JOHANNESBURG, South Africa-In a cash-strapped society and an environment where wireless technology is expected to supplant fixed telephony, prepaid has become a panacea for new African operators-so much so that several are rolling out networks purely on a prepaid platform.
Research conducted by South African-based research company BMI-TechKnowledge reveals that 68 percent of the total subscribers in South Africa are on prepaid services, with the remainder on contract. The firm estimates by 2005 with Universal Mobile Telecommunications System (UMTS) kicking off, the prepaid number is anticipated to increase to 70 percent, with the remainder split between contract and wireless data/UMTS users.
“When cellular was launched in South Africa in 1994, nobody would have thought that cell phones would eventually be owned by such a wide variety of people. Prepaid has meant that everybody from the businessman to the street hawker can own a cell phone, and more than 90 percent of all new connections to the Vodacom network are prepaid,” said Andrew Mthembu, managing director of South African wireless carrier Vodacom.
That is a hefty number considering the network carries 3.5 million users.
“Accessibility and flexibility are the key advantages of prepaid,” said Laura Sheridan of Comverse Network Systems in the United States. “By offering users flexible spending, rather than obligatory fixed payments for contract service, prepaid attracts large segments of the population that previously could not afford cellular contract plans. Prepaid offers operators the opportunity for increased subscriber rolls without cannibalizing their contract base.”
Comverse Network Systems, which supplies prepaid wireless solutions to more than 20 network operators in Africa, has found the African market so successful it opened an office as a full subsidiary of the company in Johannesburg earlier this year and is planning two more offices staffed with engineers in Africa.
Stuart Eveleigh, managing director, Comverse South Africa, said: “We have had phenomenal success in Zimbabwe, Mauritius and Rwanda due to the enthusiasm of prepaid.”
Churn caused by prepaid customers taking advantage of better deals does occur and is a problem in Africa. But it is a small price to pay for a greatly increased customer base. “There are many strategies to reduce churn and encourage users to stay with and keep healthy prepaid accounts with an operator,” said Sheridan.
“Reward or loyalty programs provide users with discounts, bonuses, free or additional services for calling, recharging or using additional value-added services such as SMS.”
Special, seasonal or product tie-in promotions are another means of solving the problem. Operators can provide holiday calling discounts, scratch-and-win cards with offers of free phones or prepaid cards attached to food products, and other items.
MTN Uganda initiated a lottery program using prepaid cards, whereby each airtime card used throughout a month is entered into a lottery draw. MTN prepaid customers can win cars, motorbikes and other prizes.
Vodacom in South Africa is currently offering one of the lowest-denominated recharge vouchers at 29 rand (US$5) with a 14-day validity period. Vodacom also cut prepaid rates by 45 percent for calls made outside peak hours and introduced one of the cheapest short message service (SMS) rates in the market at US$0.11 per message.
Several operators maintain that if expired prepaid customers are kept in an operator’s database for a certain period of time and allowed to maintain their phone numbers with incoming calls blocked, many return to the network. Carriers found that if customers are retained for three months or four months, more than 25 percent recharge their prepaid cards and came back to the service.
Whether value-added services like roaming are included in prepaid packages remains a contentious issue. Most operators want the services, but some think the market demand is too small and complex for any billing system to warrant international roaming for prepaid. Some like Vodacom, however, are considering launching prepaid roaming in 2001. They are also looking at value-added services like unified messaging and other products that enable customers who are unable to read to use voice activation.
