been announced on how MSP competitions will be closely watched to avert a scandalous recurrence. This is commendable.

The concern and unfortunate bit here is that this is a reactive action. It now is blatantly clear that ZICTA and the ZCPC paid passive attention to MSP activities. It may appear the three players in the market self regulated before this scandal.

The expectation was and should be that a billion kwacha scandal of such proportions could not see the light of day. This is an assumption underpinned on a belief that the regulatory or monitoring stakeholders appreciate the end to end mechanics of the systems used in such competitions. This then would not encourage any dubious plans to be crafted as the case was with the IT Specialist at MTN.

The hope now is that this episode will spur the relevant stakeholders into action, with an aggressive intent to identify and seal any possible loopholes. Similarly, comprehensive and periodic stress tests will be undertaken. This will prompt the telecom companies to equally invest in this aspect and ensure they are not exposed any further.

Tariffs and service

Furthermore, the regulators must now inspire public confidence and show understanding of the MSP pricing structures.

What makes up the tariffs customers are charged? Even more, how are the billing systems set up such that a minute’s call, text or data use is billed for exactly that? It is not unusual in Zambia for customers to complain about being billed noticeably higher than normal after a call. These are not new queries and ZICTA was recently on record stating that they are investigating this.

We await their findings and actions.

Additionally, service performance of the MSPs raises concerns every so often. There have been complaints of dropped calls, unreachable people when their phones are not outside coverage area, erratic internet performance etc.

All the MSPs currently claim to offer 3G services with one ISP going further with 4G. However, what difference this has made for customers remains unclear. Whether internet access becomes cheaper and efficient in real terms is a basis for further debate as it only seems like the 3G, 3.75G or 4G is a mere marketing ploy.

Service must also extend beyond product performance to customer service at frontline or even Call Centre level. Investments must be made in systems that will enhance service delivery.

This does not mean this challenge is only associated with telecom companies. It is an inherent and chronic problem across sectors in Zambia. The MSPs though have the upper hand when it comes to service improvement. The monitoring tools and frameworks are easily available to ensure service teams render exemplary service.

Audit the auditors?

The issue is not only on the part of regulators. Questions need to be asked regarding the credibility of the appointed auditors during such competitions.

The “Let’s Go Beeg” competition was certified or so we are told. If this is accurate, what constituted the certification? Further, does the engagement of auditors entail understanding the end to end process of selecting the winners? Or is this perhaps only certification of the last day of the competition, the prize giving ceremony?

It will be of interest to get the position taken by Grant Thornton, the auditors and ZICA on this matter.

Whichever way it goes and whatever constitutes the auditors’ terms of reference during such events, there is urgent need for keener attention on how competitions are certified.

What next for Telecoms in Zambia?

Zambia has an official population of 13 million plus with a literacy rate of 71%. Yet mobile phone penetration is only 38%. Contrast this with Zimbabwe, with all its recent economic pressures for instance, which has a population of 12.6m, literacy rate at 91% and mobile phone penetration of 60%. Or even Senegal with a 12.9m population with 67% mobile phone penetration.

On a simplistic basis, this shows that with 71% literacy, Zambia has the potential and capacity for its population to use mobile phone services with the right awareness interventions. Coupled with that, there have to be complementing efforts to drive income levels so people can afford the hardware and airtime for usage.

This shows that potentially, there still is a lot for the three MSPs to grow in the market. Statistics though are one thing and incomes play a huge part in harnessing this potential.

At face value, it appears the players in the sector must ingeniously devise ways to penetrate the “un-phoned” urban and rural populations able to utilise mobile phone services. The trends offer a ray of hope. In 2011, reports indicate that out of about 78 mobile payment ventures rolled out globally, half were in Africa. This is one area still at infancy stage in Zambia as is internet usage due to low penetration levels.

The future is Africa

The latest African Development Bank (AfDB) projections are GDP per capita amounts of $5,600 in 2060 from $1,667 as at 2010.

The working age population is expected to triple by 2060 from the 2005 figures. With investment in education, this presents a rise of a demanding middle class.

A simple review of these daunting statistics shows potential for telecoms players in view of current revenue and margin pressures.

More people will be able to use more mobile devices from handsets to dongles. This may as well translate into subscriber growth, airtime sales, data bundle usage and mobile payment services penetration.

MSPs therefore need to plan with a collective mind on this potential. How can subscribers be acquired and retained? How accessible and affordable can devices be? Where can these handsets, laptops or dongles be sourced for more people to get them at lower prices thus reducing setup costs? What is the long term potential and value of strategic partnerships to bridge the device availability/affordability gap? Huawei, Nokia etc are already active on the continent and have courted MSPs. Are these partnerships working?

How flexible and affordable can tariffs be to stimulate revenue through streams like data, airtime, mobile commerce or other services? For instance, as per the AfDB projections, Broadband internet as at 2010 stood at 5.6% of the continental population but is expected to leap to 99.1% in 2060. What does this mean for Zambia?

Lessons from the BEEG scandal

The scandal has brought opportunity to the fore. An opportunity to assess how things are currently done and what should be pursued differently to sustain businesses.

Only when new innovative ways are considered will we see an end to the routine competitions we now see. Instead, sustainable, long term and different methods can be employed.

Likewise, elements such as product and service performance will be paramount differentiators among MSPs.

Who wins in the end? The customer. Meaning the businesses too.

The MTN scandal is a timely wake up call for all players in the telecoms sector and beyond for those willing to learn from it.

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Posted by on May 1, 2012 in Telecoms


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