Saturday, February 08, 2020 / 08.10PM / Teslim Shitta-Bey, Managing Editor, Header Image Credit: DW
MTN, Glo and Airtel are not just market leaders, they are market shapers. They shape market reality and pander to the whims of a new generation of Nigerian telephone users called "generation Z". This generation was born in the mid-1990s to 2010. The new, but increasingly dominant, generation of digital natives has no loyalty to institutional brands, no hang-ups with digital migration and certainly no respect for inefficiency. In the new battlefield for market share, the companies that will stand will be deft, quick and forward-looking, and the companies that will be left bloodied on the field of war will be slow, awkward and near-sighted. The year 2020 will be that year that separates boys from men; the signs are already blinking.
The market for mobile telephony in Nigeria, on the surface, appears to be an oligopoly like the cement business (with Dangote Cement (60%), Lafarge Africa (30%) and BUA Cement (10%) as dominant actors) but the market's few suppliers (the definition of oligopoly) act in ways that reflect greater price and service competition than the business of cement making. MTN, Airtel, Globacom, and 9-Mobile, digital voice and data service providers are far from handshaking-rivals. The local Nigerian telecoms business is hard, vicious and unforgiving, and with generation Z (including the so-called 'Marlians') the battle for prime dog recognition is unrelenting.
So far, MTN appears to be edging ahead (see table 1 below), but the lead is not unassailable especially in the market for digital data where the headroom for growth seems faster in 2020. Recent data from the National Bureau of Statistics (NBS) gives some perspective on the relative market strength of local telcos and the not-too-distant battles that may loom in the new century.
Data, Zers and Marlians
The communications business is becoming a business of changing demography. As baby boomers and generation X (those born between the 1940s and 1970s) become grandfathers, their children and grandchildren are the new consumer demography dictating consumption demand for mobile telecommunications. In the recent past from 2000 to 2018, Nigerians have mainly used there mobile phones for voice communication, MTN for example, has seen 74.9% of its revenue come from voice services while 16.6% of revenue came from data (see table 2 below). The proportions represent an aberration from global trends. In other countries across the globe, data revenue exceeds voice revenue reflecting the high data usage of both millennials (those born in the Mid-1980s) and Generation Z (those born from 1995).
Table 1 Understanding MTN Nigeria Revenue Structure
A sub-segment of Generation Z is the "Marlians", named after the Nigerian hip hop artiste Azeez Fashola better known by his stage name "Naira Marley" with followers and admirers he calls 'Marlians'. This segment of young Nigerians is irreverent, distrustful of authority and generally consumed by the desire for wealth.
The average Marlian is lewd, rough and focused on living a life of luxury. He or she adopts a "life is short" philosophy and decides to make money without care or shame, how the money comes about remains unimportant, the rule is to make money or die trying. Marlians are digital natives but unlike other Generation Zers they are less moral, less realistic and more individualistic than communal (see table 3 below).
For telco service providers the Marlians are a treasure trove as they tend to be heavy users of both data and voice services with data service trending upwards. The fact that a service provider like MTN has only 16.6% (as at Q3 2019) of its revenue coming from data use indicates a large headroom for growth in this segment of its business, the same is true for all other telcos.
Table 2 Generations: Context, Behaviour and Consumption
The Zed generation will lead the move towards infotech disruption both as programmers, service providers and consumers. The native digital abilities of this generation will mean a rise in digital transactions and payments. The new twenty-somethings define themselves in multiple ways and see the world from a point where they are "radically inclusive", making strong social commentary through online discussion boards and social handles. The Zers typically are less confrontational and tend to be more discursive (the exception of course is the Marlians, who prefer a slash and burn approach to conflict resolution; they attract conflict like a moth to a flame). The Zers are pragmatic and tend to search for "truth endlessly" and "meaning" (again Marlians are exceptions. Marlians reduce the meaning of life to Wein Weib und Gesang-wine, women and song. And perhaps, drugs).
Table 3 Understanding Generation Z and The New Consumerism
The Numbers Game
MTN's revenue between 2016 and 2018 grew on a compound annual basis (CAGR) of 14%. MTN's revenue growth was slightly over 2% of the annual inflation rate of 11.98% in December 2019 and just under six and a half (6.5) times the 2.28% growth of GDP for Q3 2019. Digital revenue fell from N80bn in 2016 to N60bn in 2017 and N27bn in 2018 in contrast to voice revenue that rose from N609bn in 2016, N660bn in 2017 and N784bn in 2018. The company's Fintech revenue (payment platform) has also grown steadily from N13bn in 2016, N22bn in 2017 and N29bn in 2018 (see chart 1 below).
Data revenue has increased gradually, as more Nigerians resort to internet access for shopping, payment and settlements and general B2B and B2C engagements. MTN data revenue rose from N58bn in 2016, N108bn in 2017 and N155bn in 2018. The rise reflects increased data penetration and data usage across the country. In Q3 2019 total revenue climbed to N856.48bn in Q3 2019 from N764.46bn in Q3 2019, representing a rise in total revenue of 12.04%. A greater proportion of the rise in total revenue was as a result of a faster-paced growth of data use and revenue.
Chart 1 MTN Total Revenue 2016-2018
The Telco Industry In Figures
MTN Nigeria is undoubtedly the leader in the number of voice subscribers in Nigeria with 65.33m subscribers as of Q3 2019. Glomobile was second with 49.21m active subscribers and Airtel nipping at its heels with 48.91m subscribers and in fourth place was 9Mobile which had 15.33m subscribers (see chart 2 below).
Chart 2 Active Voice Call Subscribers By Service Provider Q3 2019
Source: Nigerian Bureau of Statistics (NBS), Proshare research
Despite the grand advertising by its rivals the masters of data subscription still appear to be MTN. The total number of internet subscribers on the MTN platform in Q3 2019 was 52.17m compared to Glomobile's 29.02m, Airtel's 31.98m and 9Mobile's 9.04m. With other data service providers making up the rear with 463,441 subscribers. MTN has roughly 80% (79.77%) more internet subscribers than Glomobile and MTN has 63.17% more internet users than Airtel. The fact that voice is still the dominant service that MTN providers suggest that the battlefield for meeting consumer expectations in 2020 will be data or internet subscription. The huge headroom for internet subscription growth riding on the coattails of rising Business-to-Business (B2B) and Business-to-Customer (B2C) online transactions, clearly means that telcos will have to increase their relative shares of this growing market segment. The trouble for the telcos will be the nature and character of the changing online demography.
The Gen Z consumer is on the rise and his or her values and expectations require a new approach to service delivery.
Chart 3 Active Internet Subscribers By Service Provider Q3 2019
Source: Nigerian Bureau of Statistics (NBS), Proshare research
A Gen Zer has empathy, communal spirit and a sense of self-discovery. The new internet troller has eyes set on those goods or services that tie into a broader expectation of personal goals. For example, the telcos will need to plug into the rise in the popularity of online academic and professional courses such as provided by Coursera, edx and Udemy. The Gen Z is not as self-absorbed as the millennials and their approach to digital space is engagement rather than self-projection, this means that telcos will need to provide greater opportunities for Gen Z to interact online at incrementally lower costs. The rise in engagement would compensate for the marginal fall in service cost and leave net revenue higher rather than lower.
Telcos will need to do the following to grow market share and achieve commercial sustainability:
Illustration 1: Different Thinking For a New Market
Source: Proshare Content, Proshare Ecographics
The Digital Uptick
In the coming months internet service delivery would be a critical determiner of who stays, who stagnates and who disappears from the telecommunications chessboard. Business continuity becomes checkmated by a new generation of "data" users telling the market its expectations and following through on poor quality service by voting with their Naira and feet. Staying stuck in the voice subscription rut will be a move that assures a telco of annihilation by more adept rivals prepared to take on the challenges of increased internet penetration at increasingly lower marginal rates.
The Marlians are less subtle and restrained in their approach to life, but they are equally honest, digitally savvy and unrepentantly high spenders. They are rebels with a contrived cause, often misguided but always reflecting how they feel, dream, hurt and love. Marlians represent a growing fringe group of generation Z who have little understanding of the concepts of savings and investments and their bohemian lifestyles play out in public. The Marlians have been responsible for a multi-billion Naira local betting industry that shows no signs of slowing down. Nigeria's local betting business is estimated to turn over a billion Naira daily, making it one of the most liquid and aggressively consumer-oriented enterprises in the country, with a large army of adoring punters ready to drop mullah at the crack of every dawn.
High local unemployment rate (Nigeria's unemployment rate was estimated to be 23.1% as of Q4 2019) and a sense of lost entitlement amongst Nigerian youths has created a fertile farm field for the "get-rich-quick or die trying" mindset. Marlians are the consequence and not the cause of the modern army of youths, high on wealth aspirations, conflicted in social identity (profanity and religiosity co-habit in the 'alu jo' they sing) and rebellious in their disdain for authority (reflected in their regular running battles with the police, especially F-SARs).
The regular G Zer and his Marlian counterpart reflect an evolving consumer reality, telcos will need to understand this social dynamic and construct business frameworks that address the consumerâ€™s evolving journey. In other words, telcos will need to "Gbese!" or "padan".
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