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Executive Summary The transformational role of mobile services Evolution of the industry worldwide Development of Nigerias Mobile Market Relevance of mobile industry in overall Nigerian economy Overview of mobile applications in social and economic activities across emerging markets Nigerian end users perception on the impact of mobile services The value of mobile services in daily lives Financial impact on individuals Common uses of mobile services Impact on rural population Example of local social initiatives Pyramid Perspective
Executive Summary
Mobile communications are having a positive impact in Nigeria by attracting investment and developing various commercial activities
Pyramid analyzed mobile adoption trends, examples of mobile applications as well as the perspectives of key players and 1,500 Nigerian end users. The top five conclusions of our study are as follows:
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Mobile services have ample reach in Nigeria and will continue to post rapid growth. Mobile subscriptions surpassed 72.6m at YE2009 resulting in a penetration rate of 50% of the population. Pyramid projects subscriptions will surpass 128m by 2014, creating a substantial user base for the development of the mobile applications market. The mobile industry is having a positive economic impact by generating substantial investment in infrastructure and employing a significant number of Nigerians. During the past decade, approximately $16bn has been invested in projects related to mobile services. There are as many as 3m jobs directly and indirectly related to mobile services in the country.
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Executive Summary
...Nigerian end users agree that mobile services have favorably influenced every aspect of their lives
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Nigerian end users agree that mobile services have positively influenced every aspect of their lives, enabling them to connect with different people, access information, create business opportunities, lower transaction costs and enhancing social interaction. Around the world, Pyramid has identified numerous examples of initiatives using public and private funding that leverage mobile services in social programs, improve the operation of various vertical industries and foster connectivity in remote areas. The future development of the mobile market in Nigeria will be driven by collaboration among industry players, the local government and international organizations. End users in Nigeria value mobile services greatly and are frequent users of this platform, yet the availability of specific mobile data-based applications is still limited. Developing a set of tools and information systems will require close collaboration among local and international entities; telecom vendors and operators can play a key role in importing successful initiatives to Nigeria.
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Table of Contents
Executive Summary The transformational role of mobile services Evolution of the industry worldwide Development of Nigerias Mobile Market Relevance of mobile industry in overall Nigerian economy Overview of mobile applications in social and economic activities across emerging markets Nigerian end users perception on the impact of mobile services The value of mobile services in daily lives Financial impact on individuals Common uses of mobile services Impact on rural population Example of local social initiatives Pyramid Perspective
The evolution of the mobile services market around the world is driven by advances in the areas of access networks, devices and applications
Wider Availability of High Speed Networks Versatile and Affordable Devices
Key Aspects: Intense competition among vendors brings device prices downwards Key Aspects: Declining prices for connectivity services Operators promoting bundled services Evolution towards 3G and beyond Shared access and coverage of rural population Governments and NGOs supporting programs to connect schools, medical centers, etc Key Aspects: Development of User-Generated Content (UGC) Virtual communities and cloud computing Changing patterns in entertainment drive advertising investment towards mobile platforms Improvement in key features (size, definition, battery life, camera, etc) Wider availability of embedded modules (WiMax, 3G)
MOBILE MARKET
Variety of Applications
The global telecom market continues to grow at rapid pace, particularly in the area of mobile services with subscriptions surpassing 4.5bn in 2009 and very important potential going forward in the area of mobile broadband (ie. Internet) services
Pay-TV VoIP Fixed circuit-switched voice Mobile broadband Mobile voice/messaging Fixed broadband
Pyramid forecasts that over 55% of mobile subscriptions in the world will be using 3G+ in the next three years
In Nigeria, the mobile industry has developed over the past decade driven by a successful liberalization program and the overall potential of the market
Milestones in licensing and concessions awarded by the NCC
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
February: Newtelecom policywas Digital mobile enacted. licenses were December: awardedto Auctionsfor MTN,Mtel GSM andEconet licenses. Wireless (later Vmobile, Celteland nowZain).
June: Telecommun Firstnational icationsAct longdistance2003was licensewas enacted. offeredto MTSFirst Wireless. September: FourthGSM licenseand national carrier license awardedto GloMobile. November: Nitels national carrierand international gateway license became operative.
October/ November: February: January: September: May: November: Twonational NCC Anational Gateway NCCawarded Three longdistance introduced carrier Telecoms licensesin national operator unified licensewas Integrated the2.3GHz longdistance licenses access awardedto Services bandtofour operator became licenses. PrestCable& national operators, licenses operative. Thesewere SatelliteTV longdistance but became grantedto13 Systems license discussions operative. companiesin became arestill total, operative. ongoingto March: including finalizethe December: NCCissued MTN,Zain, 3GUMTS October: issue Alloperators MultiLinks licensesto Etisalat had and introduced MTN,Zain, launched Starcomms. GloMobile services persecond Theearliest andAlheri billing. operative Engineering dateforthe licenseswas July: July2006. NCCawarded fixed July: wireless Transcorp licenses buys75% stakeinNitel
Source: NCC, Pyramid Research
Pyramid estimates that the Nigerian mobile services market has grown from 422,000 in 2001 to roughly 73m at the end of 2009
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The availability of prepaid services has been a key driver of the expansion of Nigerias mobile market; data services are only beginning to take off
Mobile market indicators, Nigeria, 2001-2009 2001 Subscription penetrationof population Userpenetrationof population Prepaidsubscriptionsas percentageoftotal ARPS(US$) DataARPSas percentageoftotalARPS Monthlyminutesofuse (MOU) Annualchurnrate 0.3% 2002 1.2% 2003 2.4% 2004 7.2% 2005 13.8% 2006 20.9% 2007 28.2% 2008 43.1% 2009 48.7%
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In US-dollar based revenue terms, the Nigerian mobile services market expanded at one of the fastest rates in Africa for the past decade and is the second largest in the region
Size of the mobile market, nominal GDP per capita and mobile service revenue CAGR, 2001-2009, Select African markets
80%
70% 60% 50% 40% 30% 20% 10% 0% $0 $1,000 Kenya $1,072 Ghana $1,093
Nigeria $6,235
Algeria $3,101
Tunisia $1,395
Egypt $4,742
Morocco $3,048
$2,000
$3,000
$4,000
$5,000
$6,000
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The explosion of the mobile industry in Nigeria has resulted in a series of positive effects across the economy ranging from investment in networks to the creation of employment
Mobile services have multiple positive effects in an economy, most notably in emerging markets. Their economic benefits extend beyond the investment that network operators allocate to license fees, taxes and network equipment and include the following factors: End user spend money on mobile telecom services and devices allows a new industry to flourish Telecom operator spending on marketing, distribution, maintenance, training, support and network enhancements create important benefits for all involved in the value chain Mobile operators create employment, both direct and indirectly, and invest in the development of the labor force. Mobile services have a wide economic impact in a country, since they enable end users to conduct their daily business in a more effective manner, reducing the time and cost of transactions, improving access to markets, commoditizing information and generally allowing businesses to operate more efficiently.
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According to Pyramids estimates, the annual revenue from mobile services represents between 2% and 7% of African countries Nominal GDP; in Nigeria this ratio is close to 4%
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Mobile operators also contribute to the economy by directly and indirectly creating jobs to provide and distribute their services; in Nigeria, we estimate there are as many as 3m jobs related to this industry
There are several groups of jobs, which can be divided into two subgroups, that gravitate around mobile services: The top category of indirect employment encompasses equipment sales, infrastructure deployment, advertising, marketing and public relations as well as security workers involved in the protection of base stations. Reportedly, in 2008 Zain employed as many as 8,000 security guards. At the base of the pyramid, there are mobile service resellers, recharge card distributors, retailers, phone booth operators as well as street vendors. The so-called mini call centers consist of simply one or a few mobile phones and airtime bought in bulk from the operator. Call center operators allow other people to use the phone for a fee and quite often will take a message, also for a fee.
Source: NCC, Pyramid Research
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In addition, the sale of airtime and SIM cards has driven various forms of entrepreneurship
Distribution on the streets and MTN and Glo points of sale, Nigeria
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In terms of capital investments, mobile operators in Nigeria have worked on infrastructure deployments, network rollouts, upgrades and expansions; the investment related to mobile services, for the past decade, adds up to approximately US$16bn
Private investment by telecom operators in Nigeria, 2001-2008
Pyramid Research estimates that capital investments in mobile networks and operations have accounted for 80% of total telecommunications foreign capital investments (a total of more than $12bn by the middle of 2008) since the Nigerian government successfully liberalized the industry in 2001. As of March 2010, the NCC reported $18bn in telecom sector CAPEX, $16bn of which is invested by mobile operators.
Source: Pyramid Research, NCC
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Mobile networks in Nigeria are in constant evolution; operators such as MTN, Zain and Glo, have undergone a technological migration from 2G to 2.5G and are working towards 3G
% of Total Terminals
Note: For the purposes of this exhibit, the following categories apply: 2G = GSM, TDMA, and CDMA One technologies 2.5G = GPRS, EDGE, and CDMA 1X, technologies 3G+ r= CDMA 200, UMTS, HSPA, Mobile WiMAX, and LTE technologies
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Additional areas where mobile services can have an important impact include rural connectivity projects, education, health, finance, agriculture, transport and entertainment applications
Vertical Rural Connectivity Nigeria
Millennium Village Pampaidaextend telephony services to hard to reach rural areas
International
India: Gramjioti Pilot Program- provide mobile broadband connectivity to villages and towns around Chennai in India
Rural Connectivity
Rural Telephony Programtrain and support local villagers to provide mobile based pay-phone services
Uganda: Village Phone- train and support local villagers to provide mobile based payphone services
Education
Ladybird Mobile Reading Program- support classroom activities through mobile based educational exercises
South Africa: Dr. Mathleverage the MXit mobile social platform to provide tutoring services
Health
My Question, My Answer- SMS and phone operator based educational and counseling program covering the HIV/AIDS topic
Uganda: Text to Change- SMS based interactive quiz and educational tool covering the HIV/AIDS topic
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Additional areas where mobile services can have an important impact include rural connectivity projects, education, health, finance, agriculture, transport and entertainment applications
Vertical Finance Nigeria
Moneybox Africa- mobile commerce application to virtually store and move money, make payments and enable other mobile based financial transactions Cassava Growers Projectdisseminates market information in conjunction with information points and trade agents
International
Kenya: Safaricom M-Pesa- SMS based mobile payment and money transfer platform
Agriculture
Uganda: Grameen Market Information- disseminates market information through SMS, supported by Community Knowledge Workers
Transport
Hot FM Abuja Traffic Monitoring- Collects traffic information sent by listeners through SMS and mobile calls.
United States: OnStar- GSM based in-vehicle security and information service
Entertainment
DSTV and MTN Mobile TV Service- broadcasts content over a mobile network
South Africa: Mxit: WAP based instant messaging and social networking program
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Table of Contents
Executive Summary The transformational role of mobile services Evolution of the industry worldwide Development of Nigerias Mobile Market Relevance of mobile industry in overall Nigerian economy Overview of mobile applications in social and economic activities across emerging markets Nigerian end users perception on the impact of mobile services The value of mobile services in daily lives Financial impact on individuals Common uses of mobile services Impact on rural population Example of local social initiatives Pyramid Perspective
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During 2009, Pyramid conducted a survey of over 1,500 mobile end users in Nigeria to analyze the impact of mobile services in their daily lives
The sample group of our survey is representative of Nigerian society, including a combination of female and male participants. The research was designed to include mobile users living in different parts of the country, with 70% of interviewees living in urban areas and 30% living in rural areas in the following regions and cities: Lagos, Abuja, Kano, Akure, Kaduna, Ibadan, Jos, Aba and Enugu. In terms of age groups, we focused the study on the 16-69-year-old population. Pyramid developed a questionnaire comprising mostly closed-end questions. The main topics covered in our interviews were as follows: Determinants of mobile ownership Drivers of usage Purpose and pattern of mobile phone usage, including: Work-related activities Entertainment and access to information Access to health, education, financial and logistics/transportation information and services
Perceived changes in patterns and benefits of economic activity among mobile phone users Perceived changes in work practices and networks of social contacts among mobile phone users Data was collected via a combination of phone-based and face-to-face interviews in households and high-traffic pedestrian areas.
Source: Pyramid Research
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60% of interviewees agreed that mobile services have positively influenced every aspect of their lives including 35% who claim that a mobile phone has dramatically improved all aspects of their lives
Q. What option best describes the impact of mobile services in your daily life? Nigeria, 2009
Source: Pyramid Research survey of 1,500 mobile service users in Nigeria, 2009
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Furthermore, over 80% of our sample has seen financial gains from using mobile services through a combination of saving on communications expenses and generating additional income by way of staying connected
Q. Have you seen a positive financial impact on your life from the use of mobile services? Nigeria, 2009
Source: Pyramid Research survey of 1,500 mobile service users in Nigeria, 2009
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End users from different age groups point out the positive financial impact of using a mobile phone ranges from increased opportunities to find jobs to savings in transportation and better access to information
Q. What type of financial benefits do you derive from mobile phone use? Nigeria, 2009
Age 46-69 Age 26-35 Job opportunity Age 36-45 Age 16-25
Increased ability to sell 0% 10% 20% 30% 40% Mobile phone users deriving benefit 50%
Source: Pyramid Research survey of 1,500 mobile service users in Nigeria, 2009
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Nigerians also rely on mobile services to conduct activities related to education, health and entertainment activities
Q. For which of the following activities do you leverage your mobile phone? Nigeria, 2009
Job opportunity
EDUCATION Communicating with teachers and colleagues Downloading information to mobile phone
Financial services
Education
EMERGENCY/HEALTH
Transportation & logistics
Calling friends, family and emergency services Communicating with doctor/nurse/hospital ENTERTAINMENT Listening to music/radio Playing games Taking/sending pictures
0% 20% 40% 60% 80% 100% Mobile phone users engaging in activity
Work-related
Source: Pyramid Research survey of 1,500 mobile service users in Nigeria, 2009
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In the area of work related activities, mobile services are leveraged by individuals living in both rural and urban areas
Q. For which of the following activities do you leverage your mobile phone? Nigeria, 2009
Source: Pyramid Research survey of 1,500 mobile service users in Nigeria, 2009
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In fact, for individuals based out of remote areas, mobile services are often the sole media of communication and a source of added income
Rural Telephony Project startup package and a phone lady on the outskirts of Suleja, a city of 105,000 inhabitants north of Abuja
Key Aspects of the Rural Telephony Project in Nigeria The program is a cooperation between the Growing Businesses Foundation (GBF), a Nigerian NGO, MTN Foundation (MTNF), which is the CSR arm of MTN Nigeria, the International Finance Corporation (IFC) and a group of small communal microfinance institutions (MFIs). A startup package, provided by MTNF, includes loans that range between N14,200 and N21,400 ($95 and $140), depending on optional material in the package, payable over a six-month period, and carry a 15% annual interest rate. The startup packages include a Nokia phone, an MTN SIM card, an optional antenna to boost the wireless signal, a solar charger, subsidized MTN airtime, promotional material. The promotional material is comprised of a table, an umbrella, chairs, banners showcasing call rates, a hat and a T-shirt. To date, the program has benefited 1,500 Phone Ladies in rural and semirural Nigeria. These beneficiaries operate in 21 of the countrys 36 states.
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Existing connectivity projects in Nigeria illustrate the complex organizational structure behind social initiatives
Rural telephony program partners and their role, 2004-June 2009
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Table of Contents
Executive Summary The transformational role of mobile services Evolution of the industry worldwide Development of Nigerias Mobile Market Relevance of mobile industry in overall Nigerian economy Overview of mobile applications in social and economic activities across emerging markets Nigerian end users perception on the impact of mobile services The value of mobile services in daily lives Financial impact on individuals Common uses of mobile services Impact on rural population Example of local social initiatives Pyramid Perspective
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Pyramid Perspective
Going forward, Nigerian end users expect to see a wider variety of data-based applications in the market; in the agriculture sector, for instance, we identified interest in a combination of information and transactional services
Q. What new mobile applications would you like to use in the future? Nigerias rural users
Money transfers over mobile phone Education-related applications from government Ability to pay for transportation fees with my mobile phone Agriculture-related information Local information (weather, news) 0% 10% 20% 30% 40%
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Pyramid Perspective
Overall, the future development of the mobile market in Nigeria will be driven by collaboration among industry players, the local government and international organizations
Key Strategic Aspects to Develop Social Initiatives Leveraging Mobile Technologies
Learn from initiatives established in other countries Attract internationals players (Multilateral organizations, NGOs, private app developers) Secure the collaboration of local industry players (incentives, funds, grants)
Developing a set of tools and information systems will require close collaboration among local and international entities Telecom vendors and operators can play a key role in importing successful initiatives to Nigeria Government agencies may facilitate databases of critical info (weather, agriculture, education) to start the program
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THANK YOU.
Badii Kechiche Sr. Analyst
PYRAMID RESEARCH UK Tel: +44-20-7560 4471 Fax: +44-20-7560 4485 PYRAMID RESEARCH US Tel.: + 1 617 871 1900 Fax: + 1 617 871 1933
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