TelOne’s Talk+ product, the diaspora opportunity, and its real competition

In October, TelOne launched a new voice product called Talk+. It’s a VoIP service that uses Skype. If you’re in Zimbabwe and need to make calls to other people in Zimbabwe, you’d be unwise to use this product. If however you’re in the diaspora (or even want to call the diaspora from Zim), no product could be better.

The biggest competition for Talk+ product is not apparent at first glance. But it’s WhatsApp and something called ‘Traffic Refiling’. Here is why:

What Talk+ is and how it works

Talk+ is a VoIP product (meaning Voice over IP), meaning the line you get works with whatever internet connection you have. Where, traditionally, a regular phone service be either a physical copper line coming into your home, or a physical mobile sim card in your cell phone, a VoIP line is just a virtual number that you put into your app on your smartphone or computer and use your existing internet subscription to make calls.

Other internet providers locally have VoIP services too; Telecontract has its Vee4Home, ZOL has ZiNumber, Africom has Guroo and so on. No new concept here.

The only difference is the Skype component mentioned above; Talk+ is the Microsoft owned Skype for Business. This is possible through a Microsoft partner locally, called Paradigm. Essentially, where ZOL would ask that you download their app so you can use your virtual number,  TelOne asks that you download Skype for Business. The Paradigm CEO told us they are doing this with Microsoft’s blessing and they are the first to experiment with customising SfB for consumers, a model they hope to replicate in Zambia and other countries in the region.

If you’re wondering why you’d need an ISP provided service to make calls where you already have WhatsApp and Facebook Messenger and indeed Skype itself doing this ably, your answer is, with ISP voice service you are able to call regular telephone numbers like +263 771 000 100, and to do so at local rates.

Talk+’s decision to use Skype will impact two types of customers very differently. The first group is Zimbabweans in Zimbabwe wishing to call local numbers. These will find the product unnecessarily difficult to use. Skype for Business was is normally sold to companies who then add their employees to the platform, so the only way for TelOne to have this used by customers has been for them to make the customers employees of an organisation called Talk+. Again, apparently with Microsoft’s blessing – the more TelOne customers, more user licenses sold so they wouldn’t say no.

Things that you find annoying include constant notifications that it’s failing to connect to your organization’s Exchange server (because it’s looking for software in Microsoft’s enterprise ecosystem); having to maintain a separate personal Skype on the same machine and needing to know which Skype to use for which calls; having to wonder why you are being referred as part of an organisation called Talk+.

For someone in Zimbabwe, all this for a service that offers local calls at 10 cents per minute (plus the cost of your internet) is too much. There are options that offer much more: such as NetOne’s OneFusion plus the ever free WhatsApp. In short, we don’t see why anyone in Zimbabwe would want to buy this?

The Diaspora will see it differently

For the diaspora though, it’s a different matter altogether. The annoyances that are a deal breaker for the customer in Zimbabwe, might be insignificant because of one important decided factor – the cost of calls to Zimbabwe. A call to Zimbabwe is ridiculously expensive.

Expensive to the tune of 39 cents a minute for a call to an Econet number from Google hangouts. 50 cents a minute when calling from the regular Skype. 70 cents a minute from Viber. And mobile operators like AT&T in the US charge 78 cents a minute.

Talk+ in comparison, only charges 10 cents per minute for all calls. The difference is huge, and this is why the diaspora will look at this as a money saver. What’s more, unlike Guroo, ZiNumber and them, TelOne has the familiarity of their brand and the strength of Skype’s going well for them.

According to Zimbabwe’s latest telecoms stats, the country currently got 51.4 million incoming international voice minutes in the second quarter this year. This translates to about 570k minutes a day. Our assumption is that these were calls terminated ordinarily, using the extortionate rates shown above. Now considering that Zimbabwe gets its fair share of refiled traffic, that official incoming minutes figure understates the actual.

This is roughly the size of the diaspora market that Paradigm and TelOne are onto, if they execute this well, and that “business app forced onto consumers” problem doesn’t albatross Talk+.

It’s not just incoming. The outgoing is a market too. Zim calls to US/UK/China/Canada are just as ridiculously expensive. Compare the 48 cents a minute Econet charges for such calls to the 16 cents a minute it charges for a call to a local VoIP number (which your relative in the UK’s Talk+ number will be) and again you have a really good deal.  As for the volume of minutes for outgoing international calls, the second quarter figure was 19.2 million which is about 210k minutes a day.

To be clear, this is not to say that Talk+ will succeed phenomenally. The annoyances we faced setting up and the failure of the platform to sign up someone in US whom we asked (and was keen) to try the product are signs they have some work to do to realise the opportunity.

Talk+’s Competition & Traffic Refiling

The easy to see competition is ZOL, Africom and the other IAPs. However, we don’t see that these are hungry enough to be serious contenders for taking a significant share of the international voice traffic from the status quo.

Africom’s website is so full of errors it’s as if they discontinued the service. ZOL requires that you call them to set up an account which means you need to open an account during work hours (time differences for diaspora), and have to deal with the back and forth to be expected when buying from a company. Telco doesn’t seem very keen on making their products known to more people.

In fact, we’d say these companies seem to have given up on pushing VoIP aggressively when the mobile tariffs in Zimbabwe were slashed some 2 years ago. Their once attractively low tariffs (10 cents per minute) were easily matched by a mobile operator price war.

The more interesting competition we see is the very tool that makes Talk+’s existence possible; the internet. Talk+’s clear value proposition of connecting people on the internet (Skype) to people offline numbers (gogo in Uzumba Maramba Pfungwe) and vice versa, will gradually be eroded away as the internet reaches more people – to the point in future when grandma’s phone can be remotely credited with unlimited WhatsApp every month without her needing to do the top up process herself.

WhatsApp is no doubt part of what’s eating away at the international voice minutes every quarter. The second quarter this year had 12% less traffic than the first and if that trend sustains, this year alone, regular international voice traffic might go down by as much as 40%. That is something TelOne needs to take note of.

The Refiling Competition

Another contributor, but one whose impact on traffic trends is difficult to measure, would be what has generally been referred to in Zimbabwe as “illegal traffic refiling”. Internationally they have various names for it but it’s essentially a  practice where fraudulent companies bypass the high international tariffs by routing calls (from the UK, say) via the internet and into a machine called a simbox (located in Harare, say) which then makes the call to the local number, making it appear like a local call & therefore enjoying local rates.

Refiling is a huge headache for mobile operators, because it means they end up making a fraction of what they are entitled. No doubt TelOne will have to consider being the better alternative to these refilers – they are as much competition as the legal operators.

One could argue ofcourse that TelOne itself is doing a form of international traffic arbitrage. Legally, but with the same result – where mobile operators would have made some decent revenue from calls to and from the diaspora, now some of those minutes will just be cheap local VoIP calls. If I were Econet I’d be worried to see Talk+ succeed. And no doubt TelOne considers Econet et al their competition too.