The CEO of one of South Africa’s largest mobile networks thinks Whatsapp is a freeloader

“Send me a Whatsapp text rather.”
“Send me a Whatsapp text rather.”
Image: Reuters/Thomas Mukoya
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No one likes a freeloader. Ask Mteto Nyati, CEO of MTN South Africa—the second biggest mobile network in the country. Speaking to South Africa’s Fin24 on Oct. 13, Nyati said that over the top (OTT) operators like the popular messaging service, Whatsapp, are making gains without any investment.

“You have to regulate them because clearly they’re making a huge amount of revenue on top of the infrastructure that the operators have paid for. Somehow they have to contribute towards the building of this infrastructure,” Nyati said.

Over the top (OTT) operators like Whatsapp, Facebook, Skype and WeChat offer their services—including voice calling, messaging and video calling—over a data connection, without having to use traditional mobile networks. OTTs are increasingly frustrating mobile service providers, who battle declining revenues in their SMS and voice segments.

MTN has set aside R10 billion ($76 million) this year to invest in improving its 3G and LTE coverage—outspending its rival, Vodacom, on capital expenditure, according to a Hilton Tarrant, a South African telecoms commentator. This is to support its growing data service business—nearly 30% of MTN’s revenues are generated from data—while revenues from prepaid and postpaid messaging has been declining over the past two years.

With a 31% market share among South Africa’s social networks,  Whatsapp is giving South African mobile operators a run for their money. In South Africa, the average cost of an sending a sms is R0.80, while messaging via the app can cost as little as R0.03.

Whatsapp voice calling, introduced this year in South Africa, has also proven popular with the average cost of a call via the app ranging from R0.02 to R0.92 per minute.

While they may be eating into the messaging and voice revenues of mobile networks, OTTs like Whatsapp aren’t completely bad for business. They can help fuel data consumption—a growing revenue stream for network operators if exploited well.

South Africa’s third largest network, with 19.6 million subscribers by the end of 2014, saw an opportunity a year ago by zero-rating Whatsapp on its network for close to a year. Though the promotion came to an end on Sept. 1—with the network opting to charge its customers R5.00 for a Whatsapp bundle. Cell C’s CEO, Jose Dos Santos, says zero-rating Whatsapp has worked well.

“Cell C has seen such great success in our venture to embrace over-the-top players like Whatsapp, and we are pleased to now bring an incredible value proposition to our customers,” said Dos Santos to iTWebAfrica.