m-Health - a Likely Opportunity for Africa’s Telcos?

by Sophie Papasavva, Partner at EMFC Loan Syndications
September 2012

 

Mobile health continues to be praised for its potential to significantly reduce healthcare costs. Yet, to enable this opportunity to succeed on a large scale, Western governments, regulators and healthcare providers have needed to work together with mobile operators and value added service providers engaged in the m-Health ecosystem; only with collaboration along the entire value chain is the wide-spread adoption of m-Health services expected to succeed. Indeed, while the developed world focuses on reducing the cost of monitoring and treating chronic conditions, the application of m-Health in Africa fulfils a much greater cause - that of spreading much-needed basic healthcare to rural areas and other out-of-reach communities. For such a less complex solution, Africa’s telcos need a much simpler business model and far less external collaboration to be profitable and succeed.

Application

The improvement of healthcare is central to the United Nation’s Millennium Development Goals to reduce poverty in the world. Yet in the vast majority of countries, especially in the emerging markets, it is the cash-strapped public sector that is responsible for providing crucial healthcare services to the population. The World Bank estimates that in 2010 health expenditure per capita was less than US$12 in Eritrea (measured in current US dollars), the lowest in Africa as compared to just under US$650 for South Africa, which was the highest on the Continent. As a comparison, the average per capita health expenditure in the European Union was more than US$3,300 in the same year.

Life Expectancy at Birth

Mortality Under 5's

Source: The World Bank

With a significant strain on resources, government’s and health authorities have looked to m-Health to help reduce costs and improve efficiencies in the delivery of such services. The idea of mobile phones being used as the device through which health information is disseminated and monitored is not new. The GSMA has expected mobile technology to play a significant role in the provision of healthcare services globally and has further predicted the growth of the m-Health market to result in a revenue opportunity of US$23 billion by 2017.[1] Moreover, with the continued popularity of smartphones, mobile telephony is expected to play an ever-increasing role in healthcare.

In emerging markets, where 4.6 billion feature phones are the norm, authorities are looking to roll out basic life-saving services, with mobile technology offering highly effective, scalable and affordable healthcare beyond the limitations of a hospital or doctor’s surgery. According to AT Kearney, Kenya has approximately 1.1 nurses and 0.1 doctors per 1,000 population as compared to 8.0 and 2.3 respectively for the UK.[2] Lives can be saved by m-Health in countries where infant and maternal mortality continue to be significant problems; by delivering advice via SMS to pregnant mothers and health information to nurses and community health workers, such deaths can be reduced by up to 30%.[3] For countries with limited access to healthcare workers and a large rural population, mobile telephony offers access to information about detection and avoidance of diseases, as well as basic treatment methods.

As the healthcare needs of emerging markets differ widely from the needs of developed countries, so stakeholders should avoid merely replicating Western m-Health business models and imposing them on the developing world.

Business Model

The mobile phone has many advantages when deployed as a healthcare tool and even the simplest feature phone found in rural parts of the Continent can become a powerful device; text messaging and voice calls can deliver real-time, critical information quickly and effectively, so that people living in remote, rural areas can reduce unnecessary travel to consult with health workers.[4] Even GSM technology thus increases the possibility of remote diagnosis by allowing individuals to communicate with hospitals or healthcare centres, maximizing the time of specialists and reducing patients’ trips to a hospital. It is clear that for the economies of Africa, the primary m-Health offer needs to be simple, easy and quick to deploy, aiming to access as many rural communities as possible. More complex solutions geared towards smartphone users and aiming to monitor chronic conditions are far less applicable here.

Still, irrespective the complexity of the solution, as a result of their extensive technical, regulatory, and market knowledge, telecom operators are aptly suited to act as intermediaries between stakeholders in the health ecosystem. According to AT Kearney, in order to gain significant revenues from m-Health, telecom operators need to move beyond connectivity to providing value added services, which may include clinical services. The consultancy firm expects operators to require a dedicated organisation with global market development and local commercial exploitation; new channels and distribution models and substantial investment in active marketing and sales. In conclusion, new capabilities are expected to be required on the part of telecom operators.[5]

Yet for the purposes of Africa’s mobile healthcare needs, none of the above is necessary. Moreover, in the two decades of mobile telephony in the world, other than SMS, one struggles to find a value added service that telecom operators have managed to launch, maintain and monetise successfully. Telecom operators are excellent at building and operating networks, managing points of access and terminals and equally successful at penetrating new markets, gaining users and maintaining a relationship with such users. Telecom operators are not the best of innovators and possibly due to their large size, are not very efficient at selling ancillary services. As a result, in order to achieve any kind of success with an innovative, yet crucial service such as m-Health, Africa’s telecom operators need to focus on the most relevant solutions and develop partnerships with technology firms to deliver these. Specialist technology firms innovate and adapt quickly and can facilitate the deployment of go-to-market strategies much faster than any in-house telco developed solution. Africa’s telecom operators need to deliver m-Health solutions for feature phones and they need to partner with firms that can help monetise their pipe effectively.

Conclusion

Research commissioned by the GSMA has found that the provision of pervasive m-Health services and applications could provide mobile operators with revenues of approximately US$11.5 billion by 2017. Monitoring services are expected to be the most popular, followed by diagnosis services and treatment services. Device vendors could benefit from a revenue opportunity of US$6.6 billion, content and application providers US$2.6 billion, and healthcare providers US$2.4 billion by 2017; for Africa as a whole, revenues are estimated at US$1.2 billion.[6]

Whilst m-Health continues to grow in popularity and importance, with many telecom operators embracing the segment whole-heartedly, the business model for mobile health in the developed world remains elusive; achieving broad uptake and at the same time monetising the potential has proven to be difficult to achieve. Healthcare organisations and practices tend to be conservative and resistant to abrupt and externally imposed changes. As a result, the healthcare industry demonstrates much slower pace of uptake for new technologies as compared to the mobile industry. However, for the purposes of basic healthcare services, as companies experienced in customer service, Africa’s telecom operators are in a unique position to capitalise on the need for user-centric services. As they have an established position in the market, subscribers trust their telecom service provider to handle personal information. As the needs become more complex sometime in the future, so Africa and other emerging markets may benefit from more complex solutions that require strategic partnerships with device manufacturers, value added service providers, insurers, healthcare companies and others. For the time being, however, Africa’s telcos are perfectly positioned to capitalise on the vast opportunity posed by the most basic m-Health services and should resist replicating the business models of more developed markets that have completely different drivers and needs.

 

[1]Touching Lives through Mobile Health: Assessment of the Global Market Opportunity” Report by PwC for the GSMA, February 2012

[2]The Opportunity for Mobile to Address Major Health Challenges” AT Kearney, February 2011

[3]The Socio-Economic Impact of Mobile Health” Boston Consulting Group, April 2012

[4]The Socio-Economic Impact of Mobile Health” Boston Consulting Group, April 2012

[5]Mobile Health: Who Pays?” Report by AT Kearney for the GSMA, February 2011

[6]Touching Lives through Mobile Health: Assessment of the Global Market Opportunity” Report by PwC for the GSMA, February 2012

Sophie Papasavva

Sophie Papasavva

Sophie Papasavva is the Founding Partner of EMFC Loan Syndications (“EMFC”), a boutique firm assisting companies seeking to raise bank debt. EMFC offers Loan Execution Support, acting as an additional ‘in-house’ resource to time-constrained finance teams. Prior to establishing EMFC, Sophie was a loans banker for 12 years, first as telecoms, media & technology relationship manager and later in loan syndications and sales, where she gained experience in multiple sectors such as oil & gas, mining, infrastructure, agribusiness and others. Sophie has originated, structured, executed, sold, restructured and syndicated loan financings ranging from simple bespoke bilaterals to complex multi-billion dollar, multi-currency syndicated transactions. Her expertise lies in arranging structured, bespoke financings for corporate borrowers operating in the emerging markets. To contact Sophie, please e-mail her directly at sophie@emfc-loans.com or follow her on Twitter at @Sophie_EMFC.