4G in Emerging Markets. Is It a Double-Edged Sword for Service Providers?

Sometimes it seems like all the talk in Telco is 5G and what that might mean for operators over the next two or three years. But this overlooks the fact that 4G’s spread across the globe is far from complete, with many countries only now upgrading their networks to support mobile internet.

In fact, this year marks a significant tipping point for the onward progress of mobile communications. The percentage of smartphone users in developing countries passed 50% in 2018, and from the middle of this year, over half of those users will be on 3G and 4G networks.[1] Great for consumers for sure, but not necessarily for operators. Basic network effect tells us that when a critical mass of subscribers has easy access to the internet, we will see an upswing in communication through social networks and a fall in operator-delivered voice and text.

A Free Digital Offer Is Hard to Turn Down

This was certainly the case in the world’s leading economies, where rising smartphone ownership led to a corresponding decline in circuit-switched calling and messaging. We’re very likely to see a similar trend in low-income markets, where the OTT voice and messaging services offered by many social media providers are likely to prove an easy sell. Few consumers can resist the same, or better, capability as operator services — but delivered for free.

If operators in markets that are “tipping into digital” are to resist this trend, they need to make digital services, including their own offering, the new point of focus. Their competitors will be web-based digital content and service providers, whose approach to the market and customers will be very different to their own and likely very appealing to relatively young demographics. Typically, digital service providers:

• Have little physical presence in terms of retail outlets, bringing their proposition to market exclusively through online, mobile channels
• Invest heavily in marketing through both traditional and online channels
• Create a strong reputation and a “must-have” aura of cool that appeals to a younger market
• Offer simple propositions which are easy for customers to understand, self-configure and buy
• Focus on the rising generation of digitally-native customers with an uncompromisingly future-focused online approach

From Here On, It’s Digital-First

For an incumbent, the best response to a transforming digital landscape is to “think digital” first and get ahead of digital competitors. Bundling services that are likely to be quickly devalued into simple subscriptions, for example, will help to retain customers while building a platform for new revenue.

Content services will represent a diversification from core communications offerings, but will raise the operator’s market profile and drive usage of smartphones and the data network. As operators are providing the essential means and point of delivery (sometimes uniquely so in countries where the mobile network is the only data network for much of the population), they should be able to drive a remunerative deal with prime content providers.

The Mobile Internet Challenge

As the new digital environment puts pressure on the business platform, operators will need to ask:

• Can I easily configure new offers and get them to market fast? Or must I depend on costly and sluggish systems that were really designed for an older generation of services (and a less competitive market)?
• Have I got the real-time business functionality that will let me automate the sales process and let customers serve themselves?
• Can I interwork easily with new partners?
• Can I even afford to do this?

4G could be a mixed blessing for operators in developing economies in their ongoing battle to defend and improve revenues. Their great advantage is the opportunity to learn from the experience of service providers who are further down the track into a predominantly mobile internet world.

For more on how 4G has proven to be a weapon that should be handled with care, click here.

[1] GSMA Intelligence