Impact of Value-added Services on Nigerian Telecoms Sector

Emma Okonji writes on the evolution of mobile telecommunications Value-added Services in Nigeria since its inception in 2002, and its impact on the telecoms sector

From 2002 to 2020, Nigeria’s mobile telecommunications industry experienced exponential growth, becoming one of the largest telecom markets in Africa. A significant aspect of this development was the rise of Value-Added Services (VAS), which played a vital role in driving both subscriber engagement and revenue generation. The key players in this field, including MobileXcetera, co-founded by Tosin Onanuga, and MTech, co-founded by Chika Nwobi, were instrumental in shaping the VAS landscape in Nigeria.

These entrepreneurs and their companies played pivotal roles in the telecoms sector through their immense contributions as VAS providers from 2002 to 2020.

Early Stages of VAS in Nigeria

Former Senior Executive of the then Econet Nigeria, Adebisi Idowu, who worked closely with the co-Founded of MobileXcetera, from 2003, during the early stages of his career in the Nigerian telecommunications industry, spoke to THISDAY about the contribution of VAS to the growth of the Nigerian telecoms sector.

Idowu gave instances how Nigeria’s telecoms sector was liberalised in 2001, with the licensing of GSM operators, including MTN, Econet (Airtel), Glo, and Mtel. According to him, the industry quickly grew, with mobile subscriptions skyrocketing from around 500,000 in 2002 to over 10 million by 2005. As mobile phone usage grew, so did the demand for Value-Added Services grew beyond basic voice communication to monotone ringtones, polyphonic ringtones and predict and win services 

“During this period, VAS offerings were limited primarily to Short Messaging Service (SMS). This was the foundational stage for VAS, where SMS-based services such as news alerts, weather updates, and simple content downloads began to emerge. Consumers were introduced to basic mobile customisation options, such as ringtones and wallpapers. Premium SMS service such as predict and win powered by MTech and MobileXcetera was very predominant. Some notable services then were the first Gulder Ultimate Search text to TV, All African Games 2003 results and especially Who Wants to be a Millionaire Homeplay quiz developed by MobileXcetera, which was the first TV to Phone interactive service to reach millions of SMS within one hour of airing on TV.

This period laid the groundwork for what would become a multi-billion-dollar VAS market,” Idowu said.

The Rise of MobileXcetera and MTech

By 2006, the VAS market had gained significant momentum. Companies like MobileXcetera, led by Tosin Onanuga, MTech, led by Chika Nwobi, Vas2NET, led by Ayo Stuffman and 3WC led, by Simon Aderionla, were at the forefront of the growth. These companies pioneered innovative mobile content delivery models that extended the range of services available to Nigerian consumers.

MTech was one of the first VAS companies in Nigeria and had an early partnership with major telecom operators like MTN and Econet. MTech provided services such as ringtones, and SMS subscriptions for entertainment, religious content, and sports updates. Chika Nwobi’s vision for mobile entertainment helped MTech expand rapidly, making the company a household name in the VAS ecosystem.

Meanwhile, Tosin Onanuga’s MobileXcetera played a crucial role in shaping the VAS industry by delivering a wide array of services, including mobile advertising, SMS promotions, and content aggregation. MobileXcetera was the first VAS provider to run a cross-network service across all 3 networks in 2003 at the same time with the launch of All African Games content delivery service. The company’s ability to blend localised content with global standards made it a significant player in the growing mobile VAS market.

During this phase, the Wireless Application Service Providers Association of Nigeria (WASPAN) was formed with the leadership of Simon Aderinola. This was to bring together players in the industry and regularise the growing industry. SMS-based quizzes, and entertainment content became popular, contributing to the rapid expansion of the VAS sector. These services enabled telecom operators to boost revenue by offering subscribers personalised and engaging experiences.

Expansion/Innovation

The period from 2010 to 2015 marked an era of deeper innovation in the Nigerian VAS industry. With internet penetration rising and smartphone adoption increasing, new opportunities arose for more advanced VAS offerings. Mobile internet services, mobile gaming, multimedia messaging (MMS), and mobile banking emerged as key areas of focus for VAS providers.

MobileXcetera and MTech expanded their portfolios to include mobile financial services. For instance, mobile banking services, in partnership with banks, allowed users to perform simple banking transactions through the Unstructured Supplementary Service Data (USSD) codes provided by telecom operators. This service revolutionised access to banking, especially for the unbanked population.

The entertainment sector also flourished during this time, with VAS companies offering access to music, videos, and on-demand streaming services. MTech introduced interactive services such as SMS-based reality show voting and game show subscriptions, enhancing user participation in entertainment events like Big Brother Africa.

At this time, mobile advertising and mobile data services began to flourish as well. Telecom operators and VAS providers, such as MobileXcetera, leveraged the growing data consumption to offer targeted advertisements via mobile platforms. These advertisements reached millions of Nigerians through SMS, mobile web, and social media, further diversifying revenue streams.

During this time, mobile internet access also grew, with many Nigerians accessing the web for the first time via their phones. Telecom operators rolled out data plans, driving the adoption of internet services. Social media platforms like Facebook, Twitter, and instant messaging apps such as BlackBerry Messenger (BBM) gained popularity, further fueling the demand for data services.

Additionally, mobile advertising became a significant VAS, with brands leveraging telecom platforms to reach millions of consumers. Entertainment services such as mobile TV, gaming, and video streaming also emerged, reflecting the increasing demand for multimedia content. By 2010, VAS accounted for a substantial portion of the telecom industry’s revenue.

Regulatory Interventions and Growth

As the VAS market matured, challenges such as spam messages, fraudulent subscriptions, and unfair billing practices came to light. Consumer complaints prompted the Nigerian Communications Commission (NCC) to introduce stringent regulations governing VAS in 2016. These regulations focused on improving transparency in subscription models, ensuring opt-in services, and protecting consumers from unsolicited messages. This regulatory shift forced VAS providers to improve service delivery and adopt more transparent business practices. Idowu however, told THISDAY that the NCC solution was not well thought out as many restrictions changed the landscape of the industry which today as affected the VAS industry.

From Inception

The former Senior Executive of the then Econet Nigeria, further explained that at a time when the concept of mobile content was still nascent in Nigeria, the co-Founder of MobileXcetera had the foresight and entrepreneurial drive to found MobileXcetera in 2003, the very first local company to venture into the mobile content space, adding that his work helped to establish the foundation for mobile VAS operations in Nigeria, which has since become a critical component of the telecoms industry.

“One of Onanuga’s groundbreaking achievements was his collaboration with me at Econet Nigeria, where we developed the first set of shortcode numbers used to deliver mobile content. This system was later adopted by all major telecoms operators in the country and became the industry standard, eventually being incorporated into the regulatory framework by the Nigerian Communications Commission. Onanuga’s ability to introduce and implement these innovations demonstrated his profound understanding of the telecommunications ecosystem and his capacity to shape industry-wide practices.

“In addition to the technical breakthroughs in mobile infrastructure, Onanuga led the creation of several first-of-its-kind mobile content services in Nigeria. For example, during the All African Games, MobileXcetera developed and distributed mobile content such as game updates, predict-and-win competitions over SMS, and news alerts—a novel concept at the time that allowed Nigerians to engage with the event in real-time via their mobile phones. These services not only expanded the scope of mobile usage, but also demonstrated Onanuga’s forward-thinking approach to content delivery,” Idowu told THISDAY.

Another pioneering service was the ‘Who Wants to Be a Millionaire’ homeplay, which allowed participants to engage with the popular TV show via SMS. This interactive mobile platform was one of the earliest examples of merging traditional media with mobile telecommunications, and it further solidified Onanuga’s position as a visionary leader in the field. His trailblazing work in Nigeria’s mobile telecoms industry has had a lasting impact, with many of his early innovations becoming foundational elements of today’s mobile content landscape, Idowu further said.