EM 2.0: A Road for the Digital Intelligent Transformation of African Carriers

The light of digitalization is now shining on Africa, transforming the continent into one that is brimming with dynamism and a growing digital economy.

The Emerging Market 2.0 (EM 2.0) model – a result of successful collaboration between ethio telecom and Huawei – represents the marriage of technology and innovation. EM 2.0 is more than a technology upgrade. It also exemplifies a profound change in mindsets and models. By optimizing digital infrastructure, building a digital cloud foundation, deploying digital O&M platforms, and enabling diverse digital services, EM 2.0 has established a new blueprint for Africa's digital economy.

With 5G and other innovative initiatives pushing Africa to the forefront of the global digital economy, EM 2.0 is a model for success that provides valuable experience and inspiration for other emerging markets.

Digital and intelligent

According to the White Paper on Global Digital Economy (2023) released by China Academy of Information and Communications Technology (CAICT), the digital economy already accounts for 46.1% of GDP in major economies, making it an increasingly important engine for economic growth worldwide. The digital era is presenting conventional telecom markets with rare opportunities to transform, and world-leading carriers have started exploring ways to grow through transformation. They are employing innovative ICT solutions to transform themselves from traditional network operators that provide only connectivity services into digital solution providers that offer diversified services and that can even serve as enablers of national digital transformation.

Africa is an emerging market with huge demographic dividends — on average, it gains 1.5 new mobile Internet users per second. The continent is expected to have 620 million home broadband users by 2025, nearly double that seen in 2021. At the same time, 40% of the African population uses mobile payment services today. According to GSMA, the total number of registered mobile money accounts worldwide reached 1.75 billion in 2023, with Sub-Saharan Africa accounting for over 70% of total growth. As the digital economy takes the African continent by storm, the most strategically important issues facing African carriers involves how to transform business operation models, address new market needs during digitalization, and achieve new business success.

ethio telecom's successful EM 2.0 transformation

With a 129-year history, ethio telecom is a state-owned telecom carrier and the second largest carrier in Africa after MTN. It has 69.5 million mobile users and dominates Ethiopia's telecom market. The emergence of new telecom carriers has intensified competition in the local market, leading ethio telecom to carry out a range of transformation initiatives that ensure sustainable business growth and empower it to seize opportunities presented by Ethiopia's digital economy.

The carrier has worked with Huawei to drive digital intelligent transformation through the EM 2.0 model by building high-quality digital infrastructure, creating cloud infrastructure, deploying a digital O&M platform, and developing innovative digital services. This has helped ethio telecom transform from a traditional telecom network operator into a digital and intelligent solution provider that has achieved enormous business success (Figure 1 and Figure 2).

Unlike EM 1.0, which focuses on connectivity, EM 2.0 (Figure 3) uses cloud-based digital O&M to enable digital services, forming a future-oriented business model that embraces network, cloud, and intelligent transformation. From an architecture perspective, local industry policies and the carrier's basic networks remain as the basis of the EM 2.0 model.

The model reshapes infrastructure by integrating the cloud platform through multi-cloud convergence and cloud-network synergy, enabling robust O&M, ensuring a good user experience and higher efficiency, and supporting the development and operation of innovative and diversified digital services that create a new growth curve.

The new networks, platform, and services support one another and create a ladder for continuous progression.

Strategy, collaboration, and capabilities

How did ethio telecom find its path forward and succeed in digital and intelligent transformation?

In 2021, the Ethiopian government licensed a new telecom carrier, shaking up the once calm market. This meant that ways to maintain robust growth in the face of intense competition moved to the top of the list of concerns for the CEO and other top executives of ethio telecom, an established carrier that mainly provided traditional connectivity services. At that time, the government was preparing a strategy to develop the county's digital economy. ethio telecom analyzed the local market environment and trends, and planned to implement digital and intelligent transformation based on its business development and operation model. To achieve this, the carrier built two foundational capabilities: mobile payments and a cloud platform. It planned to develop diversified and innovative digital services and solutions for consumer and enterprise markets, expand service boundaries, and compete at a higher level.

In May 2021, with the support of Huawei products and services, ethio telecom successfully launched the country's first carrier mobile money brand "telebirr" after just five months of development, which was key to its transformation. By the beginning of 2024, telebirr had over 40 million users, generating a transaction volume of 91 billion birr (about US$16 billion). As a result, the service received the gold award from Future Digital Accreditation Institute in 2023 in the best mobile money supply category.

However, these changes were accompanied by a number of challenges.

The first challenge was a lack of revenue despite an increase in users. Within a year of its launch, the mobile money product's user volume quickly increased to 22 million, but service revenue remained low. The service's actual usage rate was low due to the carrier's inexperience at operating new services, a lack of a specialized team, and the service's limited functions (deposits, withdrawals, and transfers). These factors combined led to weak profitability. As a result, the product generated only around US$3000 in revenue per month, barely contributing to the company's overall business and putting enormous ROI pressure on ethio telecom. The carrier responded with measures to overcome this challenge.

First, the company adjusted its organizational structure (Figure 4). It established an independent Mobile Money business department headed by the CMMO, optimized the functions of the CMO's department, and formed teams for marketing, business operations, sales development, and technical support. This new organizational structure aimed to better support the company's operations from strategy to execution.

Second, ethio telecom and Huawei planned to develop the mobile money service, aligning on strategic areas such as the future transformation roadmap and cooperation model. They agreed to add mobile finance to the mobile money service in order to develop a super app that would run on a full-stack service model, and then open up market opportunities by launching fintech cloud, public cloud, and government cloud services in three steps. This would in turn support the country's digital transformation in public services, industries, and government services. The partners also launched the joint operation of the mobile money service.

The collaboration framework leveraged Huawei's global experience in mobile money services, increased Huawei's involvement in service operations, and strengthened ethio telecom's capabilities in market development and the operation of new services. With the support of Huawei's expert team, ethio telecom quickly identified telebirr's service operation issues and market limitations due to a lack of diverse offerings. To address these issues, the carrier planned a product development roadmap that added mobile payments to the existing mobile money service, upgraded mobile finance, and expanded the telebirr product series by introducing value-added services to meet local market demand and increase service revenue and profits. In August 2022, ethio telecom launched a mobile finance product, pulling them out of the revenue downturn within less than a year.

In June 2023, the monthly revenue of telebirr increased 500-fold to US$1.5 million, restoring ethio telecom's confidence in business transformation.

The second challenge was a financial product that failed to meet market needs. A lack of specialized experience in financial services coupled with an incomplete understanding of potential needs regarding financial services had resulted in slow user growth and a high bad debt rate. Huawei assigned a specialized team of senior financial experts to join the joint operation team to help solve the problem. The team analyzed the product in terms of risk control design, tariff pricing, and user experience, and provided ethio telecom with a dynamic pricing solution for its mobile finance product, optimizing over a dozen user experience metrics in the process. Quickly seeing market returns, the bad debt rate dropped by 66% and profit margins were much higher, laying the foundation for future growth.

The third challenge was the overall business hitting a ceiling. Through several marketing improvement measures, telebirr's business scale increased significantly, with monthly transactions reaching US$200 million (about 2% of Ethiopia's GDP). However, growth quickly encountered a bottleneck, and the company's performance was a far cry from the government's expected inclusive finance target.

In response, Huawei assigned a development team of more than 30 engineers to work with ethio telecom. They scanned potential mobile payment scenarios, such as public transport, individual taxes, daily services, health services, and tuition fees, and developed services for the selected scenarios. They also launched a super app with 15 new services in two weeks, a process that would have previously taken two months. This helped the carrier shorten TTM and expand service scope.

Specialized data analytics based on the super app helped ethio telecom identify a high-value mobile payment application scenario — gas station payments. This allowed the carrier to work with both the government and gas station operators, causing mobile payment transaction volumes to surge. By March 2023, telebirr's monthly transaction volume had reached US$3 billion, accounting for nearly 30% of Ethiopia's GDP.

This meant that the carrier had successfully broken the business ceiling.

While developing mobile finance services, ethio telecom also rolled out cloud services. In October 2022, the carrier released the "telecloud" brand, which leverages a Huawei Cloud solution to implement a digital transformation strategy based on both mobile payments and cloud. This service is also positioned as a 'national sovereign cloud' to help support the government's digital transformation.

Telecloud's first batch of cloud resources was snapped up five days after its launch, demonstrating great market enthusiasm. Within ten months of launch, ethio telecom had encouraged multiple state organizations, such as the High Court, to migrate their IT systems to the cloud, and was officially awarded the national digital ID project by the government.

In the enterprise market, the carrier promoted cloud-based industry solutions. To date, more than 90 enterprises have become the carrier's targets for market expansion.

ethio telecom had integrated its fintech cloud, public cloud, and government cloud services based on its multi-cloud convergence strategy. With this strategy, the carrier works with ecosystem partners to develop innovative digital solutions for education, agriculture, healthcare, and other scenarios, empowering numerous industries and accelerating Ethiopia's digital transformation.

Another key factor driving ethio telecom's successful transformation was xCare (Figure 5), a digital O&M platform tool that matches the EM 2.0 architecture. xCare maximizes the potential of data using AI modeling and inference based on big data from networks, users, and the market, providing the eyes, ears, and brain for market expansion, service operations, and O&M efficiency improvements. For example, Huawei has developed FinCare, the world's first mobile finance operation support tool, to help with key issues like managing mobile money users, agents, and credit. In terms of user development, FinCare identifies high-value information, such as user consumption habits and transaction behaviors, to provide accurate marketing strategy suggestions for acquiring new users and increasing user engagement. ethio telecom has already applied FinCare across a range of scenarios, such as coffee shop promotions, Christmas promotions, and loan collections, improving the marketing conversion rate by 60%. FinCare can display the locations of agents and mobile users, allowing carriers to accurately deploy and manage agent outlets. It also provides location-based, real-time marketing capabilities that send SMS messages to users near merchants, encouraging users to develop mobile payment habits.

In multiple ways, FinCare helps quickly improve carrier capabilities to develop and operate mobile money services.

xCare provides a variety of other functions. It offers scenario-based solutions, such as UserCare, 2ndSIMCare, RuralCare, and RoamingCare, to overcome typical problems facing the development of mobile broadband services in Africa. These include 4G user migration, improving rural coverage, activating second SIM card slots, and international roaming operations and management.

In just three years, ethio telecom has achieved its preliminary strategic goal of digital transformation and has become a digital and intelligent solution provider.

However, it has continued on the transformation journey. In December 2023, ethio telecom and Huawei expanded the carrier's business scope by leveraging its current digital capabilities. For the B2C market, they planned a range of Internet services, such as social media, e-commerce, streaming, and gaming. For the B2H market, they planned one-stop smart home services with a premium network experience (5G FWA, premium Wi-Fi, and FTTR-H). The partners also planned to add digital ID and eKYC atomic capabilities to existing cloud and mobile payment capabilities to create the one-stop telecom application store Tele-Gallery, forming a unified gateway for users, content, and data traffic.

This would allow the carrier to monetize its role as a platform and drive Ethiopia's digital economy forward.

Lessons from the EM 2.0 model

Twenty out of nearly 30 countries in Northern, Western, and Central Africa have developed national top-level digitalization plans, with more than 80% of these countries already licensing mobile money services and over 20 carriers planning to deploy cloud platforms, paving the way for a digital Africa. As a pioneer of digital transformation in the region, ethio telecom serves as a valuable reference for other carriers across the continent. Important lessons have been learned in the following areas:

Clear strategies: Carriers should formulate digital transformation strategies based on the stages of digitalization and policy environments in a given country. Decisions on digital transformation can be driven by either national strategies or commercial factors.

Optimal service development paths: Carriers should understand the local conditions for developing innovative digital services and, as they seek ways to transform, choose those that best fit the local market (e.g., mobile money, cloud, and B2B).

Suitable organizations and talent: To ensure the robust development and operation of new services, carriers should consider adapting organizational structures to provide the specialized talent required by services.

In-depth joint operation: Carriers often face challenges when marketing new digital services, including insufficient expertise and a lack of market experience. Joint operations, with the introduction of industry experts, agile development teams, and digital O&M platforms, can make up for capability deficiencies and help carriers achieve business success.