Telcos target $1.5bn mobile Money Revenue amid regulatory Constraints

Telecommunications companies in Nigeria are engaging in a renewed push to scale up mobile money services across the entire country amid regulatory constraints, just as they look to build up alternative sources of income to offset steep decline in revenue from voice oriented services, industry observers have said.

Average Revenue Per User (ARPU) for voice services is expected to decline by around $5 per month over the next five years, down from $6-$7 in April 2013 and $10 in 2008. According to a research study published by The Boston Consulting Group (BCG), the use of mobile financial services in Sub-Saharan Africa (SSA), Nigeria inclusive, to perform basic transactions such as payment of utility bills and remittances could produce an estimated $1.5 billion in fees for mobile money providers by 2019. Telcos are determined to crack the nut, hoping to tap the massive revenue opportunities.

According to industry watchers, telcos are working aggressively to build a robust partnership ecosystem, compromising of leading financial services companies and a nationwide agent network.

Last week, Guaranty Trust Bank (GTB) and Etisalat, the United Arab Emirates (UAE) based mobile operator, formed a strategic alliance aimed at connecting 55 million  unbanked Nigerians in the next few months, through the mobile payment system. Speaking on the partnership, Matthew Wilsher, chief executive officer at Etisalat Nigeria, said, “The partnership will begin a journey for unbanked customers from our over 22 million subscriber base.”

A few months back, Globacom, the second national carrier, launched the Glo Xchange, a Mobile Financial Services (MFS) agent network stretching across the telecoms operators’ more than 35,000 dealer and sub-dealers throughout the nation. 

This move, according to Business Monitor International (BMI),  is by far the largest and the first operator-led initiative to establish a wide-reaching network of MFS agents in Nigeria. According to them, it could present a crucial turning point in the country’s underserved MFS market. Airtel is also eyeing greater stakes in the country’s mobile money market with the launch of an innovative payment service in partnership with Access Bank Plc. This new service dubbed, ‘Access Money’, allows customers to perform simple, secure and instant financial transactions using their phones. Having come to terms with the fact that little can be done to change theunfavourable regulatory environment, market observers are of the view that telecoms firms want mobile money to succeed because it offers them a fresh source of revenue.  Nigeria’s regulatory framework allows three models, which the Central Bank of Nigeria (CBN) describes as Bank-led, Non-bank-led, and Bank-focused. 

It specifically excludes telecom operators from providing mobile payments services, limiting their role to merely the provision of the (infrastructure through which other providers’ services can be offered. On reasons the the CBN gave banks the lead role, Funmi Onajide, general manager, corporate affairs at MTN Nigeria, said, “it was perceived that the telcos may have undue advantage in ruling out any form of competition against its own product through either blocking out the other players in the industry or overpricing its network access, so as to give its own product undue commercial advantage.” Onajide, however agrees that a telco-led mobile money economy is the way forward and a good move for the attainment of government’s financial inclusion objectives. Leonard Kore, a research analyst for telecoms and media at IDC has a divergent view. According to Kore,  replicating Kenya’s M-Pesa strategy will not automatically result in universal success across the country. 

“For mobile money to succeed in Africa, providers should focus on educating citizens on the benefits of the concept, simplifying the message for the poor/unbanked segments and communicating value-added propositions to the middle class and banked populations,” added Kore. Though Nigeria’s Gross Domestic Product (GDP), population and mobile telephone penetration (over 130 million subscribers) are the largest in Africa, majority of rural businesses, which have been the main success drivers of telecom-led mobile money operations in Kenya and other East African countries, are not using the service in Nigeria. According to him, if the country intends to scale the service, stakeholders in the industry need to work together to expand distribution networks, embraceinteroperability, establish a proactive and supportive regulatory environment, and develop an effective partnership ecosystem. 

“Countries such as Kenya and Tanzania that have MNO-led mobile money ecosystems have more robust growth than their counterparts with bank-led ecosystems, including Nigeria”, said Kore. “The widespread reach of their agent networks, their technological superiority, and their ownership of network infrastructure, coupled with their large marketing budgets, combine to make MNOs better candidates to lead the development of mobile money ecosystems.” Kenya is clearly an outlier in mobile money service adoption globally. Transactions in the country have grown annually since their launch in 2007, growing 24,7 percent year on year in 2014 to total $26.17 billion).

Ben Uzor