International Data Corporation (IDC) on Wednesday announced its annual predictions for the Middle East and Africa consumer telecommunications and media services market in 2014.

IDC predicts that changing customer preferences, the growing usage of applications, rising smart device penetration, and the increasing prominence of over-the-top (OTT) services will continue to transform services and business models.

The rise of the Internet economy, supported by improving data services, especially mobile services, is blurring the line between traditional telecommunications services and digital media services.

“As markets continue to evolve, more customers are eschewing core telecommunications services in favor of rich OTT services,” said Paul Black, director of telecommunications and media at IDC Middle East, Africa, and Turkey.

“This is forcing regional operators to reevaluate their business models, data offerings, tariff packages, and even network rollout plans, as well as go-to-market strategies. While traditional services are still offered, operators are expanding their role in the digital value chain by promoting local content generation and application development. Operators are also looking at adjacent markets and exploring new digital services opportunities.”

“For digital media providers and OTT players,” Black continued, “the changing market dynamics provide unique opportunities to establish direct relationships with end users. However, the business models are still evolving, and the ability to pay for these services, despite their growing usage, remains low throughout the Middle East and Africa (MEA). In this scenario, the importance of partnerships between telcos, content providers, OTT players, and digital media companies is growing.”

IDC’s Middle East and Africa Consumer Telecommunications and Media Services Top 10 Predictions for 2014, as presented in a Webinar by Bhanu Chaddha, senior research analyst for telecommunications and media at IDC Middle East, Africa, and Turkey, comprise the following:

The Exponential Increase in Mobile Data Will Force Operators to Rethink Their Network and Data Service Strategies.

Mobile data services have continued to gain prominence in the business models of MEA operators.

Those in the Middle East have remained at the forefront of technological development and invested heavily in building ubiquitous next-generation networks.

Operators in Africa, however, have taken a more cautious approach, with sporadic network evolution centered on highly populous areas and major commercial centers. In 2014, mobile data will remain a cash cow for regional telcos.

However, the growing popularity of data-hungry applications and services, particularly video, will contribute to an exponential increase in data traffic and make network investment economics difficult to justify.

The Progressive Regulatory Environment Will Stimulate Competition. Telecommunications markets in MEA have expanded significantly over the last decade, backed by progressive regulatory environments and conscious efforts by the regulatory authorities to stimulate competition.

The first era of market liberalization was marked by the opening of mobile markets to new operators, followed by progressive reforms to introduce new services (e.g., 3G) and/or the opening up of markets to competitors.

Having done this, regional regulators will strive to improve the market dynamics in 2014, accelerating the development of new services in addition to increasing competition.

Regulators can approach this in three primary ways: by introducing mobile number portability; by opening markets to mobile virtual network operators (MVNOs); and by releasing spectrum for next-generation 3G/LTE networks.

Operator Media Transformation Will Continue; Acquisitions Are on the Cards. Due to the high mobile penetration levels, operators in the markets of the Gulf Cooperation Council (GCC) are looking to add new capabilities and diversify not just into international markets, but also into new business streams (e.g., ICT and digital media services) in which the potential for growth is higher.

As operators gain control of content and content delivery, they are able to boost the uptake of their data services, which means additional revenues.

In 2014, operators will move beyond merely setting up businesses to forming clear strategies to help them play a broader role in the digital economy. One obvious solution for entering into the digital space is the greenfield approach, in which operators build a new business organization.

However, it is time consuming, and, at times, players miss the boat while waiting for the new organization to become operational.

An inorganic alternative is to acquire other stakeholders in the value chain. IDC believes operators will aim to acquire content aggregators and platform developers in order to maximize their share of the communications and media market.

Service Evolution Will Force Operators to Rethink Their Strategies and Recognize the Importance of the Customer Experience. As the usage of smartphones and mobile social media is growing rapidly in the MEA region, marketers are more cognizant of consumers’ locations and preferences.

Many organizations will explore ways to work closely with operators, media companies, and app developers to create targeted marketing practices in the region, which will prove to be a win-win situation for all involved.

Telecommunications services are evolving as social media, multiscreen offerings, mobile applications, and OTT services increasingly influence consumer behavior.

It is imperative for operators to understand consumer behavior and push products and services in line with their expectations.

This will eventually help operators to counter declining service engagement cycles and improve customer experience.

The Focus Will Shift to Designing Smartphones that Balance Price and Performance. IDC expects competition to intensify between traditional smartphone vendors and emerging players, particularly in Africa. Smartphone penetration in the region will continue to rise as consumers demand Internet access everywhere.

Samsung and other established smartphone vendors will battle to maintain their large African market shares as new players (e.g., Techno and Huawei) provide similar smartphone offerings at a lower cost. These new smartphone vendors are already increasing their distribution networks to capture emerging markets with a relatively less affluent population in the MEA region.

Other Asian vendors, including Micromax, Intex, and QMobile, have also made plans to target Africa with their new smartphone models. As the cost of producing smartphones decreases, prices are expected to drop even more in 2014, resulting in a wide range of low-cost devices, some even priced below $50.

Mobile Payments Will Pass Their Growth-Rate Peak in Africa, But the Rate Will Continue to Rise in the Middle East. Mobile money is the most popular form of money transfer and payment in some African countries.

In Kenya, Safaricom’s M-Pesa and MTN’s Mobile Money are revolutionary products that have transformed the lives of many people, especially those living in rural areas. It is imperative to note that one-third of Safaricom’s revenue comes from M-Pesa.

IDC predicts that growth in mobile money transactions such as M-Pesa will slow in Africa due to regulatory inhibitors and the lack of maturity of these services. Recent legislation introduced a 10% excise duty on money transfer services in Kenya.

This excise tax will have a minimal effect on low-end transactions; with high-value transactions affected the most. Innovative products such as M-Shwari, a new banking product for M-PESA customers that enables the user to deposit and borrow money via mobile phone and earn interest on the deposits made, will continue to spur mobile money growth on the African continent.

In the Middle East, mobile money uptake has been slow. The primary reason attributed to this is the widespread availability of banking infrastructure, with banks and ATMs accessible in all areas. However, telecommunications operators are increasing their participation in the mobile money field, with dedicated products focused on remittances and other payments.

txtNation Launches Mobile Operator Billing using Premium SMS        
txtNation, the award-winning provider of mobile billing and messaging solutions, has now launched its mobile billing solution using Premium SMS in Kenya, allowing businesses to accept mobile payments in the African country.

This comes as more Kenyans access the internet on their handsets.

Kenya is one of the fastest growing markets in mobile content and mobile commerce activity, with a 97% growth in 2013.  With a population of over 40m and a mobile penetration of 78%, this is a strong country to enter.

Recent statistics also show that 77% of internet enabled mobile phone users buy products online.

txtNation can now offer mobile operator billing using Premium SMS across the networks Airtel and Safaricom with customer price points / tariffs available across 30.00 To 50.00 KES.

The new shortcode for Kenya has been added to txtNation platform and is live now, complementing the company’s existing African footprint.

Sampson Enwere, txtNation’s area manager for Africa, said “Africa’s mobile market is the fastest growing in the world and we are delighted to add Kenya to our already strong mobile billing solutions.”