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In a new report (PDF) released by the GSMA Association (GSMA), an organisation representing the interests of mobile operators worldwide, it is revealed that relationships between mobile operators and African mobile startups need to exist.
Several startup founders, both on and off the record, complain about the reluctance of telecoms companies allowing their services to run in respective markets. Those being allowed to run on operator networks are apparently being over-charged as well.
“On every ten naira made using my service, the operator takes seven naira leaving us with just three naira out of which we will still incur other expenses including royalties to owners of content being sold on our platform,” said a startup founder on condition of anonymity.
This is not an unusual trend and many startups are being forced to look elsewhere when it comes to rolling out their services. Apps are still being rolled out even though USSD is simpler to access on all devices.
In addition, operators are also competing with startups by offering services that are similar to what startups are offering, which suggest that the operator may be reluctant to allow startups to effectively use their network via application programming interface (API) integration.
“I would rather manage 3000 users that pay me fully than 100,000 potential users that I will only get 20% of earnings after struggling to agree to strenuous inconceivable conditions,” the founder added.
Operators said they had invested billions or borrowed dollars in order to build their networks, which must be paid back within a given period. This creates the need to generate revenue from as many sources as possible.
The aftermath of this cat and mouse relationship between mobile operators and startups has resulted in both parties attempting to survive without each other. This is something that the GSMA’s latest report believes is not in the right direction.
Operators need startups
As much as it is believed that operators have enough technical and financial capacities to survive, the report showed that they need startups to deliver more value to end users, partner for innovation and access new revenue streams.
By opening their APIs to local developers, operators receive the opportunity to offer their customers some of the most innovative and relevant mobile services available in their local markets.
“By partnering with local tech innovators and attractive start-ups, operators also have a chance to give their brand image a boost. Success could be measured by looking at metrics such as the number of new mobile services launched through the API programme and the number of end users of these services,” GSMA reported.
It added that beyond the technical benefits, opening APIs gives operators the opportunity to engage with the broader local startup and developer community and partner with the most innovative and talented start-ups in their markets before anyone else.
“At a time when several emerging markets operators are considering creating investment arms (e.g. Safaricom’ Spark Venture Fund, Orange Digital Ventures, MTN’s large investments in Africa Internet Holding and Travelstart), being the first to approach and partner with leading start-ups is a major benefit.”
Accessing new revenue streams
Quoting a February 2016 IHS report which revealed that the telecom API market should reach US$1.2-billion globally by 2020, up from US$702-million in 2015, the GSMA believe that this is a healthy 11% CAGR, with growth coming mainly from the EMEA and Asian regions.
“While most of this revenue opportunity is driven by telecom APIs opened to the so-called ‘short tail’ (more established businesses, not start-ups), operators opening their APIs to all third parties (larger businesses and start-ups) also have the opportunity to unlock future revenues through fast-growing start-ups. Uber, Go-Jek, or Viber — some of the largest customers of API aggregators (Twilio, Clickatell, and Nexmo, respectively) — did not exist just seven years ago.”
Redefining revenue models for operators opening up their APIs
Although there are two main revenue models for operators opening up their APIs, pioneering operators around the world have learned that revenue opportunities from startups are mainly indirect — from revenue-sharing agreements — but also through a rise in traffic of core mobile services (SMS, USSD, mobile money, etc.). In this model, APIs are seen as an enabler, not an end product.
When an API is viewed as an enabler, operators can generate indirect revenue from startups using operator APIs (B2B2C). On the other hand, if an operator chooses to see API as a product, they can make direct revenue from startups using operator APIs (B2B).
Operators cannot simply “build it and they will come” approach. Instead, a more successful approach would be start-up friendly operator APIs.
“In emerging markets, operator APIs can still play an enabling role to unlock the growth of start-ups. This is a window of opportunity for both operators and start-ups, but it may not last. In this context, we are calling mobile operators to open their APIs, harmonise them, and collaborate with one another in order to seize this opportunity.”
“In the meantime, teams behind operator API programmes need to accelerate their outreach efforts to educate and support the local start-up community about operator APIs and engage with them more broadly,” GSMA said.
It also gave four recommendations for start-up friendly operator APIs in emerging markets – open, harmonise, collaborate and outreach to developers.
“The value is not in the APIs themselves, but in the innovative mobile services that start-ups in markets like Rwanda, Sri Lanka, Indonesia, or Egypt want to scale using operator APIs. The value will come from start-ups willing to take risks, and operator APIs will only play an enabling role if developers use them.”
Feature image: Alex Garcia via Flickr.