The Impact of Mobile Services in Nigeria_Pyramid Presentation_ Nigeria Summit_London 2010

The Impact of Mobile Services in Nigeria:How Mobile Technologies Are Transforming

Economic and Social Activities

Nigeria UK Telecommunications Summit 2010June 17-18, 2010

Mobile Services in NigeriaMobile Services in Nigeria

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Executive Summary

The transformational role of mobile servicesEvolution of the industry worldwideDevelopment of Nigeria’s Mobile Market

Relevance of mobile industry in overall Nigerian economyOverview of mobile applications in social and economic activities across emerging markets

Nigerian end users’ perception on the impact of mobile servicesThe value of mobile services in daily livesFinancial impact on individualsCommon uses of mobile servicesImpact on rural populationExample of local social initiatives

Pyramid Perspective

Table of Contents


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

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

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

During the past decade, approximately $16bn has been invested in projects related to mobile services. There are as many as 3m jobs directly and indirectly related to mobile services in the country.

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

Executive Summary


3. Nigerian end users agree that mobile services have positively influenced every aspect of their lives, enabling them to connect with different people, access information, create business opportunities, lower transaction costs and enhancing social interaction.

4. Around the world, Pyramid has identified numerous examples of initiatives using public and private funding that leverage mobile services in social programs, improve the operation of various vertical industries and foster connectivity in remote areas.

5. The future development of the mobile market in Nigeria will be driven by collaboration among industry players, the local government and international organizations. End users in Nigeria value mobile services greatly and are frequent users of this platform, yet the availability of specific mobile data-based applications is still limited. Developing a set of tools and information systems will require close collaboration among local and international entities; telecom vendors and operators can play a key role in importing successful initiatives to Nigeria.

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...Nigerian end users agree that mobile services have favorably influenced every aspect of their lives

Executive Summary


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Executive Summary




Pyramid Perspective

Table of Contents

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

Key Aspects:

•Declining prices for connectivity services

•Operators promoting bundled services

•Evolution towards 3G and beyond

•Shared access and coverage of rural population

•Governments and NGOs supporting programs to connect schools, medical centers, etc

Key Aspects:

•Intense competition among vendors brings device prices downwards

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

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

MOBILE

MARKET

Wider Availability of High Speed Networks Versatile and Affordable Devices

Key Aspects:

•Development of User-Generated Content (UGC)

•Virtual communities and cloud computing

•Changing patterns in entertainment drive advertising investment towards mobile platforms

Variety of Applications

Source: Pyramid Research

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Transformational Role of Mobile Services

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Pay-TV 1%

VoIP 20%

Fixed circuit-switched voice -3%

Mobile broadband 30%

Mobile voice/messaging 6%

Fixed broadband 11%

Global access lines by type, 2008-2014 Subscription CAGR, 2009-2014

The global telecom market continues to grow at rapid pace, particularly in the area of mobile services with subscriptions surpassing 4.5bn in 2009 and very important potentialgoing forward in the area of mobile broadband (ie. Internet) services

0123456789

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2008 2009 2010 2011 2012 2013 2014

Acc

ess l

ines

(bn)

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Source Pyramid Research, 4Q09 Mobile and Fixed Forecasts



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

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Source Pyramid Research, 4Q09 Mobile Forecasts

Mobile subscriptions by technological generation, Global, 2005-2014



2000

•New telecom policy was enacted.

•December:Auctions for GSM licenses.

2001•February:Digital mobile licenses were awarded to MTN, Mtel and Econet Wireless (later Vmobile, Celtel and now Zain).

2002

•June:First national long‐distance license was offered to MTS First Wireless.

•September:Fourth GSM license and national carrier license awarded to GloMobile.

•November:Nitel’s national carrier and international gateway license became operative.

2003

•Telecommunications Act 2003 was enacted.

2004

•October/ November:Three national long‐distance operator licenses became operative.

•December:All operators had introduced per‐second billing.

2005

•November:Two national long‐distance operator licenses became operative.

2006

•February:NCC introduced unified access licenses.These were granted to 13 companies in total, including MTN, Zain, Multi‐Links and Starcomms. The earliest operative date for the licenses was July 2006.

•July:Transcorp buys 75% stake in Nitel

2007

•January:A national carrier license was awarded to Prest Cable & Satellite TV Systems

•March:NCC issued 3G UMTS licenses to MTN, Zain, GloMobile and AlheriEngineering

•July:NCC awarded fixed‐wireless licenses

2008

•September:Gateway Telecoms Integrated Services’ national long‐distance license became operative.

•October:Etisalat launched services

2009

•May:NCC awarded licenses in the 2.3GHz band to four operators, but discussions are still ongoing to finalize the issue

Milestones in licensing and concessions awarded by the NCC

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


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Source: NCC, Pyramid Research


Pyramid estimates that the Nigerian mobile services market has grown from 422,000 in 2001 to roughly 73m at the end of 2009

•In terms of the mobile penetration, growth in Nigeria’s mobile market has been exponential, from just 0.33% of the population in 2001 to 48.7% in 2009.

•Intense competition, the proliferation of prepaid plans, low-cost handsets and the rapid expansion of mobile networks to different parts of the country are the main drivers of growth in mobile subscriptions.

•The expansion of coverage to underserved areas by the smaller CDMA operators has also led to increased competition, bringing overall communication prices down.



•Going forward, due to intense competition and constant innovation from mobile service providers, a greater number of people will see value in and be in a position to use mobile services. Pyramid projects that Nigeria’s mobile subscriptions will surpass 128m by 2014, creating a substantial user base for the development of the mobile applications market.

Evolution of mobile subscriptions Nigeria, 2001-2009

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2001 2002 2003 2004 2005 2006 2007 2008 2009

Subscription penetration of population

0.3% 1.2% 2.4% 7.2% 13.8% 20.9% 28.2% 43.1% 48.7%

User penetration of population

0.3% 1.1% 2.2% 6.5% 12.0% 17.4% 23.3% 34.5% 37.8%

Prepaid subscriptions as 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%

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



Mobile market indicators, Nigeria, 2001-2009

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Algeria$3,101

Cameroon$826

Cote d'Ivoire$1,165 Egypt

$4,742

Ghana$1,093

Kenya$1,072

Morocco$3,048

Nigeria$6,235

Senegal$716

South Africa$9,993Tunisia

$1,395

0%

10%

20%

30%

40%

50%

60%

70%

80%

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

Mob

ile s

ervi

ce r

even

ue C

AGR

2001

-200

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GDP per capita (US$)

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

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



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Mobile services have multiple positive effects in an economy, most notably in emerging markets. Their economic benefits extend beyond the investment that network operators allocate to license fees, taxes and network equipment and include the following factors:

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

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

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

Mobile services have a wide economic impact in a country, since they enable end users to conduct their daily business in a more effective manner, reducing the time and cost of transactions, improving access to markets, commoditizing information and generally allowing businesses to operate more efficiently.

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



According to Pyramid’s estimates, the annual revenue from mobile services represents between 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, 2009

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Mobile operators also contribute to the economy by directly and indirectly creating jobs to provide 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, which can be divided into two subgroups, that gravitate around mobile services:

The top category of indirect employment encompasses equipment sales, infrastructure deployment, advertising, marketing and public relations as well as security — workers involved in the protection of base stations. Reportedly, in 2008 Zain employed as many as 8,000 security guards.

At the base of the pyramid, there are mobile service resellers, recharge card distributors, retailers, phone booth operators as well as street vendors. The so-called mini call centers consist of simply one or a few mobile phones and airtime bought in bulk from the operator. Call center operators allow other people to use the phone for a fee and quite often will take a message, also for a fee.

Employment related to mobile sector In Nigeria, 2009

Source: NCC, Pyramid Research


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

Distribution on the streets and MTN and Glo points of sale, Nigeria

Source: Pyramid Research, NCC


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In terms of capital investments, mobile operators in Nigeria have worked on infrastructure deployments, 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, 2001-2008

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 middle of 2008) since the Nigerian government successfully liberalized the industry in 2001.

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

Source: Pyramid Research, NCC


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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, Nigeria, 2003-2014

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

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

% o

f To

tal T

erm

inal

s

3G+

2.5G

2G

Note: For the purposes of this exhibit, the following categories apply:•2G = GSM, TDMA, and CDMA One technologies•2.5G = GPRS, EDGE, and CDMA 1X, technologies•3G+ r= CDMA 200, UMTS, HSPA, Mobile WiMAX, and LTE technologies

Source: Pyramid Research, 4Q09 Mobile Forecasts


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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 hard to reach rural areas

India: Gramjioti Pilot Program- provide mobile broadband connectivity to villages and towns around Chennai in India

Rural Connectivity Rural Telephony Program-train and support local villagers to provide mobile based pay-phone services

Uganda: Village Phone- train and support local villagers to provide mobile based pay-phone services

Education Ladybird Mobile Reading Program- support classroom activities through mobile based educational exercises

South Africa: Dr. Math-leverage the MXit mobile social platform to provide tutoring services

Health My Question, My Answer- SMS and phone operator based educational and counseling program covering the HIV/AIDS topic

Uganda: Text to Change- SMS based interactive quiz and educational tool covering the HIV/AIDS topic


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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- mobile commerce application to virtually store and move money, make payments and enable other mobile based financial transactions

Kenya: Safaricom M-Pesa- SMS based mobile payment and money transfer platform

Agriculture Cassava Growers Project-disseminates market information in conjunction with information points and trade agents

Uganda: Grameen Market Information- disseminates market information through SMS, supported by Community Knowledge Workers

Transport Hot FM Abuja Traffic Monitoring- Collects traffic information sent by listeners through SMS and mobile calls.

United States: OnStar- GSM based in-vehicle security and information service

Entertainment DSTV and MTN Mobile TV Service- broadcasts content over a mobile network

South Africa: Mxit: WAP based instant messaging and social networking program


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Executive Summary




Pyramid Perspective

Table of Contents


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

The sample group of our survey is representative of Nigerian society, including a combination of female and male participants. The research was designed to include mobile users living in different parts of the country, with 70% of interviewees living in urban areas and 30% living in rural areas in the following regions and cities: Lagos, Abuja, Kano, Akure, Kaduna, Ibadan, Jos, Aba and Enugu. In terms of age groups, we focused the study on the 16-69-year-old population.

Pyramid developed a questionnaire comprising mostly closed-end questions. The main topics covered in our interviews were as follows:

Determinants of mobile ownershipDrivers of usagePurpose and pattern of mobile phone usage, including:

Work-related activitiesEntertainment and access to informationAccess to health, education, financial and logistics/transportation information and services

Nigerian End Users’ Perception of Mobile Services

Perceived changes in patterns and benefits of economic activity among mobile phone usersPerceived changes in work practices and networks of social contacts among mobile phone users

Data was collected via a combination of phone-based and face-to-face interviews in households and high-traffic pedestrian areas.


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

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


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

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

Furthermore, over 80% of our sample has seen financial gains from using mobile services through a combination of saving on communications expenses and generating additional income by way of staying connected

Q. Have you seen a positive financial impact on your life from the use of mobile services? Nigeria, 2009


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

Increased ability to sell

Communicate with clients

Better ability to find jobs

Better access to market information

Time savings in travel

Better access to financial information

Make and receive payments

Lower travel or entertainment expenses

Lower cost than alternative comms

Job opportunity

Mobile phone users deriving benefit

Age 46-69 Age 36-45

Age 26-35 Age 16-25


End users from different age groups point out the positive financial impact of using a mobile phone ranges from increased opportunities to find jobs to savings in transportation and better access to information

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


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


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

Work-related

Entertainment & information

Emergency or other health services

Transportation & logistics

Education

Financial services

Job opportunity

Mobile phone users engaging in activity

Age 46-69 Age 36-45Age 26-35 Age 16-25

Q. For which of the following activities do you leverage your mobile phone? Nigeria, 2009

Most commonly mentioned uses by category:

EDUCATION

•Communicating with teachers and colleagues

•Downloading information to mobile phone

EMERGENCY/HEALTH

•Calling friends, family and emergency services

•Communicating with doctor/nurse/hospital

ENTERTAINMENT

•Listening to music/radio

•Playing games

•Taking/sending pictures

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


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

Nigeria, 2009

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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 media of communication and a source of added income

Source: Pyramid Research, 2009

Rural Telephony Project startup package and a phone lady on the outskirts of Suleja, a city of 105,000 inhabitants north of Abuja

Key Aspects of the Rural Telephony Project in Nigeria

The program is a cooperation between the Growing Businesses Foundation (GBF), a Nigerian NGO, MTN Foundation (MTNF), which is the CSR arm of MTN Nigeria, the International Finance Corporation (IFC) and a group of small communal microfinance institutions (MFIs).

A startup package, provided by MTNF, includes loans that range between N14,200 and N21,400 ($95 and $140), depending on optional material in the package, payable over a six-month period, and carry a 15% annual interest rate.

The startup packages include a Nokia phone, an MTN SIM card, an optional antenna to boost the wireless signal, a solar charger, subsidized MTN airtime, promotional material. The promotional material is comprised of a table, an umbrella, chairs, banners showcasing call rates, a hat and a T-shirt.

To date, the program has benefited 1,500 Phone Ladies in rural and semirural Nigeria. These beneficiaries operate in 21 of the country’s 36 states.

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Existing connectivity projects in Nigeria illustrate the complex organizational structure behind social initiatives

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

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Source: GBF, Pyramid Research

Example of Social Initiatives


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Executive Summary




Pyramid Perspective

Table of Contents


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

0% 10% 20% 30% 40%

Local information (weather, news)

Agriculture-related information

Ability to pay for transportation fees with my mobile phone

Education-related applications from government

Money transfers over mobile phone

Percentage of rural respondents reporting use

Q. What new mobile applications would you like to use in the future? Nigeria’s rural users


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Pyramid Perspective


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

Organize

Local Players to Launch Programs / Facilitate

Industry data

Manage program towards

self-sustainability

Monitor , operate and enhance the

application + VAS

Government involvement in the promotion of the

Nigerian mobile market

Key Strategic Aspects to Develop Social Initiatives Leveraging Mobile Technologies

•Developing a set of tools and information systems will require close collaboration among local and international entities

•Telecom vendors and operators can play a key role in importing successful initiatives to Nigeria

•Government agencies may facilitate databases of critical info (weather, agriculture, education) to start the program

•Learn from initiatives established in other countries

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

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

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Pyramid Perspective

•Set clear goals for participants

•Ensure applications are available to alarge share of users

•Promote enhancements

•Secure addition of new partners to each initiative

•Develop VAS


THANK YOU.

Badii Kechiche

Sr. Analyst

Email: [email protected]

Tel: +44-20-7560 4477

PYRAMID RESEARCH UK

Tel: +44-20-7560 4471

Fax: +44-20-7560 4485

PYRAMID RESEARCH US

Tel.: + 1 617 871 1900

Fax: + 1 617 871 1933

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mailto:[email protected]

The Impact of Mobile Services in Nigeria_Pyramid Presentation_ Nigeria Summit_London 2010

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