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How Mobile Operators and Start-Ups Can Partner for Impact in Emerging Markets

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How Mobile Operators and Start-Ups Can Partner for Impact in Emerging Markets Building Synergies: How Mobile Operators and Start-ups Can Partner for Impact in Emerging Markets JANUARY 2017 GSMA The GSMA represents the interests of mobile The GSMA Ecosystem Accelerator programme operators worldwide, uniting nearly 800 operators focuses on bridging the gap between mobile with almost 300 companies in the broader mobile operators and start-ups, enabling strong ecosystem, including handset and device makers, partnerships that foster the growth of innovative software companies, equipment providers and mobile products and services. These partnerships internet companies, as well as organisations in bring impactful mobile solutions to the people adjacent industry sectors. The GSMA also produces and places that need them most, generating the industry-leading events such as Mobile World greatest socio-economic impact. In particular, the Congress, Mobile World Congress Shanghai, Mobile programme operates an Innovation Fund which World Congress Americas and the Mobile 360 supports African and Asian start-ups with direct Series of conferences. funding, technical assistance, and connections with mobile operators. The programme is supported by For more information, please visit the GSMA the GSMA, its members, and the UK Department for corporate website at www.gsma.com International Development (DFID). Follow the GSMA on Twitter: @GSMA Learn more at www.gsma.com/ecosystemaccelerator or contact us at [email protected] Follow GSMA Mobile For Development on Twitter: @GSMAm4d This document is an output of a project funded by UK aid from the Department for International Development (DFID), for the benefit of developing countries. The views expressed are not necessarily those of DFID. Authors Sam Ajadi – Insights Manager, Ecosystem Accelerator, GSMA Maxime Bayen – Senior Insights Manager, Ecosystem Accelerator, GSMA 2 BUILDING SYNERGIES: HOW MOBILE OPERATORS AND START-UPS CAN PARTNER FOR IMPACT IN EMERGING MARKETS When the term “unicorn” first emerged in 20131 to describe a privately owned start-up valued at over $1 billion, there were no start-ups from emerging markets on the list of thirty-nine. Three years later, the list has more than quadrupled to 179, including 11 from emerging markets.2 Beyond their 10-digit valuation, emerging market unicorns such as Jumia (Nigeria), Go-Jek (Indonesia), Decolar (Argentina) and Hike (India), have rapidly become major commercial and socio-economic players in their respective regions. Combined, these four unicorns have 6,500 direct employees3 and several hundreds of thousands of contractors. Go-Jek alone operates a fleet of 200,000 drivers4 and Jumia works with a network of 30,000 sales agents. 3 GSMA While start-ups are vital forces in both the innovation of communication (voice, SMS, or USSD). They are ecosystem and the wider economy, the majority also the main channel for accessing the internet and struggle to reach scale. They are often stifled by a dearth other important services, and provide a vital lifeline of investment capital, lack of payment infrastructure, in natural disasters. On the ground, mobile operators difficulty to reach unconnected users, a shortage of have deployed powerful distribution networks that market insights and limited government support, employ millions. With mobile money services, they among other challenges. A case in point is Lumkani. offer a payment solution with close to 150 million active Founded in 2014, the South African start-up developed accounts worldwide,7 addressing the shortcomings of a networked early warning fire detection system which many local banking systems. alerts community leaders and local fire department of fires in informal settlements. Despite being a low-priced Nevertheless, these mobile operators face a plethora of solution to a problem in most informal settlements in challenges. Sustainable competitive advantage in the emerging markets, Lumkani has only distributed 7,000 telecommunications sector is becoming increasingly devices across South Africa so far.5 difficult to achieve. Digital disruption has made it difficult for mobile operators to keep up with the Likewise, in emerging markets, mobile operators accelerating pace of innovation. have touched the lives of billions and reached impressive scale across all population segments. Today in emerging markets, more than anywhere else, Emerging markets represent 75% of the world’s there are opportunities for mobile operators and start- 4.8 billion unique mobile subscribers.6 Behind this ups to collaborate. Mobile operators have reached growth is the pervasiveness of mobile phones, which the scale that start-ups lack, while start-ups have the provide widespread access to easy-to-use forms local innovation mobile operators need. Mobile operators have reached the scale that start-ups lack, while start-ups have the local innovation mobile operators need. 4 BUILDING SYNERGIES: HOW MOBILE OPERATORS AND START-UPS CAN PARTNER FOR IMPACT IN EMERGING MARKETS 1 Identifying synergies: a framework for mobile operators and start-ups When it comes to scale and innovation, mobile operators and start-ups have certain “haves” and “needs”. As we looked at examples of collaborations between mobile operators and start-ups in emerging markets, it became clear that these haves and needs primarily determine the synergies, or opportunities for collaboration. 5 GSMA BUILDING SYNERGIES: HOW MOBILE OPERATORS AND START-UPS CAN PARTNER FOR IMPACT IN EMERGING MARKETS FIGURE 1 A synergies framework for mobile operators and start-ups in emerging markets: Part 1 - mobile operators’ haves and start-ups’ needs LARGE FINANCIAL UNIVERSAL RELEVANT WIDE SALES AND MARKET BRAND MOBILE CUSTOMER AND PHYSICAL COMMUNICATION PAYMENT DISTRIBUTION EXPERTISE RECOGNITION OPERATORS BASE ASSETS CHANNELS CHANNELS NETWORK AND TRUST Customer base across Financial resources, Mobile voice, Mobile money services Flagship/retail stores, Marketing and technical Visibility and trust/ segments, knowledge real estate, and SMS, USSD, etc. and carrier billing agents, online, and call knowledge, network of credibility of this base infrastructure (through APIs) (through APIs) centres partners HAVE DoctHERs uses Real estate Nova Lumos partners Cellcard runs “Cellcard mTick partners with Telenor’s data analytics marketplace Taxi app Online with MTN to distribute Lab”, an intensive M-KOPA Solar worked Orange so users can and consumer profiling ZipMatch has Cabs runs on Dialog its PAYG1 solar home 3-month business with the operator to buy their bus tickets capabilities to select received funding from (Ideamart) SMS, systems through model validation launch a Safaricom- through Orange the locations for its Globe’s CVC1 unit, USSD, and LBS1 APIs MTN’s wide sales program to turn ideas branded solar lighting Money (Côte d’Ivoire, teleclinics (Pakistan, Kickstart (Philippines, (Sri Lanka, 2016) network (Nigeria, into viable ventures system (Kenya, 2012) 2015) SYNERGIES 2016) 2016) 2015) (Cambodia, 2016) (examples) NEED CUSTOMER FINANCIAL ACCESS TO MASS ACCESS TO ACCESS TO ADVISORY AND BRAND ACQUISITION AND SUPPORT (IN COMMUNICATION MASS PAYMENT CUSTOMER MENTORING EXPOSURE MARKET INSIGHTS CASH AND IN CHANNELS CHANNELS TOUCHPOINTS AND TRUST KIND) START-UPS Low-cost customer Funding, co-spacing, or API access (SMS, USSD, Easy payment Physical/online retail Technical and Visibility and credibility acquisition, access to grants IVR1) collection processes points, pick-up and commercial support, market insights delivery points relationship brokering Sources: GSMA Ecosystem Accelerator, mTick8 ,ZipMatch9 ,Online Cabs10, Nova Lumos11, DoctHers12, M-Kopa13 1. CVC: Corporate Venture Capital; LBS: Location Based Services; PAYG: Pay-As-You-Go; IVR: Interactive Voice Response 6 7 GSMA BUILDING SYNERGIES: HOW MOBILE OPERATORS AND START-UPS CAN PARTNER FOR IMPACT IN EMERGING MARKETS FIGURE 1 A synergies framework for mobile operators and start-ups in emerging markets: Part 2 - start-ups’ haves and mobile operators’ needs MOBILE-CENTRIC INNOVATIVE & NEW BUSINESS COST EFFICIENCY HIGH CUSTOMER TANGIBLE APPROACH HIGH-IMPACT MODELS SATISFACTION SOCIO-ECONOMIC START-UPS SERVICES IMPACT Services relying on mobile Unique product offerings Fast-growing revenues Innovative operating High customer Services that solve (data, SMS, voice, USSD, models leading to lean satisfaction through great real-life challenges MFS) operating costs value proposition HAVE Orange’s investment Teta Mobile Chat enables Since its investment in Singtel Innov8 Connect Eneza partnered with Vimpelcom founded in SVOD2 start-up Vodacom to offer Jumia (Internet Africa asks start-ups to solve Safaricom to launch a and now runs the Afrostream allows the users a mobile instant Group) back in 2012, Singtel’s challenges (e.g. study tool for students. annual Eurasia Mobile operator to enrich its messenger without data Millicom collects a automation in network, Its 1.4M users spend on Challenge: a start-up content and drive a costs, hence attracting share of the start-up’s data center energy average 42 min/day on it competition across mobile video offering new users (South Africa, revenue (Africa, 2012) savings) (Asia, 2016) (Kenya, 2015) Central Asia SYNERGIES (West Africa, 2015) 2016) (examples) NEED GROWTH OF CORE CUSTOMER NEW REVENUE LOWER OPERATING CUSTOMER HIGHER MARKET REVENUE ACQUISITIONS STREAMS COSTS RETENTION AND REPUTATION SATISFACTION Increase revenue from Attract customers from Adjacent sources of Cost-efficient operations Churn reduction, Reputation MOBILE voice, data, SMS, USSD competition
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