Insight

Telcos as content providers –but why?

Analyst
Tracey Grant, IDC MEA

The focus of telcos are evolving and traditional dynamics are being replaced. Historically, they have been responsible for connectivity, but now business models are being revitalised with the development and growth of new services. The telcos of the Middle East and North Africa (MENA) are beginning to converge their traditional abilities and the delivery of attractive and compelling content is opening up valuable new revenue streams.

It’s little wonder they are jumping onto the content bandwagon, but what is motivating them? Content costs are high and it is a new skillset currently not catered for internally, but with the decline in traditional revenue channels, there are many reasons to actively search for new revenue streams, and content is a key driver of subscriber retention.

The ability to personalise and display a true understanding of their customers is a key factor driving telcos to enter this unknown arena. Mobility exaggerates consumer desires to devour media, and if a telco is already providing a consumer with voice, Internet, and mobile services, the provision of TV content is usually a welcome add-on.

It goes without saying that video is being consumed more and more across the region, and data usage is rising rapidly alongside this. Today’s consumers are showing an increased appetite for uninterrupted and unbuffered content access, meaning the growing popularity of video is a win-win situation for telcos if data usage revenues grow alongside the uptake of telco-operated content services.

The MENA region is extremely youth-centric and digitally enabled, and we already know that video is driving conversation, brand affinity, and the retention of customers. Value-added services such as the ability to watch content on-the-go and across devices are being rolled out by telcos across the region, albeit slowly. Over-the-top (OTT) providers have quickly embraced the concept of viewing content in whatever form and on whatever device, and now a ‘mobile-first’ mentality is gradually creeping into content strategy and delivery for telcos as well.

Reducing the level of churn is an essential focus for the telco community, and a happy customer is typically a long-term, paying customer. If another essential service such as content is provided to them, the customer becomes less likely to churn. Installing an additional set-top box after having the telco configure all the other services is a lot like hard work, and we know that consumers prefer the path of least resistance when it comes to in-home – and mobile – entertainment, connectivity, and communication.

As such, we are beginning to see telcos playing to their strengths. They realise that content delivery cannot only be profitable but also help to reduce customer churn. Providing a holistic experience, all from one contact point, is an attractive proposition for consumers who already deal with multiple service providers and are being bombarded by brands.

As well as helping to retain existing customers, an inevitable increase in the average revenue per user (ARPU) is seen when further services are added. That said, if telcos are to actively participate in this new sphere, they must offer service personalisation and develop a deep understanding of what they customers want to watch and how. Across MENA, but primarily in the GCC, telcos such as Etisalat, du, and Ooredoo are fine-tuning their packages and delivery methods as part of their content service rollouts. But these are still early days, and the region as a whole continues to offer significant opportunities for telcos looking to enter this space and capitalise on the strong demand that clearly exists.

At this point, it’s worth noting that there is a reluctance to pay online for services and products right across the region, an attitude that is proving to be a key challenge for all OTT, Pay TV, and IP service providers. Given this reality, telcos find themselves in a prime position courtesy of their integrated billing capabilities, enabling them to leverage their position of trust to add content as an easy and convenient additional service. Rather than consumers having to actively pursue and join a new – potentially unknown – OTT service, or having to deal with a variety of pay TV operators to establish a full bouquet of content like movies, sport, and series, they can go direct to their already established and trusted telco and access all these services in one easy and convenient step.

There is still a long way to go for telcos to really competitively match the offerings and experiences available directly through broadcasters or with OTT service providers, but they occupy an enviable position as established and trusted brands in the market. As such, consumers are open to them aggregating and delivering content, and by positioning themselves as future-focused organisations keen to cater to the MENA region’s large youth market, telcos are on the right trajectory to gain – and then retain – their future audience.

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