As technology becomes increasingly complex, the core business of providing telecommunications connectivity becomes increasingly simple. A business that started by providing numerous different transmission platforms  through which we could communicate is consolidating into a large and expansive IP network, moving data at high speed around the globe. As such we have seen significant investment and dramatic progress in the industry’s ability to provide the same services, but in much greater quantities, at better speeds and higher quality.

This transformation benefited  consumers substantially as we pay lower prices for better services, but from the providers’ perspective this has serious consequences of declining Average Revenue Per User (ARPU) and a need to diversify to drive profits. M-Pesa; the Safaricom mobile payments service in Kenya, is possibly the best example of a telecommunications company successfully expanding into other areas in a market-changing way. But at its inception, it was simply an example of a company taking a customer-centric approach and directly transforming to meet their customers’ needs.

Customer centricity is at the root of Value Added Services (VAS), since you simply answer the clients’ needs with solutions that needn’t reside naturally in your business. Despite this, the idea and importance of Value Added Services such as M-Pesa can be interpreted quite differently in the context of the consumer and enterprise markets.

Consumer

In many ways the consumer VAS market in Africa is quite developed. M-Pesa is probably the most socially integrated mobile payments service in the world, while the idea of such a service has not been taken up so keenly in much of the western world, likely due to the more developed banking system and greater reliability of credit ratings. The key point in any value added service is that transforming your offering to meet a client’s need has parallel benefits – direct revenue impact of additional services and positive impact on customer loyalty, which are also the drivers for seeing this trend towards customer-centricity across industries.

Looking at an example of the insurance industry in Africa, while large insurance companies in Africa struggle against a historic lack of trust in the insurance market, telcos are making a play to cross the industry vertical and build on the trust that consumers have in them. While margins to a telco on a simple insurance product are low, the sale builds a substantially stronger bond to the customer, something particularly important in a market where prepay dominates and consumer loyalty is low, mainly driven by price.

The idea of mobile money speaks mainly to the consumer market, but there is also huge potential for the telco operators to build more integrated, value-adding solutions when selling to enterprise.

Enterprise

The shift to a customer centric approach is also increasingly being mirrored in the enterprise space, as telcos look to find revenue further up the value chain by creating tailored, transformational solutions for large enterprise customers. It is easy to see the value for both sides in this equation: the customer receives a full, one stop shop service solution with simplified pricing and vendor management structure, while the provider has generated a long term partnership with a large client and increased revenue from the services they provide. In this context we see a potential enterprise sale begin to appear closer to an outsource or managed service deal than a simple minutes and megabytes sale, with the relationship-depth and revenues to match.

The enterprise market in Africa provides an interesting opportunity to telcos with a presence in Africa. Like many markets on the continent it is immature but with huge potential, but the key distinguishing factor is the potential to create lasting partnerships with clients as they succeed in growing in Africa. While there are a unique set of challenges around building the capability both technically and commercially, it is the potential to prosper in supporting the growth of large businesses around the continent that makes it such an attractive opportunity. For telcos, taking the enterprise relationship further involves understanding their client’s customer, and helping shape solutions with those clients to disrupt the market in which they operate.

Conclusion

It is not yet known what the biggest breakthrough in VAS will be, whether we will see a worldwide shift to mobile payments or if other services such as m-health will bring healthcare to rural populations around the globe. But one thing is for certain: the default business model for telecoms operators is unsustainable in the long term. If approached correctly, using their customer intelligence appropriately, telecoms providers can use Value Added Services to be the biggest differentiator in any region. But; if ignored or incorrectly approached, competitors will push forward and pick up profits at their expense.

In an industry full of cost challenges such as high capex costs for the provision of core services, an opportunity that creates loyalty in the customer base, increased revenue and diversification of risk away from core business areas is a key opportunity to grasp. Specifically in Africa, there is opportunity right now to gain enterprise market share and clients with the potential to remain loyal for years to come if relationships are built correctly. The stickiness provided by long-term managed service or outsource deals is substantially greater than that of any more simple sale.

Whatever the outcome, African telecoms will be an interesting market to watch in coming years as demand for connectivity drives significant change throughout the continent.