African newcomer Smile has launched in three markets this year with a pure LTE play. The firm believes that new technology can only be properly exploited by new players and has pledged to shake up markets across the region. Tom Allen, Smile’s COO, talks to Mike Hibberd

Mike Hibberd

November 12, 2013

7 Min Read
Disruptive Data

smileLTE has been developed and sold to the global operator community as a means of migration—a technology that resets the mobile network for the challenges of a data-driven world. The ‘E’ stands for Evolution and for most operators LTE is just the latest step in a long journey of mobile network technology, as they transition away from legacy networks at the end of their lives.

But not for all. African operator Smile Communications, which this year has launched LTE networks in Nigeria, Tanzania and Uganda, is a newcomer to the cellular industry. And with none of the legacies or histories of its traditional mobile competitors, the firm has a distinct take on the market and the opportunity it provides.

Smile started life as a WiMAX player in 2007, launching in Uganda two years later with a brief to bring mobile data and voice services to the underserved. But the limitations of the WiMAX device ecosystem forced a rethink and the firm negotiated the migration of its licences to internationally harmonised LTE spectrum, a process that was completed in 2011. While Smile is now an LTE player, and part of the global cellular community, it’s origins as a challenger and technology outsider still influence its thinking. Chief operating officer Tom Allen refers to his incumbent competitors as “the mobiles”, clearly putting some distance between the newcomer and the establishment.

With no legacy network and VoLTE handsets not yet available, Smile is promoting data services in the first phase of its launch but the firm’s approach to voice is an illustration of its disruptive mindset. While many operators view OTT voice applications like Skype and Viber with suspicion that can border on hostility, Smile is prepared to embrace all types of usage. “We’re happy with OTT voice services and our customers are already using OTT solutions on our network,” says Allen. “We don’t have a market to protect and we don’t have a 3G network investment to protect so we’re happy for the market to tell us what it wants to do and to go with it. We sell megabytes and you can do what you want with your allowance,” he says.

Nonetheless the operator is already testing Voice over LTE (VoLTE) on its network and will begin trialling VoLTE devices in the first quarter of 2014. Allen says the firm will introduce VoLTE capable handsets at some point but stresses that Smile is open to a range of approaches for a service that it views as just another use of data. “We could prioritise Skype traffic on our network and make sure it gets a better grade of service,” he says, “which is the complete opposite to what a mobile operator would do. We’re not saying we’ll do that but we would look at it seriously, we’ll see what the market demands. Maybe regulators would come under pressure from mobile operators to intervene but would that really be in the public interest?”

In any case while Smile doesn’t have “problems like circuit switched fallback,” Allen says, it also lacks interconnection deals, nationally and internationally, so is restricted in terms of voice offerings. These deals will be struck in the next three to six months, he says.

When VoLTE-capable smartphones do become available they will be expensive by any standards but especially so in African markets. Allen concedes that device cost is a barrier to uptake, with LTE dongles currently retailing for around $70. But prices are falling, he says, with each batch the firm orders being 15 – 20 per cent cheaper than the last, thanks to downward movement in silicon costs. In a year’s time, he predicts, price will be comparable with 3G dongles, which are priced in the $30 range today.

Smile prices data “exactly par to the market,” Allen says. The firm will not match the lowest price in the market but has pledged to price without a premium, “at a level the market is bearing.” Simplicity of pricing is essential, he says, and while much of the rest of the mobile broadband operator community is looking at sophisticated new ways to price and sell data, Smile wants to keep the focus simply on volume. Application- or time-specific pricing are among the concepts that Smile is trying to avoid, he says.

“From our perspective data is just data; we don’t care when you use it or what you do with it. For us it’s just a flat rate per megabyte and maybe that’s where the world will go,” he says. “We’re absolutely committed to simplicity and as customers move to a data world we want them to get what they’re paying for.”

Smile has taken the unusual step, by today’s standards, of developing an entirely proprietary BSS environment system with no third-party development. This gives it maximum flexibility, Allen says, and removes any need for external consultancy when new products are required. User numbers are understandably low at this early stage, with estimates from Informa’s WCIS+ for end Q3 this year putting Smile’s Nigerian subscriber base at 25,000, Tanzania at 2,270 and Uganda at 1,357.

But among these early adopters, consumption is high, Allen says. Subscribers are using three to five times more data than they were as WCDMA users, Allen says and mifi devices are proving particularly popular. “Our base stations are running at around 60Mbps per sector in the downlink and 20Mbps per sector in the uplink and I’ve got four base stations in Tanzania that are already at around 40 per cent of capacity, with roughly 300 users per base station.”

LTE connections are driving file transfer and streaming TV services, Allen says, as well as a lot of YouTube content as users search for “how-to” solutions surrounding common PC applications like Microsoft Office. But customers—Smile is targeting enterprise and educational institutions as well as individual consumers and the domestic market—need educating on the impact of their usage on their consumption, he says.

One corporate customer called up to complain that he’d been cut off, not having realised that live streaming an entire three-day cricket match to his office would drain his data allowance very quickly. And the downside of a fast connection, Allen points out, is that certain web services—Skype and YouTube included—upgrade performance when they detect one, which accelerates consumption. “We have to help educate our customers to become sophisticated users,” he says.

Smile’s mission statement is to provide service to “everyone across Africa”, so expansion is on the agenda. But acquisition is not the firm’s preferred route. Instead Smile is banking on being able to convince regulators that LTE licences should be used to introduce new players. The firm is already lobbying the South African regulator along these lines and having less formal conversations with other regulators in the region.

“We’re looking for new markets and what we’re hoping is that the regulators will see the sense in bringing in a new entrant with a track record [in LTE]. There aren’t many of those around,” Allen says. “We don’t know yet what the regulators are going to do but you need a new entrant to stimulate and break the market and force the pace.”

The firm is keen to strike wholesale deals with incumbent operators as a means of spreading the LTE advantage, Allen says, but it is not prepared to share any of its spectrum assets. As well as enabling existing international players like Vodafone and Orange to reach new markets without having to invest in infrastructure, he says, this will offer an evolutionary path to Africa’s WiMAX and CDMA operators, which are reaching the end of their technological roads.

Allen acknowledges that there are plenty of players in the African mobile market who doubt that Smile can deliver LTE at a price point that will create a sustainable business. But he says the firm has absolute conviction that it will be proven right and that it will change the African market as a result. Central to its chances, he says, is the firm’s willingness to approach the opportunity unencumbered by legacy of infrastructure or operation. “I know a lot of people are watching what we’re doing and there are some who think it’s a recipe for disaster,” he says. “But we have the opportunity to change the model and when we prove we’re right I think it will open the doors to lots of new entrants for LTE in Africa.”

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Mike Hibberd

Mike Hibberd was previously editorial director at Telecoms.com, Mobile Communications International magazine and Banking Technology | Follow him @telecomshibberd

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