- Africa's biggest mobile phone operator MTN recently announced a multi-million dollar software deal with global billing firm Intec with the aim of launching 3G (third generation) mobile communications in South Africa. This deal is a significant win for many reasons - and not just for the companies involved. It could soon provide South Africans with cheap basic local calls.
Under the terms of the contract Intec's so-called "Singl.eView technology" will be installed to handle billing for MTN's South African operation, which has over 7.7 million pre-paid and post-paid subscribers. This is a good system to have in place since it will provide MTN with the technical flexibility to bring new services quickly to market, without having to worry about the process of charging end users or third party vendors. Every calculation is done automatically.
This agreement is also significant for MTN as it shows the industry that the company is willing to invest serious money on creating a solid, reliable network-one that can not only support rapid growth rates and provide a superior customer billing experience, but, most importantly, manage the uncertainties of tomorrow's market demands. This is crucial to South Africa's telecommunications industry, which is currently steering its users towards next generation services.
Otherwise known as 3G, next generation services are promising a wealth of possibilities to South Africa's mobile phone users, including wireless Internet access and video down streaming. As the market for 3G develops, so will the opportunities to expand the technology's services. However, it is still unclear as to what customers will want to pay for.
This probably explains why MTN has taken a forward-looking approach to handling a forward looking technology such as 3G. In other words, the company's investment in Intec's solution is to ensure the network is flexible enough to manage the billing requirements of any service type- even those that have not yet been created.
Like MTN, Intec gains a lot from this new contract as well. Apart from the obvious profit gain, Intec can now add another tier-one company to its expanding customer list. The fast growing billing company - which was co-founded by South African businessman Mike Frayne in 1997 and has a major R&D facility in Cape Town - already provides its software to all of the telecommunications players in the country. The firm also has a major market share in other African countries such as Kenya, Egypt and Nigeria.
The next challenge for Intec is to ensure that it maintains the level of commitment required to support the roll out 3G service in South Africa - the second country on the continent to launch the service after Mauritius. If MTN's delivery of 3G is successful, then customers will have a reliable network to access multi-media content via their mobile phone, along with the choice of selecting the best price plan for their life style. But whether 3G will attract the number of customers need to make it a commercial success is still anybody's guess.
Fortunately, South Africa - along with the rest of the continent - has the advantage of being the last place in the world to roll out 3G, enabling operators to sit back and learn from their Northern counterparts before developing their own business plans.
The idea to launch 3G in South Africa, for example, was shelved for a number of years for fear that the cost of setting the whole thing up would be too great. A big worry was the possibility of running up billion dollar debts just to obtain a 3G license - a financial predicament that many European operators faced when they won the auction to compete in markets such as France, UK and Italy.
As the social and economic benefits of 3G became clear, however, the South African government stepped in to help operators avoid the financial pitfalls of auctions. This was achieved by capping the cost of 3G licenses. This enabled MTN, Vodacom and Cell C, the country's three mobile providers, to acquire licenses for a fraction of the cost paid by European operators. Vodacom, the number one mobile operator, launched its services in December 2004. Following closely behind Vodacom's footsteps is MTN, which is expecting to roll out its 3G UMTS service in the first half of this year.
Of course, the big question that everyone is asking is exactly how much will MTN’s handsets cost and will they be accessible to the masses? In Europe many operators have had to give away their costly phones for free just to attract new customers to their services. So far it seems to be working. Vodacom South Africa is also offering free phones to initial users.
Indeed South African mobile operators, like their foes in Europe, are faced with the same worries as they embark on similar marketing tactics to attract customers. MTN predicts that 10 percent of the continent's population will own a 3G handset by 2010 - with the greatest per capita of users in South Africa. This is considered a very small number.
The issue of competitive pricing to attract users is therefore important. Most of the world's mobile players are relying on cheap, flat-rate "all you can use" package deals to increase 3G take up. Under-pricing costly services, however, will only lead to financial difficulties down the road.
Flexible price plans supported by billing applications must be introduced sooner rather than later. In order to do this and make a profit, operators have to deliver a service that most people would want to access. So far the killer application for 3G in Europe has not been complex, high-bandwidth applications such as video down-streaming, but cheap basic local calls. Will this also be the case in South Africa?
MTN's plans for next generation accessibility are ambitious. And although it is too early to gage 3G's success, one thing is clear: if it is going to make a profit anywhere, it will probably be in South Africa. The country's mobile penetration rate is around 40 percent, compared to less than 6 percent for most other African countries. Furthermore, MTN already earns its highest revenue from data services in South Africa - a clear indication that the market already shows an interest in using mobile phones for other purposes apart from basic calls.
In addition, South Africa's mobile player is planning to extend its 3G service - which will include wireless Internet access - to reach remote areas and less affluent neighbourhoods. This will give many people an opportunity to tap into the Internet for the very first time, bringing the entire country up to speed with the rest of the digital world. With the right billing tools in place, the company can deliver this vital service at a price that still makes a profit - without ever having to hurt the end user's wallet.
*Georgia Hanias is a freelance journalist affiliated with Intec
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