06 March 2019
Prepaid churn in South Africa is so astronomical that operators must replace their entire prepaid subscriber base every 18 months on average, according to new research from Strategy Analytics and Juvo.
The report, called Death by a thousand nos, highlighted the methods to encourage sustainable loyalty amongst prepaid customers and calculated the reduced churn and increased revenues that are possible for developing market operators.
Although prepaid is the dominant form of mobile connection – accounting for 94 per cent of connections and 80 per cent of revenue in Africa as a whole in 2018 – in South Africa alone, operators wasted USD51m last year replacing lost prepaid customers.
That is because 93 per cent of subscriber acquisition cost expenditure was devoted to replacing churning customers – amounting to 2.7 per cent of prepaid OPEX.
James Muriithi, head of Africa at Juvo, said more than nine in 10 African mobile customers are on prepaid plans, accounting for eight in 10 dollars of mobile revenue on the continent.
“But churn is so high that operators across Africa spend hundreds of millions of dollars a year simply replacing lost prepaid customers – over R700m in South Africa in 2018 alone,” he said. “The way we, as an industry, approach prepaid must change.
African operators face a constant ‘countdown to no’ – swathes of customers leave every month, most as they run out on credit.
The solution is to flip this around. By saying ‘yes’ and offering customers convenience airtime credit to all subscribers at the point of low balance, operators change the relationship.
More importantly, with the data they generate, operators can build financial identities to offer personalized mobile financial services which are proven to boost loyalty and provide a sustainable foundation for new, revenue-generating services.”
The report also found that prepaid services dominate the mobile market in many other parts of the world, but primarily in developing countries.
Globally they accounted for 5.7 billion connections and USD265bn in service revenue in 2018 shares of 71 per cent and 32 per cent respectively.
However, these ratios were significantly higher in developing regions, where prepaid services account for 82 per cent of connections and 50 per cent of revenue in developing Asia-Pacific markets.