WhatsApp, Skype, other OTT platforms threaten telcos dominance

By AYOOLA OLAOLUWA

Global System for Mobile communication (GSM) companies’ tight hold on the Nigerian telecommunications market is currently under threat with the continued adoption of Over-the-Top (OTT) platforms by budget-seeking Nigerian subscribers as alternative sources of communication, Business Hallmark findings have revealed.

Confronted with rising inflation and constant review of call and data rates by operators, individuals and businesses have resorted to making use of OTT platforms as their daily means of communicating in order to save cost.

According to Wikipedia, OTT are platforms or devices that deliver contents via Internet connections, rather than through traditional cable or broadcast providers.

In other words, OTT is another channel through, which image, audio and video contents are delivered to end users using internet-enabled devices.

Through OTT, online documents, including image, audio and video contents can be viewed across any device, including mobile phones, laptops, palmtop or any mobile device, television sets and many other Internet enabled electronic gadgets.

OTT platforms can also be used to conduct live phone and video calls/chats or stream live events.

According to findings, in the last three years, OTT platforms, such WhatsApp, Telegram, Skype, Snapchat, WeChat, Facebook Messenger, Google Chat and many others have become Nigerians preferred choice of communicating, especially when they are making long calls.

The major shift to OTT, telecoms industry experts claimed, go as far back to Covid19 lockdown days when individuals, businesses, as well as social and religious organizations were forced to meet and communicate virtually.

The trend, the experts further explained, later became the norm amongst many owing to several factors like change in fashion and habits and economic considerations.

“Many Nigerians, after surviving the lockdowns imposed by the government to prevent the spread of Covid19 pandemic became accustomed to internet-enabled platforms like WhatsApp, Skype and Zoom.

“Till today, many individuals and businesses still rely on these platforms to communicate and do business. I know about worshipers, who have not entered the church since the end of Covid19, but now worship online.

“Apart from the trend becoming habitual after a long time of using, the need to cut down on cost is also pushing many subscribers to OTT.

“It is far far cheaper to make calls or send messages through OTT channels than doing so through telcos”, said Toyin Obaleye, an IT reporter based in Lagos.

A one week survey conducted by BH among telecom subscribers, who are also users of OTT apps showed that many of them prefer to make calls and send messages through digital platforms.

Sixty one out of the 100 responders, said they wholly employed OTT platforms like WhatsApp, Telegram and Skype to communicate their messages to families, clients, as well as religious and social groups.

Fifteen of the respondents claimed that while they use both to make calls and send messages, they, however, prefer to use OTT, when they are making long calls or sending heavy materials.

Meanwhile, the remaining 24 respondents admitted to only using their GSM lines to make calls and services.

The survey confirmed that 46 percent of subscribers, who admitted to using OTT platforms are youths between the ages of 18 and 45 years, while 30 percent are educated with the skill and knowledge needed to operate modern digital appliances.

Out of the remaining 24 percent respondents, who confessed to not using OTT, 16 percent are either illiterates, who lack the knowledge to operate android or sophisticated devices, or are poor Nigerians, who cannot afford to purchase the devices.

The remaining eight percent, the survey found out, are mostly well to do adults, who are used to the old ways of doing things. The people, who falls into this bracket said they prefer to employ traditional GSM lines to do their day to day communications.

Speaking with out correspondent, a student, who claimed to perform over 90 percent of his communications through OTT channels, Tobiloba Alade, said he took the route because it is cheaper for him.

“”With as little as N100, I can make calls all day and send unlimited messages to my friends and family through WhatsApp.

“This is not possible through normal phone lines provided by GSM companies. N100 recharge on my MTN line will only give me about 5 minutes call time and 10 text messages.

“Meanwhile, we have not talked about heavier MMS (Multimedia Short Service) like memes and pictures that are more expensive to send through normal lines.

“Telcos even have daily, weekly and monthly social media tariffs for as low as N50, which you can go for. You can imagine spending only N50 daily to access social media apps like WhatsApp, Facebook, Snapchat, Instagram, Tik Tok, YouTube and the rest. That is a big deal to me”, said Alade, a student of Yaba College of Technology, Akoka, Lagos.

Another respondent, Mr. Olawale Ige, a staff of a publishing outfit in Ikeja, Lagos, told our correspondent that he decided to embrace OTT platforms because they are cheaper to maintain, compared to the traditional services provided by telcos.

“I thank God for the coming of OTT. Before now, I used to spend between N10,000 and N12,000 monthly on recharge cards.

“But in the last one year, I now spend only N6,000, which I even share with my wife and three children. Combined, we used to spend about N20,000 monthly on making calls and sending messages

“The secret is that after loading N6,000 on my phone, I convert it to data, choosing Alway-On bundle on MTN which gives me 45GB (1.5GB daily).

“Mind you, I also get bonus airtime and data on the purchase, which I rarely use. What I do now, and this is not peculiar to me, is to first call the recipient of the outgoing call, asking him or her to switch on their Internet so that we can talk on Telegram or WhatsApp.

“I do speak for over 2 hours sometimes without my data finishing. I don’t even subscribe to DSTV again. My children now download latest movies online with the 45GB, which we put on flash drives and watch on my 40 inches TV screen”, Ige enthused.

While subscribers of GSM firms are praising the coming of OTT, which they claimed had helped them to drastically cut down on airtime and text messages costs, telcos are lamenting the attendant revenue loss brought about by OTT platforms encroachment on their territory.

According to available records, the impacts of the emergence of OTT services have been devastating on telecommunication services providers.

“OTT platforms are taking away our customers. Their services are similar and are cheaper substitutes to the services offered by telcos with the result that customers are being lured away and significant revenues are being lost.

“Thank God for the data arm of our businesses, we would have been out of business by now. At least, they (OTT) can’t operate without Internet, so they still need us”, a top official of a telecommunications firm in Lagos, who did not want his identity revealed noted.

Though, there are no official figures for the records of calls and messages made in the country through OTT channels since they are foreign owned and are not regulated in the country, experts put the percentage share of messages sent in Nigeria between OTTs and telcos at 71 percent and 29 percent respectively.

Though BH cannot independently confirm this figure, the implication is that telcos have lost about 71 percent of their text messaging business running into billions of naira to OTT channels.

According to the Nigerian Communications Commission (NCC) in its ‘2022 Subscriber/Network Data Report’, Nigerians exchanged over 25.93 billion text messages locally in 2022.

The report showed that while 14.09 billion SMS messages were sent, 11.84 billion were received.

The implication of the report is that despite earning N103.72billion revenue from text messages in 2022 (N4 per message), telcos, if reports of OTT controlling 71 percent of business is true, lost N243 billion of their SMS revenue to OTT channels in 2022 alone.

The 2023 figure is expected to be much higher when released.

Meanwhile, majority of the SMS sent through telcos, BH findings showed, are statutory and official messages like banks alerts and releases, as well as NIN confirmation texts.

Majority of personal messages dispatched by subscribers, it was learnt, are sent through social media apps like WhatsApp and Telegram.

An interesting observation was made by our correspondent during the course of compiling the report. It was observed that while most Nigerians prefer WhatsApp to make calls and send messages, Europeans, Americans and Middle East residents in Nigeria like the Indians, South Koreans, Lebanese and Saudis favour Telegram.

On the other hand, the Chinese community in Nigeria prefer to communicate through WeChat.

An account staff in a Chinese firm Ibafo, Ogun State manufacturing plastic storage tanks, disclosed that all the workers employed by the company, including locals and expatriates, were compelled by the management to open a Wechat account for easy communication and the dissemination of official information.

Meanwhile, as increasing competition in voice and messaging services continue to erode their revenue base, telcos are shifting focus to other products and services to boost their revenue profile.

Apart from consolidating their mobile money business in order to benefit from the huge windfall in retail banking, the telcos are also investing heavily in data services infrastructure.

According to industry sources, the four GSM providers, MTN Nigeria, Glo, Airtel and 9Mobile have in the last three years invested massively in broadband infrastructure and upgrade of their Internet network across the country.

“Encouraged by the wide use of their data services by messaging apps, whose services are driven by data and strong Internet connection, the four telecoms giants have spend over $1billion within the last three years to expand their broadband infrastructure and upgrade their Internet network across the country.

“You can see the result of the investments in their (telcos) declared data revenue.

According to the NCC in its recently released ‘2022 Subscriber/Network Data Annual Report’, the massive rollout of fibre (terrestrial fibre and submarine cable), which stood at 96,198 km in 2022 from 86,057km as of 2021, provided the backbone for the 46.77 per cent surge of data consumption in the country to 518,381.78TB.

Expectedly, the telcos massive investments in broadband infrastructure has continued to have positive effects in their bottomline.

For instance, Airtel Nigeria disclosed in its Q1, 2023 financial statements that it raked in N407.1billion in data revenue in the fiscal year ending March 31, 2023.

Likewise, MTN Nigeria also reported N227.8 billion revenue from data sales in the first quarter of 2023.

Meanwhile, the two remaining GSM companies, which are not capitalised, Globacom and 9Mobile, did not avail the public of their financial statements as they are not compelled to do so being privately owned entities.

Meanwhile, a market research firm, Ovum, predicted that there would be a drop in spending on traditional communication services offered by the incumbent telcos by 36 per cent in the next 10 years.

According to the research firm, services offerings of OTT apps were built on innovative business models and offered much lower price than traditional telcos were offering.

Also, a global research firm, Juniper, in its latest report titled: ‘Evolving the Conversation with OTT Business Messaging’, projected that OTT services platforms like Facebook, WeChat, Messenger, Google Chat, Telegram and WhatsApp, among others, will continue to eat into telcos SMS revenue.

The research firm disclosed that apart from individuals, businesses all over the world are now shifting to OTT platforms for all their messaging needs because of their zero or very low costs for messaging, compared with telecom operators’ messaging services.

It concluded by saying that global business messaging traffic on OTTs will rise from 93 billion in 2023 to 254 billion by 2027.