Building synergies: How mobile operators and startups can partner for impact in emerging markets

• Building synergies: How mobile operators and startups can partner for impact in emerging markets
• Both sides have expertise the other wants, case studies reveal strong potential

WHEN the term “unicorn” first emerged in 2013 to describe a privately owned startup valued at over US$1 billion (RM4.4 billion), there were no startups from emerging markets on the list of thirty-nine. Three years later, the list has more than quadrupled to 179, including 11 from emerging markets.

Beyond their 10-digit valuation, emerging market unicorns such as Jumia (Nigeria), Go-Jek (Indonesia), Decolar (Argentina) or Hike (India), have rapidly become major commercial and socio-economic players in their respective regions. Combined, these four unicorns have 6,500 employees and several hundreds of thousands of contractors; Go-Jek operates a fleet of 200,000 drivers and Jumia works with a network of 30,000 sales agents.

While startups in emerging markets are vital forces in both the innovation ecosystem and the wider economy, the majority struggle to reach scale. They are often stifled by a dearth of investment capital, lack of payment infrastructure, difficulty to reach unconnected users, a shortage of market insights and limited government support, among other challenges.

Likewise, mobile operators have touched the lives of billions and reached impressive scale across all population segments. Emerging markets represent 75% of the world’s 4.8 billion unique mobile subscribers. Nevertheless, these mobile operators face a plethora of challenges. Sustainable competitive advantage in the telecommunications sector is becoming increasingly difficult to achieve. Digital disruption has made it difficult for mobile operators to keep up with the accelerating pace of innovation.

Today in emerging markets, more than anywhere else, there are opportunities for mobile operators and startups to collaborate. Mobile operators have reached the scale that startups lack, while startups have the local innovation mobile operators need.

When it comes to scale and innovation, mobile operators and startups have certain “haves” and “needs”. As we looked at examples of collaboration between mobile operators and startups in emerging markets, it became clear that these “haves” and “needs” primarily determine the potential synergies, or opportunities for collaboration. Based on this finding, we were able to design a framework that outlines theses “haves”, “needs” and resulting synergies.

Collaborations between mobile operators and startups which yield mutually beneficial synergies are already a reality in emerging markets. The below video gives voice to the ones who talk about it the best: mobile operators, startups, and local ecosystem stakeholders.

Our analysis of the synergies between mobile operators and startups in emerging markets yielded four main takeaways:

1. Any collaboration between a mobile operator and a startup needs to be balanced.

Both parties need to benefit from the collaboration for it to make sense and be sustainable. Therefore, before going ahead with a partnership, mobile operators and startups need to clearly assess their haves and needs, and then use the framework above to identify specific opportunities for collaboration.

However, it is important to note that a “have” on one side can fulfil different “needs” on the other side. For instance, the innovative and high-impact services a startup provides can help a mobile operator with customer acquisition and customer retention. In Nigeria, when eCommerce startup Jumia offers exclusive discounts to MTN customers, it not only generates new customers on the operator’s side, but also increases the satisfaction and loyalty of its existing customers.

2. Mobile operators have a range of tools to accelerate a startup’s growth.

Financial support is only one of these tools. Mobile operators can also support startups with customer acquisition and market insights, brand exposure and trust, advisory and mentoring, and providing access to customer touchpoints, mass communication, and payments channels. (Infographic 1)

3. Mobile operators are uniquely positioned to create additional value across a range of industries.

For example, education (Safaricom and Eneza), transportation (Orange and Mtick), energy (MTN and Lumos), or others. The ability of mobile operators to drive scale across other industries gives them an edge over other potential corporate partners.

4. Startups can help to address some of a mobile operator’s key challenges.

In the face of decelerating revenues and increasing competition in the telecommunications sector, startups can provide a way for mobile operators to stay relevant. The examples in the synergies framework (Infographic 2) demonstrate that startups can help mobile operators grow core revenue, create new revenue streams, or lower costs. They can also boost a mobile operator’s value proposition, leading to higher customer retention, customer acquisition, and better reputation.

The three case studies captured in the report illustrate these points, showcasing collaborations between mobile operators and startups in emerging markets. The case studies cover startups at three different stages (early stage to unicorn) in three markets (Pan-Africa, Kenya and Pakistan), operating in three different segments (EdTech, eCommerce, and HealthTech).

With this report, the GSMA Ecosystem Accelerator programme calls on mobile operators and startups in emerging markets to continue seeking partnerships and opportunities for collaboration.

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