The Electronic Voucher Distribution opportunity in Mobile Telecommunications in Nigeria

August 2009

Nigeria has the single largest mobile subscriber market in Africa

Distribution of Mobile Cellular Subscriptions in Africa, 2008

Other 34% Nigeria 26%

Nigeria has overtaken South Africa as the largest mobile market in Africa
In 2000, South Africa accounted for 74% of Africas mobile subscribers

South Africa 19% Ivory Coast 4% Tanzania 5% Ghana 5% Kenya 7%

Most users tend to have more than one mobile subscription

The Nigerian population, though significant only accounts for 19.6% of the African population

Note: SSA ex. SA Sub Saharan Africa excluding South Africa Source: ITU World Telecommunication/ICT Indicators Database

In recent years Nigeria has grown significantly faster than other major African mobile markets
Mobile Cellular Growth in Africas Largest Mobile Markets, 2002 - 2008
Nigeria 64.8

Ghana

56.2

Kenya

41.9

Ivory Coast

Nigerias mobile market has grown significantly faster than the entire African mobile market

Tanzania

37.3

South Africa 0

17.8 20 40

Africa = 42.1

60

80

CAGR, 2002 - 2008

Note: CAGR Compound Annual Growth Rate (%) Source: ITU World Telecommunication/ICT Indicators Database

Despite significant growth the penetration of mobile subscribers in Nigeria is still relatively low
Penetration of Mobile Subscribers in Africas Largest Mobile Markets , 2008
100 90.6

80

Penetration (%)

60 50.7 49.6 41.9 40 30.6 41.7

Africa = 36.5

20

0 SA Ivory Coast Ghana Kenya Nigeria Tanzania

Source: ITU World Telecommunication/ICT Indicators Database

Given Nigerias current penetration levels, mobile subscriber growth is expected to continue
Projected Number of Mobile Subscribers in Nigeria, 2008 2012
160

140

x2.2
126.7

140.3 134.5

120
Mobile subscribers (millions)

100

95.9

80 64.0 60

40

20 0 2008 2009 2010 2011 2012

Note: Assumption Nigeria mobile subscribers will make up 25% of total mobile subscribers in Africa Source: Africa Mobile Factbook 2008

99% of mobile subscribers in Nigeria are prepaid customers

Country Prepaid Subscriptions, 2008
120

100

99.0

98.9

98.7

96.7

94.1

Africa = 94.8
81.9

Prepaid subscriptions (%)

80

60

40

20

0 Nigeria Ivory Coast Kenya Tanzania Ghana SA

Source: Wireless Intelligence, IMF, Ernst & Young Africa Connected A telecommunications growth story, ITU World Telecommunication/ICT Indicators Database

Despite being the foremost means of distributing prepaid airtime, scratch cards have a number of challenges
The Generic Airtime Distribution Model

In Nigeria, over 65% of prepaid airtime distribution is achieved using scratch cards Challenges of physical scratch cards
Management of the scratch card supply chain and related logistics
Manufacturer contracts Stock levels Write-offs and losses Airtime pin and card security Storage facilities

Inflexibility with regards to airtime denominations

Lower denominations vs. cost of raw material vs. increase in stock levels

Heavy reliance on physical infrastructure to reach remote areas

Transportation networks and modes

Electronic Voucher Distribution (EVD) provides a more cost effective, efficient and flexible model for the distribution of prepaid airtime
The Generic Airtime Distribution Model

Advantages of EVD
Airtime can be sold anywhere as long as signal coverage exists
Optimizes distribution over the operators coverage area Ensures distribution to more remote areas with poor physical connectivity

Translates into supply chain cost savings given the electronic nature of stock management Airtime can be sold in smaller denominations Works across a variety of media
Point-of-sale terminals in stores Direct handset recharge ATM recharge Internet recharge Credit card/ direct debit recharge

How EVD works

The airtime request is transmitted over the mobile operators GPRS network to an application server Airtime is stored and managed by a proprietary virtual distribution and logistics platform running on the server Airtime stock can be replenished directly from the network operator or a super-dealer The recharge information can be delivered directly to the handset or to other compatible media e.g. pointof-sale device The server can also communicate with banks to debit retailer or dealer accounts

Potential EVD clients

Mobile operators
11 in Nigeria e.g.
MTN Glo Mobile Zain Multilinks Prestel Reliance Starcomms Visafone M-Tel Intercellular Bourdex

Airtime super-dealers
Retail chains Banks Post Office Individuals

The business model

Realising Africas Potential (RAP) Investments has partnered with a provider of EVD technology in South Africa to collaboratively seek opportunities in the rapidly growing telecoms industry in Africa Our partner, an ICT company in operation since 2003, has developed a virtual distribution and logistics platform that forms the basis of the service offering and is the ultimate solution for prepaid retailers
The platform is capable of working with a variety of output devices including: Integrated GPRS POS with screen, keypad and high-speed thermal printer, JAVA/GPRS handsets or a PC with a GPRS modem The platform is already being utilised in 4 African countries for airtime (and electricity) distribution Typically, the client is charged an agreed percentage of the airtime value that is sold through the platform Our partner is also the sole and exclusive distributor (for Africa) of a state-of-the-art handheld POS terminal

RAP Investments leverages its networks in Africa to gain access to key decision makers in African telecoms markets and to tap into EVD opportunities that exist

realiseafrica@gmail.com +27846783000