Africa is a challenging market for pay-TV services, with limited discretionary income for pay-TV and an audience that is fragmented across more than 50 countries. But it's also home to more than a billion people and has experienced significant economic growth in recent years.
That was enough to inspire African telecom company Econet -- and the CEO of its recently launched media division, Joseph Hundah, to launch the Kwesé TV service.
Speaking at the TV Connect event last week, Hundah talked about his reasons for moving forward. "The average age of the African population is under 18 years," he said. "And if you drop South Africa, which has an average of 26 years, it's even lower. And the behavior of African youth is very similar to that of youth populations in other countries."
He also pointed out that smartphone penetration in the continent is several times that of TV, for a number of reasons. Firstly, fixed line penetration is lower than mobile coverage. Also, residential electricity connections are not as standard as in Europe or the US, and supply is also not as reliable. Penetration of smartphones is also expected to double in the next four years, as Africa sees a growing middle-class and a 3% increase in urbanization.
He felt that the existing providers, while well established and dominant, were priced at a premium. Africa was broken into two pay-TV "dominions," with South African Multichoice the dominant provider for English language programming; and Canal Plus the main provider of French services. Between them, they had mostly carved up the pay-TV market in Africa.
But Hundah feels that these services are missing a trick or two. Firstly, a service that targeted smartphones was more likely to appeal to a larger user-base, particularly since Africa has a large youth population. Secondly, greater pricing flexibility could be important in a country with limited credit card adoption and low discretionary income.
Econet also brings its own skills and assets to the table. It boasts 20 million mobile subscribers across Africa as well as 50,000 plus connections to its pan-African fiber network, Liquid, which stretches thousands of miles across the continent. The company has also developed its own mobile payments service, Ecocash, and Cassava, a platform which supports multiple mobile payment systems and is integrated with a wide range of mobile operators serving customers in multiple African countries. (See Liquid Telecom Wins Approval for $470M Neotel Deal and “Africa is now at the inflection point of Mobile Money 2.0” Interview of Srinivas Nidugondi, Mahindra Comviva for AfricaCom.)
Econet also has an established base of 4,600 employees from more than 20 different African nations, and based in ten locations. Hundah sees this as an important asset as well, citing local knowledge and insight into multiple national markets.
Kwesé is primarily positioned as a direct-to-home satellite service, not that different on the surface from Multichoice or Canal Plus. It offers a smaller channel line-up (55 channels compared with 150-200) and stresses exclusive content -- 40% of its channels are exclusive. It has also invested in sports, partly because of the way in which sports rights are licensed in Africa. Most content is sold on a national basis, which makes bidding for content a very fragmented process. But sports are sold on a pan-African basis, which suits a pan-African satellite service such as Kwesé very well.
But Hundah doesn't see these as Kwesé's primary differentiators. He feels the service is built on two unique value propositions. Firstly, in keeping with the young, "mobile-first" audience, Kwesé has invested in developing a robust and full-featured mobile service. The Roku-powered app is available to Kwesé satellite subscribers, but also as a stand-alone app, Kwesé Play. Econet has used its existing relationships with mobile operators around the continent to promote and deploy the app, but has also negotiated a discounted data rate for Kwesé users to ensure viewership doesn’t result in sticker shock.
Secondly it has created far more flexible pricing options for the end user. According to Hundah, "Africa is largely a cash-based market, and services are moistly pre-paid. Multichoice has a 50% churn rate, because it charges a monthly rate, and not everyone is able to pay that much in one go."
Kwesé offers shorter pre-payment cycles; users can pay every few days. For the mobile-only service, users can pay the equivalent of $0.99 for each day.
This payment flexibility was a major factor when partnering with Netflix. Netflix was holding back from targeting Africa according to Hundah, largely because of the billing and payment challenges for a subscription service. But Econet's Cassava platform was able to resolve this issue and involve mobile operators as well.
"The billing gateway is key to service deployment," said Hundah. "Most people don’t have credit cards, or even bank accounts. So our mobile cash capabilities are very important. Having that payment eco-system is key to our approach. And mobile is also a key element."
Econet has taken an interesting approach and while it's too early to say if it will be successful, the strategy seems based on clear, rational considerations. Targeting the young smartphone viewer is probably a sound strategy in almost every part of the world today. And we have already seen services such as Flipkart in India grow explosively, because they found an effective payment solution in a region where low credit card adoption had long limited digital commerce.
— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation