AYO Tecnology Solutions Limited

The Rise of the New IT Service Provider Superstar

AYO Technology published pre-listing plans which show that it has strong ambitions to grow its revenue from R479 million to R7.7 billion over two years. The strategy it plans to adopt consists of a strong M&A element, combined with a novel approach to team up with a global IT Service Provider.

BT SA Alliance

AYO Technology has entered into a strategic agreement with BT SA.  This will see some of BT SA’s major clients transferred from BT SA to AYO Technology.

As a result of the addition of products and services from BT SA to their current portfolio, AYO believes that it can win more business from BT SA’s clients, while also tapping into the broader market.  Should this alliance be successful, then AYO Technology will have demonstrated a new strategy of how to partner with global IT Services Providers to the benefit of both parties.

Who is AYO Technology?

They are a B-BBEE ICT Group, offering numerous end-to-end solutions to a range of industries.

The Group was established in 1996 and has evolved over time through continually adapting to the local and international ICT landscape. The process of adaptation was enabled by acquiring new businesses, partnerships and sourcing innovative technology within its existing portfolio.

AYO Technology, through its divisions, subsidiaries and partners, provides solutions to both the public and private sector within South Africa and abroad. Its private sector client base comprises mostly of blue-chip multi-nationals.

The Group maintains strong relationships and holds key value added reseller or supplier agreements with principles such as Nokia Siemens Networks South Africa (Pty) Ltd (“Nokia Siemens”), Cisco Systems, IBM, InterSystems Corporation, Microsoft Corporation and Riverbed Technology Inc, which provides the group with continuous access to up-to-date technology.

AYO Technology Revenue Ambition

They plan to grow their revenue from R479 million (Aug 2017) to R4.4 billion (Aug 2018) and to R7.7 billion (Aug 2019).

They plan to do this through:

  • A strategy that consists of M&A;
  • Transferring revenue from BT SA to AYO Technology; and
  • Winning more business from existing BT SA customers.

AYO Technology believes that its empowerment credentials will be a significant competitive advantage that will enable it to win new business in the SA market.

AYO Technology Revenue May 2018

The chart shows the dramatic rise in revenue forecast by AYO Technology for 2018 and 2019.

What is AYO Technology’s Revenue Strategy?

Two pillars underpin AYO Technology’s strategy:

Key to AYO’s strategy is the strategic agreement it concluded with BT SA in December 2017.  This will see BT SA transfer various clients from its operations to AYO Technology. AYO Technology will earn 21% and 18% of its 2018 and 2019 revenue transferred from BT SA to AYO Technology.

In addition, AYO Technology believes that it can grow the services purchased from their existing customers and earn R860 million and R1 325 million additional revenue or 19% and 17% of its 2018 and 2019 revenue.

AYO Technology plans to aggressively engage in M&A acquisitions over 2018 and 2019. They plan to earn R2 billion from new acquisitions in 2018, and R4.4 billion in 2019. These revenue streams represent 47% and 56% of the forecasted 2018 and 2019 revenue. AYO Technology will use part of the capital raised in its listing to fund the acquisition of new ICT companies.

Thus, AYO Technology plans to earn R2.9 billion and R5.7 billion in new revenue from additional revenue earned by using BT customers and through M&A.

The planned AYO Technology revenue growth within the customer base outstrips the revenue growth in the customers ICT budget. AYO Technology acknowledges this and believes that it will win business from other service providers who currently service these customers. They claim that their stronger BBBEE level and the range of products and services, will enable it to achieve its revenue targets.

BT SA Revenue Analysis

The information provided in the AYO Technology Pre-listing document shows that BT earned R1.48 billion in the year ending August 2017.

Analysis of the revenue source shows that BT SA earned 66% of its annual revenue from three customers.

BT SA earned R115 million from the provision of telecommunications services to other telecommunications service providers.

The following chart shows the revenue distribution.

BT SA Revenue May 2018

 

(Before the transfer of clients to AYO Technology)

The AYO Technology transaction valued BT SA at R3.3 billion.

What does this mean for the market?

AYO Technology plans to become one of the top ten IT Service Providers over the next two years. To achieve this, AYO Technolog needs to displace existing IT Service Providers along with winning a larger share of new business arising from market growth.

Should the AYO Technology strategy prove to be successful, then the rest of the IT Services Providers will experience revenue and market share loss.

In response to this new competitive threat, IT Service Providers will need to review their respective empowerment credentials to close the gap between a strongly empowered IT Service Provider, such as AYO Technology, and themselves. This is in addition to assessing how their service profile compares against that of a global IT Service Provider competing in the domestic market.

3Gvs4Gvs5GNew

3G vs 4G vs 5G – Analysis of Vodacom SA

Summary

Since the deployment of the first 3G base stations, Vodacom has led the market in expanding network coverage. An analysis of the network deployment and uptake of 3G and 4G services, shows the following interesting points:

Reviewing the Technology Investment:

Vodacom has aggressively accelerated the deployment of 4G coverage, reaching 80% population coverage after only 5 years.

By comparison, the 3G network reached 80% population coverage after 8 years.

However, the analysis of 3G and 4G adoption by their customers, shows significantly different technology adoption profiles.  After 5 years, 4G adoption is less than half of the 3G adoption.

What does this mean?

Vodacom has invested strongly in driving 4G coverage.

However, the 4G device adoption has not kept pace with network coverage expansion. The slower adoption has not hindered Vodacom in driving 4G network coverage.

Looking Ahead to 5G

The strategic capability of Vodacom to invest in 5G without a strong link to 5G customer adoption, will underpin and solidify its market leadership position.

Only MTN has the capability to match the above strategy. Cell C and Telkom Group will not be able to match such an investment strategy easily.

Vodacom Strives for Technology Leadership

Vodacom has striven to lead the market when it comes to new technology deployment.

They launched 3G services in December 2004 and 4G services in October 2012. By comparison, MTN SA launched 3G services 6 months later, in June 2005. However, MTN launched 4G services (November 2012) within 1 month of Vodacom announcing their 4G service launch.

3G vs 4G Population Coverage – Vodacom

The following exhibit shows the respective 3G and 4G network population coverage since deployment.

3Gvs4GPopulation

The exhibit shows that Vodacom drove 3G population coverage quite strongly from 2004 to 2012. Interestingly, the sharp rise from 24% to 74% corresponds to the introduction and growth of Dark Fibre Africa (DFA). The launch of DFA was built on the uptake of dark fibre by Vodacom.

Vodacom has aggressively expanded their 4G population coverage, In comparison with the 3G population coverage.

3G vs 4G Population Coverage Comparison – Vodacom

By tracking network deployment in years, from initial service launch, it clearly shows how aggressive 4G deployment was compared to 3G deployment. The following exhibit presents this analysis.

Population Coverage Comparison

There are significant underlying factors that impact the deployment of 3G and 4G networks:

  • Vodacom needed to build out and/or wait for the provisioning of high capacity backhaul to their 3G base stations. Vodacom also needed to adopt a Fibre-to-the-Site (FTTS) backhaul strategy.
    • The advantage of this strategy is that the backhaul was scalable to accommodate the high capacity demand required by the 4G network. Thus, there is a significantly lower waiting time for the provisioning of high capacity 4G base stations.
  • Vodacom re-farms 3G spectrum to offer 4G services. Thus, the underlying infrastructure is in place for the deployment of 4G services.

In support of Vodacom’s 4G network deployment, is the roaming agreement it has entered into with RAIN.

The roaming agreement enables Vodacom to achieve two key network deployment strategies:

  • Capacity (densification): The rollout of 4G coverage by Rain using the Vodacom sites ensures that the Vodacom customers benefit from the network rollout.
  • Coverage: Using the Rain network frees Vodacom to focus on network coverage growth.

3G vs 4G Customer Technology Adoption – Vodacom

The proxy used for technology adoption is the ratio of technology SIMs to total SIM base. The handset base excludes M2M, dongles and tablets.

Device Adoption

By comparison to 3G, the adoption of 4G significant lags the adoption of 3G (device adoption).

This has not hindered Vodacom in driving 4G network coverage.

Quite likely, the 4G national roaming agreement with Rain has enabled Vodacom to focus on driving network coverage rather than focus on both network coverage and network capacity (densification). This behaviour illustrates the strategic value of the roaming agreement.

3G vs 4G Network Coverage Adoption – Vodacom

The following exhibit shows the relationship between network coverage (%population) and the adoption of technology (%SIMS).

Technology Adoption

Based on the exhibit, we can see that Vodacom has strongly driven 4G network coverage with little regard to the adoption of 4G devices. The ability to drive network coverage speaks to the strategic financial capability of Vodacom to invest in their 4G network, without linking this investment to 4G service uptake.

Vodacom has reported that its 3G and 4G customers show significantly different behavior. 4G customers consume more data and represents a higher ARPU customer. Vodacom reports around a 20% uplift in ARPU. Thus, while the 4G adoption has not matched the 3G adoption, the 4G customer has shown to be a more valuable customer (based on ARPU).

What Does this Mean for Vodacom’s 5G Strategy and the Market Competitors?

Based on the 4G behavior, we would expect Vodacom to adopt a similar 5G strategy – that of driving population coverage ahead of 5G service adoption. Vodacom can sustain this strategy while it has the strategic capability to generate cash from its operations to invest in network coverage.

The strategic challenge to the competitors, is that Vodacom can afford an investment strategy that does not directly link to customer adoption. MTN SA may be able to match such a strategy, but it is unlikely that Cell C and Telkom Group would be able to.

The implication of this strategy is that Vodacom can drive 5G network coverage and thus maintain / sustain their technology leadership. This will underpin their market leadership position.

Cell-C-2017

Cell C 2017 Results Analysis

Cell C announced their FY2017 results on 21 February 2018. This note presents a summary of their results.

 

FY2017 Summary

The refinancing of Cell C has removed a significant financial burden and has freed up cash flow for investment into the business.

Cell C looks confident in the marketplace and has displayed a dedicated focus in the consumer market with an upward revenue growth. They have indicated that they are willing to invest and acquire in order to grow the business through potential fibre acquisitions, content growth and digitisation.  Their latest numbers reflect as follows:

  • 2 million subscribers: Cell C reaches a total subscriber base of 16.2 million, (14.8 million retail and 1.4 million MVNO subscribers)
  • Cell C earned more revenue from data servicesthan it did from voice services
  • The normalised EBITDA margin increasedfrom 20% (FY2016) to 23% (FY2017)
  • The refinancing deal has cut debt from R17.7 billion to around R6.8 billion

In response to the new board structure, several new posts were created which includes Wholesale, Head of Content, and Digital Transformation.

Operational Performance

Cell C Subscriber Numbers

  • Cell C grew its retail subscriber base by 5% YoY growth.
  • Cell C’s data user subscriber base stagnated, showing only a 0.7% YoY growth. Data user growth has rapidly declined from 160% in FY2015, to 19% in FY2016, now to 0.7% in FY2017.
  • Similar to its slowdown in retail subscriber growth, Cell C’s MVNO subscribers showed an 5% YoY growth.
  • Cell C’s MVNO subscribers represent 8% of its total subscriber base.
  • The company has seen a strong uptake of its retail FTTH offering. FTTH subscribers grew by 678%in 2017.
    • Launched C-Fibre in 2016 with open access FNOs – FrogFoot, Mitsol and Vumatel
    • Launched C-Fibre in 2017 with open access FNOs – Metrofibre, Octotel and Openserve

Cell C refused to release any information on the performance of its content service Black.

Financial Analysis

On a blended basis, Cell C’s ARPU is the lowest in the market.

This suggests that they have a much higher proportion of Prepaid customers when compared to Telkom.  70% of Cell C’s service revenue is generated by its Prepaid segment.

Financial Commentary

In 2017, Cell C earned more revenue from data services than it did from voice services.

The normalised EBITDA margin, based on service revenue, increased from 26% (FY2016) to 28% (FY2017). Note that this differs from the reported EBITDA margin of 50% as Cell C incurred a significant Once-Off revenue item of R4 billion.

Capex reduced significantly from R2.3 billion to R1.2 billion, a reduction of 47%. This resulted from the delay in concluding the refinancing deal.

Strategy

Cell C have defined four strategic pillars:

(1) Mobile Prepaid and (2) Mobile Postpaid

  • 70% of Cell C’s service revenue is generated by its Prepaid segment.
  • A key focus area is the growth of data services. In 2017, data revenue surpassed voice revenue.
  • Cell C continues to seek out innovative offers to win subscriber market share and raise the Postpaid ARPU.

(3) MVNO Wholesale

  • Cell C reported that it will continue to drive growth in its MVNO business.
  • MVNO revenue grew from R315 million (FY2016) to R717 million (FY2017), however its MVNO subscriber base only grew from 1.3 to 1.4 million over the same period.
  • Cell C has seen strong growth in revenue, driven by the increased consumption of data services.

(4) Broadband

  • Cell C has defined its broadband strategy along two dimensions: (1) mobile broadband and (2) fixed broadband (fibre).
  • The operator plans on growing its LTE coverage and intends investing upwards of R3 billion to expand LTE coverage.
  • In Q2 2018, Cell C will launch a triple play offer that will include mobile, fibre and entertainment through the Black platform.
  • The operator indicated that it has acquired two fibre players (no names mentioned). The first is a retail ISP, while the 2nd acquisition is a network operator who has deployed FTTH access fibre.

Cell C plans to invest R3 billion in 2018, and R3.5 billion in 2019 respectively into their network (Capex).  Cell C has indicated that it will invest R1 billion in its LTE network in 2018.  Overall, Capex will increase steadily over the next coming years.

A Cloud Focus

2018 Microsoft Tech Summit Review

Cloud Key Take-Outs

The tipping point has arrived for cloud services in Africa. The barriers to adoption have been eroded and delivery models for IT have changed forever.

  1. Companies will adopt cloud services at a faster rate. Through the use of local data centres, barriers to cloud adoption such as data protection, reliability and latency are being addressed.
  2. Pivotal to the development of Microsoft’s cloud strategy is Microsoft’s commitment to the African continent. Microsoft has taken great strides in improving the quality of service for companies in South Africa and on the continent, by building two of their own data centres in SA and forging relationships with Internet Solutions, Liquid Telecom and Teraco.
  3. Any company – vendor or end-user – that does not have a commitment to the cloud will be left behind.

Demand for Cloud Services

A recent study, presented at the Microsoft Event, found that 93% of South African companies are developing a cloud strategy.

The major drivers of this trend are: (1) economic imperatives, (2) technological advancement and (3) societal changes.

On the societal side, key research findings by Microsoft include:

  • New generations have new expectations: +50% of the workforce will be millennials by 2020. They have new expectations in terms of how and where they want to work.
  • Employees increasingly want the flexibility to work from anywhere. It is estimated that +42% of the global workforce will be mobile by 2022.
  • Employees demand to be “untethered” by routine tasks and to be free to tap into their own creativity, as they believe it fuels success.
  • Cyberthreats are at an all-time high. 74% of businesses expect to be hacked in the next year, therefore security needs to be built into every touchpoint.

Driving Cloud Adoption

To drive cloud adoption in the region, Microsoft is establishing an Azure cloud region in South Africa to offer locally hosted cloud services to South African businesses. This entails providing technical skills and deploying infrastructure in co-located data centres in Johannesburg and Cape Town.

In terms of global scale, Microsoft operates twice as many hyperscale cloud data centres than the combined count of its global competitors. South Africa, through Microsoft’s distributive data centre deployment model, will become part of this global network.

Africa Reach

Microsoft Azure’s hyperscale data centres (Johannesburg and Cape Town) are due to launch in 2018. With this launch, Microsoft will increase the number of globally announced Azure regions to 42.

The new SA data centre facilities will provide highly available, scalable and secure cloud services, with the option of data residency in SA, to companies operating across the African continent. The cloud services include Microsoft Azure, Office 365 and Dynamics 365.

This is a strategic development that will boost cloud adoption. Currently many companies in Africa rely on cloud services delivered from outside the continent – either via locations from within the European Union or elsewhere.

About the Event

Microsoft held its second South African Tech Summit in Cape Town on 13 and 14 February. Approximately 3 000 people – ranging from end users of Microsoft products to developers and partners – attended the event. The summit included an exhibition floor “the Hub”, multiple breakout rooms and labs, and keynote speeches presented by prominent Microsoft executives.

  • Microsoft speakers outlined the company’s vision for Microsoft 365 and Azure.
  • Partners showcased their latest offerings in the Microsoft enterprise and cloud-based services space. Partners included: Axiz, Britehouse, Checkpoint, Citrix, EOH, Liquid Telecom, StorTech and Veeam.

Look out for more information on the event in the coming weeks.

Bosch Connected IoT Conference

2018 Bosch Connected World

It has become increasingly obvious that in practice, the Internet of Things (IoT) can be simplified into three generic applications – location tracking, event monitoring and condition monitoring. The rest is about applications to get data into the system, and to respond appropriately and securely to changes. What is less clear is telcos’ role in the emerging IoT ecosystem.

This was highlighted at Bosch Connected World 2018, a two-day conference and invited exhibition in Berlin, which attracted 4 000 visitors, ten times more than at the maiden event in 2014.

Bosch: A Prime Enabler

As one of the world’s leading makers of electrical and electronic components and finished goods, Bosch is both a consumer and a producer of IoT artefacts. It has some 270 factories, making the firm its own best guinea pig for Industry 4.0 factory automation experiments – a prime enabler and a leading source of knowledge about what works and what does not.

According to Bosch CEO Volkmar Denner, every product the company ships will be capable of connecting to a network by 2020. Some 60% of its products now support Internet Protocol (IP), up from 10% last year. In 2018, it will ship some 38 million IP-enabled products (up from 27 million last year) which includes finished goods.

Mikey, a voice-operated Bosch home automation platform, similar to Apple’s Siri or Amazon’s Alexa, will allow home owners to interact with their kitchen appliances. Mikey can check the refrigerator’s inventory, recommend suitable recipes based on the content, and pre-heat the oven for just-in-time cooking.

Co-Developing Products

Bosch will be co-developing products with customers which could result in components such as sensors and lightweight combined electric gearbox-axles integrated into products. Planned for launch in the early 2020s is Daimler’s new S Class Mercedes Benz which will be enabled to park itself (after automatically finding a suitable spot in the parking garage), as well as their new robot taxi. The Deutsche Post – DHL electric self-driving mail wagon is closer to launch and will free postal delivery staff from having to carry the 115kg payload.

A constant refrain from every speaker at the conference was that a concerted effort will be required for the IoT to be a success. Like many large firms, Bosch bought its way into the IoT by acquiring smaller firms, and now partners with and supports a host of nimble software-based start-ups to develop and deliver solutions. This partnership model is the only viable way of dealing economically with the complexity of tracking assets, watching them, and getting them to respond appropriately.

Connectivity

Clearly, nothing will happen without connectivity, so networking is the central, crucial, enabling infrastructure for the IoT. But Bosch’s strategic pillars are sensors, software and services. Bandwidth is a commodity to be bought from the lowest priced supplier who can deliver the speed and resilience required by the application.

Bosch believes most machine-to-machine communications will be local and limited to the machine, production line, home or factory automation system of which it is a part. Relatively little data needs to break out into the Internet or the public network.  For example, most on-board electronics will aim to keep passengers, cargo and vehicles safe in transit. Low latency is a non-negotiable. At the outset, vehicle-to-vehicle and vehicle-to-infrastructure (street) communications are likely to use Lidar rather than 5G. And edge computing (with edge data centres) will reduce the amount of traffic transmitted over the access and core networks.

There are some emerging applications that require massive connectivity and bandwidth for which telcos may be uniquely suited. One such example is a city or regional Intelligent Integrated Intermodal Transport System. Passenger and goods needs are sensed, data is fed into a centralised processing systems that control the allocation of vehicles, timing of journeys and information is communicated back to the users. Notwithstanding, advances in decentralised computing and artificial intelligence-based self-organising systems may limit core network traffic.

Telco Opportunity

Inevitably, industry standards for applications and vertical markets will precipitate out of the present alphabet soup of initiatives. This presents an opportunity for the telcos to play at the scale to which they are accustomed.

Nevertheless, customers are looking for someone to take responsibility for connectivity in every IoT-based system. Telcos can reorganise to service the granularity required for individual systems, or partner with firms that are prepared to get their hands dirty assembling and managing the (mostly) customised applications. Offering customers that “one throat to choke” may be risky, but it might also be telcos’ best chance of becoming essential members of the emerging IoT ecosystems.

A sensor-laden mock-up of a self-driving car Bosch is working on, on show at Bosch Connected World 2018 in Berlin.

A sensor-laden mock-up of a self-driving car Bosch is working on, on show at Bosch Connected World 2018 in Berlin.

AfricaCom-336x280

2017 AfricaCom Conference Review

About the event

The annual AfricaCom event was held at the Cape Town International Convention Centre (CTICC) from 7-9 November 2017, with a line-up of global thought leaders who provided interesting insights on future technology trends and market developments in Africa. The event also offered a good networking platform for industry players and essential learning opportunities. The event also marked 20 years of AfricaCom, which has become the largest ICT event on the continent.

A summary of key discussion points and take-ways from the conference is provided below.

New trends

M-commerce was notably among the disruptive technologies that were under the spotlight at the event and is expected to be far more “disruptive” than PC-based e-commerce ever was. In the next 6 years Africa is expected to lead digital solutions, with companies with clear digital strategy expected to lead the market. Among the key messages delivered at the event was the need to encourage local manufacturing companies to take a leadership position in the region. Other notable topics that were discussed included Big Data, Artificial Intelligence, Smart Cities, Digital Health, SDN & VFN, and Blockchain.

A growing trend is that of governments trying to recreate monopolies in the market, instead of creating an enabling environment for competition to thrive and intervene in markets such as rural areas, where it often does not make economic sense for private sector companies to invest. This is coupled with a growing practice by governments of treating telecoms sector businesses as cash cows. Some of the operators claim that as much as 60% of their revenues are taken by governments. The key message from the operators on this issue was that ICT should not cross-subsidise other industries, so that revenues generated in the ICT sector can be reinvested to further sector development and innovation.

A single national network model, such as the WOAN proposed by the South African government, also came under scrutiny, with operators sharing a common view that this model could be harmful for the telecoms sector. Furthermore, market regulators need to be educated on a continuous basis, in order to be able to regulate very dynamic markets effectively.

IoT and high data costs

The issue of data costs was very topical. From an operator point of view, the cost of operating a telecommunications network remains very high in many markets across Africa. Lack of proper utility infrastructure negatively impacts the operational efficiencies of telecoms operators, which in turn results in higher retail prices of data than the public and the state would like to see. Moreover, there is also the question of economic principle, with operators in most markets opting to charge for data what they can, if not constrained by regulation. More can be done in terms of trying to reduce the retail price of data to benefit users. Operators such as Safaricom (Kenya) are reviewing their data charge models to see how prices could be reduced further.

However, other operators are of the view that MNOs no longer generate large profits as they had done in the past, largely due to competition from the OTTs who have negatively impacted the price of voice services. Decreasing voice revenues do not leave the operators with much room to move when it comes to lowering prices of other products (such as data).

A panel discussion on IoT resulted in a call to use IoT to transform the telecoms industry. IoT will also help businesses to be more efficient. Africa is expected to benefit considerably from IoT, particularly in sectors such as mining, transport, tourism, health and energy. As such, security around IoT platforms needs to become a priority.

The journey to 5G

3G is expected to continue carrying most of the traffic in Africa as the technology lifespan is usually 20 years. Most operators in Africa began 3G deployment 5 to 10 years ago. However, operators should not be rolling out 2G and 3G networks in isolation. As we enter the new era of high speed connectivity, when 5G eventually arrives, the technology is expected to drive real convergence. It is believed that in the next six years, the world will be ready for 5G, with the first subscriptions expected to start early in 2022. Africa is expected to reach 2 million 5G subscriptions by the end of 2023. However, the predicted commercial launch of 5G services could be brought forward, given that by the end of 2017 the first phase of 5G standard will be completed. This will allow early adopters to launch commercial offerings, particularly in the developed markets.

Some of the speakers at the event believe that Wireless-to-the-Home technology will drive connectivity globally and not fibre, as many anticipate. Nonetheless, the deployment of fibre will continue to be essential, as it does serve specific needs in the market more effectively than wireless technologies.

Bridging the digital divide

On the need to connect Africa’s next billion, a study revealed that of the 240 countries that were part of the study, some 104 do not have broadband strategy. For African countries to grow their GDPs, they need to prioritise broadband rollout. The example of Singapore was given, which came from a historically low ICT ranking to become one of the leading countries globally by prioritising broadband rollout. Currently, Africa contributes less than 5% of the global GDP and 75% of the people on the continent do not have smartphones. Moreover, 50% of the people in Africa are still serviced exclusively by 2G networks. Several initiatives are being undertaken by various companies to bridge the digital divide in Africa. These include:

  • SmartWIFI – The hotspot service is intended to bring WiFi to rural areas, enabling retailers, hospitality establishments, petrol stations, as well as healthcare centres or schools to become a connectivity point and a digital gateway to opportunity for the surrounding population. Access can be extended to several kilometres through off-the-shelf Wi-Fi repeaters.

Project Loon – A network of balloons located at the edge of space is designed to extend Internet connectivity to people in rural and remote areas worldwide at an affordable cost. If successfully rolled out across the African continent, Project Loon has the potential to assist countries with low Internet population coverage to achieve nation-wide coverage. Connection signal is transmitted up to the nearest balloon from  a telecommunications partner on the ground, relayed across the balloon network, and then back down to users on the ground. The demonstrated data transmission speed between balloons over 100 km apart in the stratosphere and back to earth (directly to LTE devices) is up to 10Mbps.

  • The Express Wi-Fi initiative will be expanded through a partnership with Facebook in Nigeria, with the goal of connecting more people to the Internet in a cost-efficient way. Express Wi-Fi in Nigeria is focused in areas where people gather and work, including markets, cafés and public outdoor spaces.

Creating an enabling environment

African countries are encouraged to start educating rural communities, empowering them to use devices to enable growth. However, lack of access to the Internet, lack of local content, lack of spectrum, lack of affordability (costly devices) and a poor demand side (due to lack of proper education, particularly in rural areas) are some of the key issues that are contributing to the current digital divide in many parts of Africa.

Furthermore, governments are urged by the operators to create enabling environments to support innovation in Sub-Saharan Africa. For their part, some of the state governments in Africa are already taking steps to improve ICT penetration and use it as a socio-economic enabler. Examples include:

  • Namibia – Currently, Internet penetration is around 50% of the population but the country has declared access to the Internet a basic human right and wants to achieve 100% population coverage in the next two years. New investment initiatives should be announced soon.
  • South Africa – The Ministry of Telecommunications and Postal Services is urging operators to consider bridging the digital divide through the greater use of satellite broadband services, with satellite technology offering far wider coverage than terrestrial networks. It is disappointing that of the 100 satellites to have been launched globally in 2017, only five will have been launched by African states. There needs to be greater focus on the use of satellite technology in Africa.
  • Zimbabwe – The government is the biggest spender on ICT in the country and intends to accelerate mobile network deployment. The government has interest in 2 out of the 3 MNOs operating in the country. New policies have been introduced, which will encourage infrastructure sharing between the operators.

To reduce the cost of communication, initiatives such as uniform roaming charges between operators in an economic community such as SADC and joint infrastructure investment by operators should be encouraged.

Africa Cube

2017 FTTH Africa Council Conference Review

This year’s 2017 FTTH Africa Council Conference highlighted some interesting developments that were presented and discussed among the delegates. These are our key take-outs from the conference:

Besides looking at the fibre developments in the various markets, with current focus on the importance of rolling out quality infrastructure in the Africa, LATAM, MENA, Europe and the Americas, the key messages at conference also centred around the recent topical issues, mainly the road to 5G, and the need to build next generation mobile networks to support fibre. The telecoms sector players seem to be actively tracking developments around 5G, not only because it is expected to complement fibre solutions, but also because 5G is no longer regarded as a spectrum-based network, but rather a platform that is scalable, segmentable and designed for the Internet of things.

The influence of the regulatory authorities in shaping and growing economies around the globe also came under scrutiny. As discussions gained momentum around the subject, it became clear that the market does not favour heavily regulated environments, as previous studies indicate that there is little economic growth achieved in such markets. Regulators were also urged to be agile to ensure that policies and legislations that being introduced, move at the same speed as the technological developments themselves. Locally, the government was urged to entrench investment-friendly policy and market certainty before infrastructure investment take place on a scale needed by SA.

The developments in the IOT market also received attention at the conference, as well growing interest in Big Data analytics. This despite growing concerns that Big Data is susceptible to hacking, and can also be used for spying. Privacy as well as discrimination challenges were also highlighted as possible danger areas as far as Big Data is concerned, as everything can be tracked and analysed through Big Data.

In the fibre market, opportunities in the highly urbanised areas are increasingly becoming small, this has prompted operators to now target small towns in their endeavours to build smart cities. The operators however conceded that the high cost of extending fibre internet services beyond urban areas does not make expansion to smaller towns viable, especially combined with the lower number of potential subscribers, although expenses associated with equipment and electronics of fibre networks have come down. Notably, operators are currently considering various models that they can adopt in order to bring fibre to these towns in a sustainable way, and have also urged governments to put incentives on the table, that will encourage them to roll out fibre in the small towns and cities, as well to stimulate uptake of services.

In terms of monetising fibre, operators were urged to embrace infrastructure sharing models, as these would allow them to reduce costs. It must nonetheless be emphasised that each market is different, meaning this preferred model might not be ideal for some markets. In terms of rolling out fibre networks, the general view is that Africa continues to be challenged by shortage of funding, shortage of skills, lack of proper planning as well as policy uncertainty, although the continent is at least getting the fibre footprint right.

Overall, an intervention to deal with the issues highlighted above will require operators to undertake careful studies to understand the problem, before possible solutions are implemented. This as we are moving to a fragmented world, that will be characterised by cloud services, integrated services, simplicity, and single identity.

Moreover, the increasing adoption of fibre solutions in various markets around the world is expected to have a positive impact on our journey to the 4th Industrial Revolution and the global digital economy. This is because the industrial Internet, Internet of Things (IoT) and Big Data are also driven by optics, and so is the foundation of platform economics. However, telcos of today will continue to be challenged by the disruptive players such as OTTs and MVNOs, as well as growing competition facilitated by open access networks, more innovative solutions entering the market, and competitors that are quick to embrace newer technologies.

For further details, please contact Ofentse Mopedi.

Africa Telecoms

NG Telecoms Africa Summit 2017 – Africa Analysis Feedback

Africa Analysis recently attended the GDS NG Telecoms Africa Summit 2017, held at the Raidsson Blu Hotel in Lusaka Zambia, over the period 26 to 28th of April 2017. The Summit saw the gathering of commercial, operational, marketing and technical executives from telecommunications operators and service providers across Africa. The event provided a platform to discuss the various challenges that telecoms operators face in their respective local and regional markets.

The three key challenges identified by the delegates were:

  1. The network and infrastructure related issues;
  2. The customer and how to improve service and experience quality; and
  3. The future development and trends that African operators are likely to face.

In addition, the keynote address delivered by Lucy Quist, CEO of Airtel Ghana focussed on the concept of “rethinking” telecommunications in Africa and the ability to create and deliver African solutions for the African telecommunications opportunities and challenges. The presentation highlighted the need to adopt fresh approaches to content, data services, infrastructure and devices as network operators across the region begin to look at evolving revenue streams and customer expectations.

The network and infrastructure challenge

The network and infrastructure related challenges emphasized the growing reliance on offshore data centres, cloud security, and a perceived lack of vendor support.

Other key infrastructure challenges identified included:

  • 4G LTE
  • Data centres
  • Cloud
  • Offshore data centres
  • Cloud and IoT relevance given the infrastructure challenges

The main points of concern were:

  • Why are these solutions not manufactured on the African Continent?
  • Do the equipment and solutions vendors have the African operators’ best interests at heart?
  • Operators maintain the status quo and new technologies and services such as 4G/5G will be irrelevant if it is constructed on a broken system implying that it will not be sustainable.
  • Services such as cloud and IoT will require operators to fix current problems and challenges.

Operators also highlighted the fact that operators also faced challenges as to political and regulatory stability noting that in certain instances network roll out projects were derailed by government or competitor intervention.

The customer experience challenge

The central theme of the discussion was the ability of network operators to be able to better understand their customers to deliver a better service. At the heart of this was the ability to leverage technology and services such as cloud and data analytics to get to know the customer better. However, operators will need to first develop a brand and loyalty before being able to implement cloud and big data services.

The future

Discussions concerning the future of the network operators in Africa focussed on:

  • Partnership and monetization potential of the over the top (OTT) players
  • Internet of Things (IoT) – the revenue potential and expected growth
  • Bandwidth demand and its growth
  • LTE – the upgrade path and the business case

The OTT services across Africa present operators with a threat and an opportunity. Many operators have sought to embrace the OTT players and have zero rated the data services of these players to entice additional customers and demonstrate value add for their customers. Others have attempted to offer OTT like services in the form of their own platforms. However, the real challenge for the operators has been the ability to monetize or grow their revenue from these services.

The IoT market presents another revenue growth opportunity. However, operators will need to ensure that they have the right platforms and ecosystems in place for these services to gain traction.

A key concern has been the massive growth of bandwidth consumption across the region. Operators find themselves caught between a rock and a hard place as they face pressure from consumers and regulators to reduce the cost of data services while costs of bandwidth decline, forcing them to offer more bandwidth at the same rates with a resultant growth in data consumption.
The development of 4G/LTE in Africa will depend on the ability of operators to develop a solid base and business case for their existing 3G networks.

Africa Analysis Assessment

The NG Telecoms Summit brought many challenges being faced by network operators to light. However, it appears that these challenges and opportunities are viewed as being separate from each other. Operators need to view the evolution in the communications services as part and parcel of the growth of services in Africa.

End users will become more sophisticated and demanding in services being consumed and the associated costs. This presents operators an opportunity to push more advanced services into the market and begin to re-align their roles from being the mere pipe or conduit for services to being the enabler of application and content. It is at the application and content point of the services stack that Africa can begin to create unique and tailored services to meet local demand.

In addition, the development of future platform and technologies such as 4G/LTE and 5G will depend on the operators and their ability to develop sound business cases for 3G to use as a foundation for these technologies.

 

Trends in the Future Workforce

Future Workforce Study 2016

Dell and Intel have teamed up to create their newest Future Workforce Study 2016, which reveals how people around the world feel about how technology is shaping the workplace. Collaborating with Penn Schoen Berland (PSB), a series of online interviews were conducted across seven target industries, with adults who work more than 35 hours a week. South Africa was included in the study and is grouped with Europe.

Key study highlights:

#1 Employees expect to work in a smart office in the near future

  • Today’s office is not smart enough; however, workers expect to be working in smart offices in the near future. Employees globally feel their offices are not advanced enough and desire an environment that uses data to make “smarter” decisions about employee habits like temperature, lighting etc. Workers are not only ready for businesses to implement the latest technologies to make their offices smarter, they expect it to happen within the next five years. Specifically, 44% of employees worldwide feel that their workspace isn’t smart enough, and more than half expect to be working in a smart office within the next five years.
  • This expectation is highest among the younger workforce, with 69% expecting to be in a smart office within the next five years. The consequences for not meeting these expectations is also greater for the millennial workforce, with 42% saying they would quit a job with substandard technology and 82% saying workplace technology influences what role they would take. Further, a majority of workers place an emphasis on functional benefits with 63% of millennials and 55% of older workers (over 35 years old) indicating they would rather have high-tech perks, such as augmented/virtual reality (AR/VR) and Internet of Things (IoT) than low-tech perks like ping pong, free food etc.

#2 The way we communicate will continue evolving away from face-to-face meetings

  • The way we communicate will be the next thing to change. The influx of new technology in the workplace has affected how employees communicate, collaborate and work more efficiently. In fact, with many employees believing that face-to-face meetings will be obsolete soon, the norms of office communication could be the next major change impacting the workplace.
  • While 57% of global employees still prefer to have face-to-face conversations with colleagues, half of global employees and three in five millennials think better communication technology and remote teams will make face-to-face conversation obsolete in the near future. In fact, a majority of workers in China, India and South Africa already do not prefer face-to-face conversations and instead use collaborative technologies to communicate with colleagues. Within this evolution, 79% of millennials believe workspaces are more collaborative than they used to be, and over 70% of millennials feel that advanced tech/smart offices are crucial to a collaborative, productive and efficient work environment.
  • Further, employees noted that virtual-sharing allows for collaboration with colleagues while remote capabilities would be the most beneficial technology integration into their office lives.

#3 Virtual reality and artificial intelligence adoption is growing

  • Virtual reality and artificial intelligence could impact the workplace sooner than we think. Cutting-edge technologies including virtual and augmented reality and artificial intelligence may soon play a pivotal role in how we work, and employees are expecting these technologies to impact their lives soon.
  • While millennials are the keenest for this convergence, interestingly it isn’t just the younger workforce who are looking forward to the introductions of these technologies into their working lives. Two thirds (66%) of the global population would be willing to use AR/VR products in their professional lives, while 46 percent believe the technologies will improve productivity within their individual role. Just under two thirds (62%) also believe that the introduction of artificial intelligence will make their job easier, while half (50%) say AI will lead to more productivity in the workplace, with 30% listing the ability to automate complex or repetitive tasks as the major immediate advantage.

#4 Remote employment continues to grow, given the advancement of enabling technologies

  • Remote employment allows global workers to focus equally on productivity and quality of life benefits, revealing the range of advantages that flexible working provides. Evolving technology has already had a huge impact on modern employee lifestyles. Technology has allowed people to change their lifestyles and, in turn, this has impacted their work styles and preferences. With these changes, employers are offering more flexible work arrangements to keep up with this evolution to cater to the mobile worker.
  • Over half (52%) of employees already work outside of a traditional office at least one day a week, while 18% are working from a public location every week. Employees are also seeing the advancement of technologies to better enable these new working arrangements, with respondents listing advanced security protection as the single most important technology to be implemented into their workplace.

Future Workforce Study 2016 Report
Dell and Intel have teamed up to create their newest Future Workforce Study 2016, which reveals how people around the world feel about how technology is shaping the workplace. Collaborating with Penn Schoen Berland (PSB), 3801 online interviews were conducted across nine different markets between April 05 and May 03, 2016. The report primarily analyzes adults who work more than 35 hours a week and work in one of seven target industries: Education, Government, Financial Services, Healthcare, Manufacturing, Media & Entertainment, and Retail.