MTN unveils its first OTT service and roadmap for digital fortunes

MTN has announced the acquisition of music streaming platform Simfy at AfricaCom and outlined the future of the telco, which doesn’t look very much like a telco anymore.

This is of course a slightly unfair statement, as the mission of connecting the unconnected millions across Africa will continue to be a top priority for the business, though CEO Rob Shuter highlighted the team have much bigger ambitions when it comes to maintaining relevance in the digital economy. The Simfy acquisition is just one step in the quest to morph MTN into a digital services business.

Speaking during the keynote sessions at AfricaCom, Shuter highlighted there are still major challenges when it comes to connectivity in Africa, though telcos need to look deeper into how these challenges can be solved. The most simple roadblock is a lack of connectivity across the continent, but when networks are being deployed, telcos need to understand how consumers are engaging with the connected world. A good place to look first and foremost is China.

“Our mission is not just about connecting people, but understanding what the users want to use the internet for, so we can build networks properly,” said Shuter. “When we look at China today, that will be Africa in the next two to three years.”

Looking at how consumers use connectivity in China starts to paint a picture. Media takes up 17% of time of devices, while communications and social media takes up 33%. Shopping and payments account for 16%, and gaming takes up 11%. For MTN to be relevant in the future, Shuter has ambitions to create a presence in each of these segments.

To capitalise on payments and shopping, the mobile money offering will be revamped and launched in South Africa during Q1 2019. Nigeria has also just changed its regulatory regime when it comes to mobile money, and Shuter said the team would be applying for a payments service license over the next month, with plans to launch a mobile money offering in Q2 2019. This is a big moment for MTN, as while the mobile money offering has been present for some time, this is the first venture into its two largest markets.

For Shuter, creating a digital services company has two components. Using connectivity as a platform, a comprehensive partnerships programme has been launched in four main verticals (communications, rich media services, mobile financial services and eCommerce) with the team working with various established players in the ecosystem, but MTN also have to push itself further up the value chain and offer its own competitive products. This is where Simfy fits in.

As a music subscription product, customers will be able to merge both connectivity and music payments onto the same bill, but Simfy will not be incorporated into the greater MTN business from an operational perspective. Simfy will continue to operate a separate entity, allowing it to maintain the OTT environment. Shuter highlighted he would not want the corporate and operational structure of a telco, completely unsuited to the OTT landscape, to impact Simfy’s operations.

On the financial services side, the team will make use of MTN’s scale to establish a more prominent footprint. With a user base of 24 million already, this number seems to be doubling every 18 months. The significantly larger mobile subscription base can be used to springboard the mobile money business north, as Shuter highlighted the distribution network is key. When customers come to top-up their airtime or data allowance, they can also deposit cash into digital wallets. It is convergence at its finest, though leaning on Orange’s ambitions to diversify out of the traditional telco playground.

There are still huge challenges from a connectivity perspective across the African continent, but MTN seems to recognise there is more to be excited about than simply collecting subscriptions. If the Simfy acquisition is to be taken as evidence of MTN’s future roadmap, this looks like it could be a case of convergence done right, not allowing the cumbersome, archaic telco machine to muddy the OTT waters.

IBC 2018: New content, new markets, new partners – the Netflix growth plan

Netflix is one of the largest technology companies on the planet, but there is still mountains of room for growth over the next few years.

Speaking at IBC 2018 in Amsterdam, Maria Ferreras, VP of EMEA Business Development at Netflix pointed towards some quite remarkable figures. In the 11 years since Netflix starting its streaming business the platform has amassed 130 million subscribers. While this is of course an astronomical figure, some might have assumed it would be higher. With profits of $2.8 billion over the last twelve months, the opportunity for growth is still buoyant.

The question which remains is how to do this. Netflix has been incredibly successful in securing subscriptions through its own marketing strategies, though partnerships with telcos and broadcasting businesses are top of the agenda for Ferreras.

“What is critical for us is making sure Netflix is available,” said Ferreras. “It’s all about making access easier.”

The idea behind these partnerships is creating opportunity. The partner organizations might not only have a better relationship with potential customers, but they also address some key challenges in terms of billing and experience.

On the billing side of things, Ferreras asks the industry not to use Western standards when assessing new territories. For example, in Saudi Arabia not only is credit card penetration low, a number of the domestic brands are not accepted by eCommerce sites. Partnering with the telcos offering consumers in this market an opportunity to pay through their own billing platforms. There are numerous other countries around the world where this could be the case, meaning partnerships with telcos offer an opportunity to engage new customers who were not accessible to the business before.

Looking at the experience, this is about accessibility once again, but a different twist. Here we are talking about the content aggregation model, taking away the complication of accessing content through multiple windows in the fragmented content ecosystem. With the Netflix app installed on set-top boxes, content platforms or smart TVs, the frustration of exiting applications before entering new ones is removed. With both billing and navigation, it’s all about simplifying the experience.

Such partnerships tie into another column in the growth plan; entry into new markets. While some territories have been experiencing the Netflix bonanza for more than a decade, there are still markets where the brand is a newbie or even non-existent. This is the simple aspect of the plan, launch in new regions, though the complication comes with the experience.

Some areas are mobile orientated, some have poor connectivity and some have lower-end devices. In each of these circumstances, the Netflix proposition needs to be adapted to standardize the experience over every device. This standardization also extends to the different partnerships as well. There is no such thing as differentiation here, the Netflix platform will be the same wherever you go.

The final pillar is localisation. Ferreras said Netflix will continue to aggressively expand its content portfolio, not only moving into new genres, but also creating content which is targeting specific countries or regions. This is where Netflix needs to improve in some regions, as the depth of content in the right language or genres lacks. It is a work in progress, though local co-production initiatives with partners will help accelerate this process,

One area Ferreras highlighted the business will not be heading is live sports. The objective of Netflix is to innovate through creating experiences which other platforms cannot. In sport, Netflix is increasing its portfolio with sports documentaries and interviews, though this is content to support the sports story. When delivering live sports to the consumer, not only does this not fit with the on-demand ethos of Netflix, but it cannot do anything different from traditional broadcasters. As a genre, live sports does not fit the bill.

Netflix might be an internet heavyweight, but the opportunity to grow is still quite surprising.

Internet giants decide US government has nothing to offer security talks

A coalition of internet giants have decided to have a meeting to discuss cybersecurity and misinformation during November’s US mid-term elections, but the government didn’t make the invite list.

It isn’t often the worlds tech giants all get along, but this seems to be an area which they can all agree on. Something needs to be done to remove a repeat of the controversy which has constantly stalked Donald Trump’s Presidential win, and it isn’t even worth bothering listening to the opinions of the government.

According to Buzzfeed, Nathaniel Gleicher, Facebook’s Head of Cybersecurity Policy, called the meeting, inviting twelve other organizations but the government was not on the list. The snub seems to follow a similar meeting in May, where each of the invitees left feeling somewhat disappointed with the government contribution. We can only imagine Department of Homeland Security Under Secretary Chris Krebs and Mike Burham from the FBI’s Foreign Influence Task Force simply sat in the corner, one holding a map and the other pointing to Russia shouting ‘we found it, we found it, look, they don’t even do water sports properly’.

“As I’ve mentioned to several of you over the last few weeks, we have been looking to schedule a follow-on discussion to our industry conversation about information operations, election protection, and the work we are all doing to tackle these challenges,” Gleicher wrote in an email.

The meeting will take place in three stages featuring the likes of Google, Twitter, Snap and Microsoft. Firstly, each company will discuss the efforts they have been making to prevent abuse of the platform. Second will be an open discussion on new ideas. And finally, the thirteen organizations will discuss whether the meeting should become a regular occurrence.

While interference from foreign actors has proved to be a stick to poke the internet giants in the US, criticism of the platforms and a lack of action in tackling misinformation has been a global phenomenon. European nations have been trying to hold the internet players accountable for hate speech and fake news for years, but Trump’s Presidential win is perhaps the most notable impact misinformation has had on the global stage.

With the mid-term elections a perfect opportunity for nefarious characters to cause chaos the internet players will have to demonstrate they can protect their platforms from abuse. Should abuse be present again, not only would this be a victory for the dark web and the bottom dwellers of digital society, but it will also give losing politicians an opportunity to shift the blame for not winning. While this meeting is an example of industry collaboration, each has been launching their own initiatives to tackle the threat.

Facebook most recently revealed it scored users from one to ten on the likelihood they would abuse the content flagging system, and has been systematically taking down suspect accounts. Twitter has algorithms in place to detect potential dodgy accounts and limits the dissemination of posts. Microsoft recently bought several web domains registered by Russian military intelligence for phishing operations, then shut them down. Google has also been hoovering up content and fake accounts on its YouTube platform.

Whether the internet giants can actually do anything to prevent abuse of platforms and the spread of misinformation remains to be seen. That said, keeping the bundling, boresome bureaucrats out of the meeting is surely a sensible idea. Aside from the fact most government workers are as useful as a bicycle pump in a washing machine, Trump-infused politically-motivated individuals are some of the most notable sources of fake news in the first place.

Russian telcos push for OTT tax on new data storage laws

Russian telcos are lobbying the government to grant new powers which would allow them to tax non-domestic internet companies to ease the burden of new data storage laws.

According to Reuters, the telcos are proposing new legislation to ease the financial burden of the new laws designed to give the state more oversight on communications within the country. As part of the new rules, telcos would be forced to store customer data in the country (calls, texts, internet search history etc.) for six months. The data storage rules come into force in October.

Ahead of the October launch date, the telcos have warned the imposition would result in larger costs. To protect the pockets of shareholders and executives alike, the telcos have suggested these incurred costs for data storage would be passed onto the consumer with tariffs potentially rising as much as 10%. Should the government look favourably on the proposed bill, telcos could seek compensation for the costs from non-domestic internet companies such as Facebook and Google.

Of course it seems perfectly reasonable for telcos to want to spread the burden of the digital economy throughout the ecosystem, it has largely bore the brunt of the financial expense while others profits at the top of the value chain for years, but this is a different matter. Facilitating government ambitions to more surgically monitor citizens and potentially eradicate the concept of privacy might not sit easily with the internet giants.

That said, bowing to government ambitions despite a conflict with apparent principles of the organization is a story which has been hitting the headlines recently. In an effort to penetrate the Great Firewall of China, Google has been creating a censorship-friendly version of its news app which could filter out stories which do not please the government. Google is not alone here as LinkedIn accepted these censorship rules years ago.

Other technology companies might not be as flexible as Google or LinkedIn. Those who maintain principles and refuse to fund the governments ambitions to rid Russia of independent thought will potentially face regulator Roskomnadzor reducing the speed of access to their websites for Russian users.

This is nothing but a proposal for the moment, though should it progress, the internet companies will face another principles versus profits dilemma.

Alibaba revenues soar but profit column takes a hit on the spreadsheets

Alibaba comfortably passed analyst estimates for the three months ending June 30, as total revenues soared 61% year-on-year.

Total revenues for the period stood at roughly $12.2 billion, while the team brought in net income of $1.1 billion. Profits at the business have dipped quite considerably, 45% compared to the same period in 2017, though this was primarily due to share-based compensation for Ant Financials’ recent fundraising, and investments in new revenue channels.

“Alibaba had another excellent quarter, with significant user expansion and even more robust engagement across our growing ecosystem,” said CEO David Zhang. “Our China retail marketplace business continues to gain share, with New Retail initiatives driving further revenue growth and enabling our retail partners to seamlessly serve customers. We are executing our plan of providing more value and choice to users along the consumption continuum, with digital entertainment and local service offerings that tap into big addressable markets beyond core commerce.”

“The exceptional growth across our major segments of core commerce, cloud computing and digital media and entertainment validates our strategy of investing in customer experience, product, technology and infrastructure for the future,” said CFO Maggie Wu.

The core eCommerce business performed strongly as you would expect, the Taobao site increased monthly active users to 634 million for example, though the new investments are starting to make some waves.

The cloud computing business almost doubled with revenue growing 93% year-over-year to roughly $710 million, driven by land-grabbing additional customers and also increased interest in higher value-added products and services. During June, Alibaba Cloud’s product innovation focused on big data analytics, artificial intelligence, security and IoT applications, though products which enabled migration from on premise data centres onto the public cloud platforms were a notable driver of revenues.

Over at the Digital Media and Entertainment business unit, revenues reached roughly $910 million, a year-on-year increase of 46%. Success has been primarily attributed to Youku, its video hosting service and China’s answer to YouTube, with daily average subscriber growth of 200% year-over-year for the period. Part of this growth will be down to partnerships, such as the relationship with China Central Television (CCTV) to stream all 2018 FIFA World Cup games to hundreds of millions of fans in China. While this is of course a massive boost for advertisers, without such a show-piece next year, the team will have to think of some new ideas.

While Alibaba does seem to now be taking the traditional internet giant approach to business, grow today and make money tomorrow, it does not usually sit well with investors who are in it for the cash. That said, investors will be happy to see success in the new ventures. Profits might be down, but with the cloud and digital media business units performing well, investors will sit easier with other investments in areas such as its AI-powered voice assistant Tmall Genie and online food delivery service Ele.me. Alibaba is demonstrating industry trends are not just myths.

Investors will also be extra pleased with this performance considering the woes of rival JD.com. Last week, the group reported a 31.2% year-on-year rise in revenue to $17.8 billion, though this was short of analyst expectations. This quarter usually sees a boost in revenues due to the mid-year ‘618’ shopping festival, though execs blamed a crossover with national holidays as the reason for declined sales this year.

There’s nothing quite like money in your pocket, but Amazon has proved the ‘invest in tomorrow’ business model can work. Alibaba might have bought itself a bit more breathing room to forget about profits and focus more intently on diversification.

Streaming officially overtakes traditional Pay TV in UK

It’s been a watershed moment on the horizon for some time, but new figures from Ofcom confirm subscription numbers for streaming services have overtaken the ‘traditional’ pay TV market in the UK.

The Media Nations Report claims there are now more subscriptions in the UK to Netflix, Amazon and Now TV than there are to ‘traditional’ pay TV service providers. Traditional pay TV subscriptions totalled 15.1 million, while it was 15.4 million for the streaming subs. While this is a moment we have been anticipating for a while, the change will only accelerate as more streaming services develop partnerships to ease access for the consumer.

“Today’s research finds that what we watch and how we watch it are changing rapidly, which has profound implications for UK television,” said Ofcom CEO Sharon White.

“We have seen a decline in revenues for pay TV, a fall in spending on new programmes by our public service broadcasters, and the growth of global video streaming giants. These challenges cannot be underestimated. But UK broadcasters have a history of adapting to change. By making the best British programmes and working together to reach people who are turning away from TV, our broadcasters can compete in the digital age.”

As you can see from the chart below, younger generations are spending less time on broadcast television, preferring online formats, a trend which will compound the decline.

Ofcom TV Trends

With the more attractive demographics accelerating the decline, the traditional pay TV is going to become even less popular. Consumer habits are shifting online, and advertising revenues always follow consumer habits. With less advertising money being received, these providers will have less budget to compete with quality programming. It’s a self-fulfilling prophecy which ultimately leads to the death of traditional formats.

After several years of attractive growth, pay TV providers saw a 2.7% decrease in total revenue last year to £6.4 billion, while the spending on original programming is also declining. The BBC, ITV Channel 4 and Channel 5’s £2.5 billion combined network spending on original UK-made programmes in 2017 is 28% less than the 2004 peak of £3.4 billion. Admittedly this is not a direct representation of the pay TV subscription market, it does demonstrate the pressures faced by traditional content providers.

This is a change over which we have been expecting for a while, but perhaps this is another reality check needed by the telco industry to improve infrastructure.

Openet finds people are losing their faith in OTTs

Research commissioned by BSS vendor Openet found the Facebook data scandal has affected overall trust in digital service providers.

Just over half of the 1,500 people surveyed in the US, UK, Brazil and Philippines said they were less likely to share their data with an OTT (i.e. big internet company) as a result of the data scandal that hit Facebook with the Cambridge Analytica revelations. This trend also applied to free digital services in general as people have apparently got the memo that companies don’t just give stuff away without expecting something in return.

Openet’s narrative is that this represents an opportunity for operators to present themselves as a more trustworthy source of digital products and services. We had a chat with Openet CEO Niall Norgan and he described a potential role for operators as the providers of a seal of trustworthiness equivalent to ‘fair trade’ labels on consumer goods.

“Until now, digital service companies like Netflix or Uber have been held up as the poster children for delivering personalised digital experiences and services,” said Norgan. “But it seems some have been a little too liberal in their use of consumer data, ruining the party for everyone.

“Since the Facebook data scandal, consumer attitudes towards digital service companies and personal data have eroded, with some consumers even deleting accounts in protest. In fact, many have expressed an interest in paying for services if it means that their data won’t be abused, signifying an end to the ‘freemium’ era. Consumers are clearly screaming out for something different, something trustworthy.”

Of course Openet has a vested interest in this narrative. It has been undergoing a strategic pivot over the past couple of years to position itself as the vendor operators can turn to if they want to do something about the OTT threat. Norgan explained that billing itself isn’t the strategic play it once was and that operators need to get better at things like analysing data and partnering with other digital service providers to get with the times.

“Mobile operators have traditionally had a much more conservative approach in their use of subscriber data, despite having an abundance of it,” said Norgan. “For a long time, this conservative approach to data use has been used as an unfavourable measure for operators’ digital efforts, especially in comparison to other digital-first companies.

“But times are changing and it’s clear that consumers expect more if they are to hand over personal data in exchange for services. Mobile operators have earned the right to answer this call. But to be successful, they must learn from the mistakes made by social media and digital service companies alike. Transparency around data collection and opt-in processes are now top priorities for consumers. Operators must bear this in mind when seizing new digital opportunities.”

Here’s a summary of some of the findings from the report. Even if they deliver everything they claim, vendors like Openet can only take operators part of the way. They’re still wrestling with colossal cultural inertia and creating new digital services is never going to be a core competence. But the trust angle does seem to have some legs, if only operators can work out how to exploit it, but in a good way.

Openet OTT survey

Uber sets sights on emerging markets

Uber has launched a more data-friendly version of its popular ride-sharing app to target emerging markets, starting in India.

Uber Lite is a reduced version of application, which works on any network and any android device, which is only 5MB the equivalent of three selfies. The core functionality of the app has been retained, though many of the bells and whistles (which we try our best to ignore) have been removed during the efficiency mission.

“We continue to see exponential growth outside of the U.S., and are thinking a lot about building for the next hundreds of millions of riders who we hope will choose Uber to get around,” said Shirish Andhare, ‎Head of Product for Emerging Markets. “That’s why today, we’re introducing Uber Lite: built in India, designed for the world. Uber Lite is a simple version of the rider app that saves space, works on any network, and on any Android phone.”

Part of the challenges with the app will be adapted the service for those in areas with spotty connectivity. One solution is for the app to decide where the driver picks you up, with a number of designated pick up points. Popular destinations are also cached, while the team is also boasting about machine learning capabilities which should personalise the service, both of which could streamline the process of booking a ride but the practicalities remain to be seen. The map function has also been removed, which is an interesting idea.

The pilot will be launched over the next couple of months, with new markets being targeted later in the year.

Mavenir places fortunes in hands of big boys and RCS

Mavenir is a business which has been growing steadily over the last few years, capitalizing on the virtualization buzz, though future prospects could ultimately be out of their control.

One aspect of the business model for Mavenir is simple. It is somewhat reliant on the process of decoupling hardware from software, the emergence of standardised NFVi, which in turn will allow operators to reduce spending on hardware, placing more emphasis on software, which is the dream situation when rolling out the 5G world. Mavenir does of course have some pretty handy technology outside this grand plan, but this seems to be the general thesis.

This trend of decoupling hardware from software is already underway, though admittedly progress has been lethargic to date due to resistance from today’s heavyweight vendors and some operators clinging to the strategies of yesteryear, but staggered steps forward are being made. This is where Mavenir can enter the fray with the knockout punch; because its business model is not associated with hardware, it can offer software products and services cheaper.

The overarching theory is sound. Companies like Huawei and Ericsson, despite becoming software players in their own right, will have to protect total revenues; the transition from an integrated hardware/software solution to purely software will drop revenues, therefore in the first instance prices in the pure-play software business will be inflated. These are companies which will not want to shock investors with a plummet in revenues, therefore the transition into the virtualized world with be ‘managed’. With the traditional heavyweights overcharging, Mavenir can swoop in and undercut because there are no legacy hardware business revenues to worry about.

This all sounds like a very effective business model, but a lot of it is dependent on factors which are outside the control of the company itself. As it stands, Mavenir is profitable, with revenues of roughly $500 million and plans to grow this number to more than $1 billion in four years, but this all depends on virtualization trends picking up pace, operators embracing the new dynamics of the digital economy, 5G deployments to be as optimistic as currently being preached, and of course the assumption they can undercut the bigger boys on price.

But this is only one part of the Mavenir story, the other is focused on RCS, and looks incredibly promising. To date, RCS has been somewhat of a dirty word for the operators, with the webscale player plundering the bounties. But the tide is turning. Recognising the potential for RCS when delivering new services in messaging and multi-media content, it is embraced by operators in North America, with trends slowly beginning to sail across the Atlantic to Europe.

In the RCS world, Mavenir has been one of the first to get to the party. The team has already developed cloud-based applications, allowing easier integration for the operators, but more importantly, these applications aren’t just focused on the consumer services. This is where the webscale players have been reaping the benefits, but with an eye on the enterprise services market, Mavenir has the potential to make solid progress.

Another very important factor is the procurement process. The team already count 240 companies around the world as customers, and many of these customers are fickle beasts. They don’t like the unknown and fear change, the fact Mavenir is already a known entity is a positive. But known under what name…

This has been the plague of the business for the last few years. It was known as one name, then another brand, before adopting a new logo. Consistency has not be a major play, which will certainly make some nervous. A big question is whether Mavenir has permanently solved its identity crisis.

The theory about being able to undercut competitors is believable, but until competitors start talking about pricing models, we’ll never actually know. The assumption here is competitors will be defensive of hardware revenues, not aggressive on the software side. However, trends in the VoLTE world, where Mavenir is arguably knocking the likes of Nokia and Ericsson off the pedestal, and RCS are looking promising for the business.

A large component of Mavenir’ success seems to be heavily reliant on the deviousness of today’s mega-vendors and whether they will abuse relationships with customers, as well as adoption trends with are largely uncontrollable. A lot of future success seems to be dependent on moving cogs functioning smoothly and in a timely manner, but the team is confident… some might even say cocky.