Company Trend Analysis - TV Partnerships To Embed Data Usage Trends - JUNE 2017


BMI View : African operators have struggled to generate significant returns on investment in 3G and, more recently, 4G. Our view is that low-cost access to video content will provide the quickest route to monetising 4G investments, while also encouraging customers to spend more per month on a recurring basis than they would otherwise do on basic voice-and-Internet 2G/3G platfor ms. MTN's partnership with Kwese TV is, therefore, one we would hope to see replicated across the region.

MTN Ghana has entered into a partnership with Econet Media-owned Kwese TV to deliver premium entertainment and sports content to the mobile operator's 4G subscribers. Intense competition in the Ghanaian mobile market has already forced Airtel into a merger with Tigo in a bid for scale that will give it access to revenues and capital needed to reinvest in high-speed mobile broadband infrastructure. MTN has already successfully developed mobile financial services (MFS) as a means of broadening its customer base. However, as we have long argued, significant returns on 4G investment will be elusive until operators are prepared to offer higher-value content, with paid video content most likely to generate recurring revenues.

Video To Increase Data Usage Proclivities
MTN Ghana: Mobile Service Revenues (ZARmn)
Source: BMI, MTN

Although the partnership will offer first-to-market entertainment programming from youth culture channels such as Revolt, Viceland and Sky Vision, which are not available from any other provider, we believe the real draw for MTN's customer base will be Econet Media's comprehensive access to sports content. In March 2017 alone, the company secured exclusive free-to-air sub-Saharan African distribution rights for World Cup 2018 content, obtained rights to pan-African boxing content from Kalakoda Promotions and launched the popular ESPN sports channel in key African markets.

The satellite TV operator only launched in January 2017 to a footprint that initially covered only Ghana, Rwanda and Zambia. Rapid diversification into streaming will allow the fledgling operator to recoup its distribution rights investments and help it rapidly enter new markets. Partnering with MTN - which has a 3G/4G presence in 20 sub-Saharan African markets - will therefore be essential to its long term growth ambitions.

Deals such as this will also benefit mobile network operators, whose core voice and messaging revenue streams have been undermined by the emergence of free or very low-cost over-the-top (OTT) IP-based alternatives such as WhatsApp, yet are struggling to encourage users to adopt disparate on-net value-added services to offset that impact. Video, as we have argued in the past, will be essential in attracting and retaining customers, with the universal appeal of sports content the most effective way of achieving that goal. Kwese's investment in more mainstream or niche programming, such as that it is taking from AMC and Scripps, will appeal more to traditional satellite TV service users but, as smartphone screens get bigger and operators develop more data-centric packages with multi-screen options, so the appeal of mobile TV in Africa will grow.

Digital services accounted for 25% of the MTN Group's ZAR10.68bn (USD) consolidated data service revenue in the year to December 2016, outpacing MFS (7%), general value-added services (4%) and ICT (5%). Despite falling data tariffs, data usage increased sufficiently to ensure revenues still grew year-on-year. MTN Ghana reports that data accounted for 42% of total revenue in 2016, driven by deep smartphone penetration and wide availability of LTE. New lifestyle data bundles also played a key role in ensuring recurring use of premium services. Video content will ensure that this trend continues, not just at MTN Ghana but also at other operators across the region.