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MTN Swaziland Impact of Data Traffic Explosion on Mobile Operators By Thembi Mkhonto Agenda • • • • • • Mobile Industry and Economy Mobile Traffic Trends Key Drivers for Data explosion Challenges with Data explosion Operator’s Strategies Conclusion Copyright© 2013 Mobile Telephone Networks. All rights reserved 2 Mobile Industry and the Economy • The rapid spread of mobile technology has a profound socio-economic impact on the economies of every country in the world. • The mobile ecosystem makes a significant direct contribution to GDP • The mobile industry has impact on the wider economy – Enhanced productivity for “highly mobile” workers – Improves education, health and agriculture sector in developing markets like Swaziland – Creates employment and entrepreneurial opportunities Copyright© 2013 Mobile Telephone Networks. All rights reserved 3 Mobile Traffic Trends • Voice revenues have stagnated in recent years • Drastic decline in SMS traffic – Most Swazi mobile users prefer whatsapp over traditional sms • Exponential growth in mobile data usage – The number of mobile-connected devices exceeded the world’s population in 2014 – MTN Swaziland has seen a 15-fold increase in data traffic over the past three years • Flat rate pricing typically used - margins are generally lower than the historical voice-dominated traffic margins and, more important, show a declining trend – MTN Data Bundles offered at a lower rate that out of bundle usage Copyright© 2013 Mobile Telephone Networks. All rights reserved 4 Key Trends for Data usage, Revenues and Cost Source: Alcatel Lucent 2011 Copyright© 2013 Mobile Telephone Networks. All rights reserved 5 Forecast Growth by Cisco Device Type 2014 2019 Nonsmartphone 22 MB/month 105 MB/month M2M Module 70 MB/month 366 MB/month Wearable Device 141 MB/month 479 MB/month Smartphone 819 MB/month 3,981 MB/month 4G Smartphone 2,000 MB/month 5,458 MB/month Tablet 2,076 MB/month 10,767 MB/month 4G Tablet 2,913 MB/month 12,314 MB/month Laptop 2,641 MB/month 5,589 MB/month Source: Cisco VNI Mobile, 2015 Copyright© 2013 Mobile Telephone Networks. All rights reserved 6 Key Drivers for Data Explosion • Mobile penetration rates: 2007 forecasts for mobile subscriber numbers in 2020 have already been exceeded • Availability of faster networks – MTN has deployed 3G technology with theoretical connection speed ranging between 3.6 Mbps and 42 Mbps About 80% country coverage 97% of the country covered with GPRS and EDGE – MTN has plans to implement LTE (4G) technology in the near future to offer theoretical speeds of up to 672 Mbps • All-IP mobile networks to serve an ever increasing volume of data, enabling a vast array of innovative services. – Although the MTN is not an All-IP network, the core and the 3G network are based on IP. The plan is to have an all-IP network within the next 3 years. Copyright© 2013 Mobile Telephone Networks. All rights reserved 7 Key Drivers for Data Explosion • Device evolution is one of the key enablers of the data traffic explosion – Swaziland has seen proliferation of smartphones, dongles, tablet devices • Thousands of interesting applications are also fueling mobile data subscription and revenue growth – Data customers have access to a wide spread of applications from wherever they are • M2M connections, which includes a range of devices and objects – A number of local entrepreneurs are offering car tracking services to individuals, businesses and the public transport operators – Smart TVs are already available in the local in the market – Utility companies using telemetry services to monitor remote sites Copyright© 2013 Mobile Telephone Networks. All rights reserved 8 Challenges with Data explosion • As users demand more from networks, they expect that a network should “just work”, anywhere and any time • Network coverage gaps, network congestion and service degradation are more apparent than ever and threaten to affect customer loyalty. – Challenge covering a mountainous country like Swaziland – Customers concentrated in towns while they expect the get same experience in the rural areas – Country being affected by SA Power Load Shedding which reduces available capacities • Operator faces growing restrictions from limited available resources with a decline in revenues from legacy services such as voice and messaging – Customers complain about high data charges (comparing Swaziland with countries that have liberalised the telecommunications industry) Copyright© 2013 Mobile Telephone Networks. All rights reserved 9 Challenges with Data explosion • Limited local content – most content is hosted in South Africa –Results in increased bandwidth cost • OTTs present a high risk of disintermediation – turning the operator into dump pipes – Facebook, Whatsapp and Skype are the most commonly used OTTs within the country – IP-based messaging, voip and mobile video not only drive the explosion of mobile data traffic but also massively impact carrier revenues • High level of capital investment required to increase capacity – No opportunities of sharing costs with other operators Copyright© 2013 Mobile Telephone Networks. All rights reserved 10 Network Strategies • Improving operational efficiencies – capex and operational expenditure now goes under considerable scrutiny to make the business case for continued network evolution viable for the operator – Network Optimization –Operator always looks for intelligent ways to expand their network capacity QoS and policy-management techniques to offer differentiated services to users, manage network congestion - more “selfaware” and dynamically configurable network Offloading traffic onto local access points femtocells to free up mobile network capacity Carrier aggregation, network analytics and caching to allow operator to get the most out of their infrastructure Copyright© 2013 Mobile Telephone Networks. All rights reserved 11 Network Strategies Cont’d – Network Sharing Sharing passive network components (such as sites) with other service providers, e.g. SPTC, Police, Broadcasters Outsourced network maintenance to hardware vendors Mobile services are increasingly being migrating into the Cloud to deliver on the promise of service access anytime, anywhere through any device at reduced cost • Continuous Innovation – Operator has confidence that their infrastructure is future-ready and that they can depend on the availability of new innovations – Continually investigates the alternative ways to access disruptive technologies, which may be in the form of internal development, strategic alliances and acquisitions. Copyright© 2013 Mobile Telephone Networks. All rights reserved 12 New Business Models • Redefined Business models – Key focus is on Data Revenue – Policy management is being implemented to form new business models and maximize the service monetization. offering tiered service levels that guarantee superior performance and quality to higher paying subscribers • Strategic Partnerships that focus on value creation – Operators collaborates with the service providers, suppliers and distributors for continuous operations improvement – Outsourcing of non core functions to allow more focus on customer and strategic issues Copyright© 2013 Mobile Telephone Networks. All rights reserved 13 Recommended Political Strategies • The Regulator and policymakers must be careful not to hinder the growth opportunities through short-term polices – create an enabling environment Allowing operators to continuously innovate to meeting the unsurpassed demand for data • Private and public sectors need collaborate to support the development of a mobile innovation ecosystem. – “m:Lab” in Nairobi, which is a centre for mobile entrepreneurship provides incubation, developer training, application testing, and ecosystem building, with support from The World Bank, Qualcomm, Samsung, Nokia, Microsoft, and others. Copyright© 2013 Mobile Telephone Networks. All rights reserved 14 Conclusion • MTN is faced with the challenge to continuously scale their networks to support bandwidth-hungry applications and keep customers satisfied. • The operator’s revenues are not keeping pace with the increase in traffic. • The operators has realized the importance of embracing the fact that the traditional telco business model is facing competitive threats and adopt new strategies – The difficulty faced by established players is to reinvent themselves into agile entrepreneurial start-ups – Their natural response is to try to resist disruptive technology to protect their existing market share and revenues. • MTN key strategy is to create a Telco 2.0 ecosystem – a multi-sided business model with the mobile operator at the centre, acting as an enabler between upstream partners (software developers, content providers, consumers, public sector, vertical industries) and downstream private and enterprise customers. Copyright© 2013 Mobile Telephone Networks. 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