The monetisation of BIG DATA and IoT for Network Operators in Somalia

For my first publication here on medium, I will share with you an assignment I had at Uni where I was tasked to write a paper for an incumbent Network Operator of my choice (anywhere in the world), setting out a case for a new product that would help the operator derive revenue from Big Data and the Internet of Things.

In the paper, I:

  • Set the scene by outlining the current technical and commercial status of big data and the IoT marketplace and how this represents an opportunity for telecom network operators.
  • Conducted an environmental analysis of the telecommunication business environment pertaining to the county I chose.
  • Analysed the strengths and weaknesses related to my chosen network operator entering this new market and the associated threats and opportunities therein.
  • Gave a brief overview of the proposed service describing the customer perceived features, price positioning, target market segments and network requirements (i.e. additional infrastructure investment). An estimate of the size of the available market for the proposed services and expected market share obtainable within a reasonable time frame.
  • Provided Financial projections by giving an approximate estimate of the incremental revenues that may be generated from the new services, and the associated incremental costs.
  • And finally, completed a risk analysis summarising the key risks in implementation, their likely impacts and how they may be mitigated.

Obviously like any good student I organised myself and left ample time to complete this assignment…Naa not me 😒 Procrastination is my middle name. But hey, science says people who procrastinate are geniuses 😅. Anyways, I hope you enjoy reading this as much as I didn’t enjoy writing it, so without further ado:

Monetisation of Big Data and the Internet of Things for Network Operators

Scene Selection

The past few years have seen large excitement surrounding the Internet of Things (IoT) and “Big Data”, with industry experts believing that IoT will infiltrate and fundamentally transform markets and industries, allowing the introduction of new business models and the changing of business processes. Ericsson predicts that by 2021, there will be an estimate 16 billion connected IoT sensors and devices, far exceeding the estimated total number of mobile phones (Ericsson, 2016).

According to Research Nester, in 2015, the global IoT market reached just under $600 billion and is expected to grow to $724 billion by 2023 (Research Nester, 2017). McKinsey & Company, however, predict that by 2025, IoT will have a potential global economic impact of $3.9 trillion — $11.1 trillion a year, which would be equivalent to 11% of global GDP. On average, 33% of that predicted value would be generated from factories running IoT operations and optimisation schemes, making it the most impactful in terms of value among the different industry sectors (McKinsey Global Institute, 2015).

Many enterprises have now embraced this development and have incorporated IoT solutions as part of their business strategies. This undoubtedly opens opportunities for network operators who provide backhaul connectivity to IoT devices, but the question remains, what other avenues can operators capitalise on?

Here we will explore the IoT value chain and try to identify areas in which network operators can increase their revenue.

figure 1: IoT Value Chain

Observing Figure 1, we notice that majority of the value lies in value-added services and solutions. This comes as no surprise because ultimately the intelligence and information learned from the obtained data is the most valued asset to the end customer. Big Data analytics is where the majority of the value lies since the raw data needs to be translated into usable information for the client who would be willing to pay a considerable amount if it meant large savings could be made in the long run for the business.

Hardware manufacturers are positioned well since the silicon required to deliver these services are always in need. As smart devices integrate more into everyday life, OEMs will be poised in a good position to roll out new products to everyday consumers as IoT becomes universally accepted.

Network operators are positioned as the vital link between hardware and the end solution. The main purpose is to provide access to the required services. Currently, it may seem as though operators hold the least value in the value chain, but without network accessibility, the IoT platform may not be as lucrative as suggested. Opportunities for operators may lie in providing different levels of service quality and accessibility to customers. But network operators need to be careful and avoid becoming “dumb pipes” similar to when the internet was at its infancy and network operators did not capitalise straight away. Later as the internet matured, operators began providing internet services themselves and started capitalising, instead of leaving it to Internet Service Providers (ISPs) such as AOL and the like.

Now that IoT is slowly maturing, it would make sense for network operators to look beyond the network and take initiative investing their assets vertically in the value chain and consider different avenues such as provisioning services, supporting services, data mining and analytics. Data traffic passes through the network therefore accessibility to data wouldn’t be a major concern.

Environmental analysis

Here we will attempt to analyse the political, economic, social and technological environment pertaining to Somalia’s telecommunications industry.

Political Analysis

figure 2: British Foreign Secretary Boris Johnson meeting Somali President Mohamed Abdullahi ‘Farmajo’ (VOA News, 2017)

Somalia is a country in the Horn of Africa which has suffered from conflict, instability and corruption since the collapse of Mohamed Siad Barre’s government in 1991. Unfortunately, Somalia has not seen a stable government since then, but the people remain steadfast and hope remains high especially with newly elected President Farmajo injecting a spirit of hope into the people.

After the collapse of the government, Somalia fell into a state of lawlessness and anarchy and was deemed one of the most dangerous places on Earth consecutively.

In 2004, after continual attempts to bring law and order to the chaos, Abdullahi Yusuf was appointed President to Somalia’s Transitional Federal Government (TFG).

In 2012, for the first time since 1967, Somalia held its first presidential election and elected Hassan Sheikh Mohamud as President of the new Federal Government of Somalia. The Federal Government is made up Federal Member States who have some level of autonomy over regional affairs. In 2017, former Prime Minister Mohamed Abdullahi “Farmajo” was elected as Somalia’s 9th President.

Economic Analysis

Somalia has a rich history in the trade of frankincense and myrrh and was regarded as one of the key trading routes to mainland Africa on the Silk Road. It has also been alleged that the frankincense gifted to baby Jesus by one of the three wise men, came from the Land of Punt (Puntland) in Somalia.

Unfortunately, Somalia is now among the few countries deemed by the UN as least developed. Despite the violence and political unrest, the economy has been supported mainly by trade and export of livestock, agriculture, remittance from abroad and the telecommunications industry. Somalia is also rich in natural resources, having many unexploited reserves of uranium, iron ore, copper, salt, natural gas, oil, bauxite, tin and gypsum (Central Intelligence Agency, 2017).

The country’s currency is the Somali shilling but most trade is conducted in US dollars. Somalia’s GDP (as of 2015) was $5.925 billion with living standards among the worst in the world. The economy very much still relies on international aid and countries such as Turkey have invested immensely with programmes in place to help rebuild the country. This support boosted confidence and there has been a recent surge in the real estate market especially in the Capital, Mogadishu.

Somali diaspora support families in Somalia through remittances which have proven to be a lifeline for the majority of the population. Since the collapse of the banking infrastructure, Network operators have served as banks and mobile money platforms such as Hormuud’s SAAD money transfer service is one of main platforms people use for everyday trade (Independent, 2010).

The UAE’s P&O Ports have recently signed a deal investing $336m for managing the development of a major port in the north-east Puntland State of Somalia, this will boost the local economy and introduce opportunities of further investment in the region (Henderson, 2017).

figure 3: Boy reading a book on Lido Beach Mogadishu (creativenomad, 2017)

Social Analysis

The Somali people are traditionally nomadic with a rich sense of culture and history reaching as far back as Ancient Egypt. They are a very proud people who hold ties of kinship dearly, though, tribal disputes are still a cause of concern in some regions. The Somali people have a very high entrepreneurial spirit and are very much tired of the instability and constant conflict they face. They are always keen to support one another and eager for anything that will bring stability, peace and prosperity to their nation.

Technical Analysis

The telecommunications industry has surprisingly thrived through all the chaos and one thing the telecoms industry in Somalia boasts about is having the lowest international call rates in Africa and actually, one of the lowest in the world. Money transfer companies such as Dahabshiil have also seen good profits and have contributed to the economy immensely. Currently, the lack of legislation poses a threat to business stability (Firestone, et al., 2015).

SWOT analysis

By conducting a SWOT analysis on Somalia’s largest Network Operator Hormuud entering the IoT market, we can find ways in turning strengths into opportunities and understand how weaknesses can become threats.


The telecommunication industry is strong in Somalia and has served as one the lifelines to the country’s economy. Hormuud is in a very strong position with over 40% of mobile subscribers using its network.

Mobile payment services are one of the main platforms used by subscribers on the network.

Hormuud has strong capital and has opportunities to continue expanding into areas with no coverage.


The lack of security due to violent extremism is the main source of concern for Hormuud because large amounts of resources are needed for security personnel to ensure continued network connectivity. The lack of regulation and lawlessness is another source of concern which may hinder any possibilities of growth.

IoT is a new area for Hormuud which means staff would need further training. This may delay any opportunity in providing new services.


Foreign investments are slowly entering the market which means growth and healthy competition that may improve services. IoT is new to Somalia and there has barely been any mention of it in the market so being first adopters of the technology could serve not only as good PR but may firmly establish Hormuud’s position as a market leader.


Not only does IoT serve as an opportunity, but it also serves as a threat. The lack of experience and knowledge in the field may require outsourcing skilled work which may be too dangerous in the current climate. Unfortunately, large areas of Somalia are still under the control of the terrorist group Al-Shabab who have no appetite for peace or progression.

Market analysis and Service positioning

The Horn of Africa is currently suffering a severe drought similar to what was experienced in 2011. Due to Somalia’s high susceptibility to drought, we propose a solution which may help tackle the problem with the aid of technology. We propose the use of smart sensors for constant real-time monitoring and evaluation of key indicators such as water level, humidity, water purity and rainfall throughout hotspots in Somalia to reduce the effects of drought with insight. The real-time data can be used to organise and prioritise support in needed areas. This service is aimed at Government, the UN, NGOs and other aid organisations who provide humanitarian support within Somalia.

Hormuud is positioned very well to provide this service because of its good history of philanthropy within the community through the Hormuud Telecom Foundation. Their portfolio of community support may build confidence with customers who may otherwise be inclined to go to competitors.

This proposed service not only avails the drought situation but also serves as an investment in infrastructure and connectivity to areas that have no access. Where there is no prior coverage, a choice of either VSAT, microwave links or fibre connections can be used for backhauling.

Bargaining Power of Suppliers

The bargaining power of IoT device suppliers is not very high simply because of the wide variety of manufactures that can provide the required product. But, the bargaining power of satellite communication providers is high due to the limited number of operators.

To reduce the satellite communication provider’s bargaining power, Hormuud might consider investing in its fixed network and expanding into the required regions, this however would mean higher costs but more control.

Bargaining Power of Customers

The bargaining power of the customer is the highest because they dictate whether the project will go ahead or not. The target customer is limited to NGOs, charities and the Government which means they can dictate a lot due to their limited number.

Threat of New Entrants

The threat of new entrants is high because anyone can offer this solution as long as they have a strong capital investment. Hormuud, however, is one of the largest mobile network operators in Somalia with annual sales of $40m (Hogan Lovells, 2012). Since Hormuud has the funds in place to spearhead projects like these, they are in a better position than many others. And since nothing like this has been done, they can be first to market meaning 100% market share.

Threat of Substitute Products

The threat of substitution may be high because there is nothing stopping target customers from conducting research the way they have been doing in the past. But since the support process has remained the same and no significant improvements have been made, new initiatives should be considered.

Competitive Rivalry

Competitive rivalry is healthy yet Hormuud still rains champion with over 2 million subscribers on their network. The nearest competitor is Telecom Somalia with 1 million subscribers. Competition is currently not a threat yet Hormuud needs to be innovative to be ahead in the game.

Financial projections

Here we will clarify the financial projections estimated for revenue and costs associated with our proposed IoT service.

Firstly, because there are no financial statements available for Hormuud, all values created in this analysis are purely speculative. We assume that Hormuud has paid off all loans prior to this investment and we will also assume that tax is fixed at 5% to create business attraction. Our proposed service is mainly aimed at the Government, NGOs and charity organisations.

figure 4: cash flow diagram

Hormuud is advertising two services, the first is an Installation service where all IoT sensors and network connectivity are established for the costumer. The installation service is made up of a minimum 10 smart water sensors for each site at a cost of $30 each and connectivity to the network is either via Hormuud’s cellular network or a VSAT connection with a partner satellite company. The cost of connectivity to the cellular network is $20pm for each site. Costs for out of coverage areas would require a VSAT connection at $50pm for each site (prices have been researched from a range of VSAT providers in Somalia). Once the installation and network establishment are complete, the handling of the data is left to the customer. The installation service is advertised at $3000 per annum for each site.

The second service is the Installation and Data Management service (IDM). Like the Installation Service, the IDM service would provide the installation in addition to providing data management and analytics presented bespoke. This service is advertised at $5000 per annum for each site.

We will assume that for the first year Hormuud will have 20 sales in areas with cellular coverage and 30 sales for areas without coverage, making a gross profit of $192,000. After deductions of OPEX and tax, the Net profit after tax is $15,390 creating a net margin of 6.69%.

Figure 4 shows a cash flow diagram for the first 5 years of this project. We estimate a cost of $130,000 in Year 0 for equipment and software requirements. We predict a minimum of 13 IDM sales for the first year and a 20% increase in sales for every year thereafter. We also deduct a maintenance cost of $5000 for each year after the first. This 5-year prediction gives us a healthy Net Present Value (NPV) of $163,634.96.

Associated material of the activity sheet, income statement and cash flow statement can be found in the appendix.

Risk analysis

Here we will briefly summarise the key areas of risk for implementation and the likely impact it may have.

The key risks are as follows:

  • Regulation (Very likely and highly impactful)
  • Solution: self-regulation among all MNOs
  • Security (Very likely and highly impactful)
  • Solution: More security measures
  • Skilling Staff (Very likely and highly impactful)
  • Solution: Outsource work, Train staff


After completing the market analysis, I believe the proposed IoT service is not only unique to the market but may actually serve to bring real tangible improvements to the region. Though Hormuud Telecoms is currently market leader, there remains a lot of space for expansion and so Hormuud needs to dimension itself effectively. We have projected a net margin of 6.69% in the first year with speculative figures but the market demand for these services may be higher than predicted. The Federal Government of Somalia and aid organisations are overwhelmed with the drought situation and lessons have not been learned from the last drought in 2011, this proposed solution may give a clear insight into how to tackle another drought situation if it occurs.


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creativenomad, 2017. Tumblr. [Online]
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Ericsson, 2016. Ericsson Mobility Report, Stockholm: Ericsson.

Firestone, R., Kelly, T. & Rifon, A., 2015. Supporting the ICT sector in Somalia. [Online]
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[Accessed 23 April 2017].

Henderson, J., 2017. P&O Ports inks concession to develop $336m port in Somalia. [Online]
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Heritage Foundation, 2016. Somali. [Online]
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Hogan Lovells, 2012. Telecom: Somalia’s success industry, s.l.: Hogan Lovells.

Hormuud Telecom, 2017. Homepage. [Online]
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Independent, 2010. Mobile transfers save money and lives in Somalia. [Online]
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[Accessed 23 April 2017].

Libelium World, 2017. Smart Water Sensors to monitor water quality in rivers, lakes and the sea. [Online]
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McKinsey Global Institute, 2015. THE INTERNET OF THINGS: MAPPING THE VALUE BEYOND THE HYPE, s.l.: McKinsey & Company.

PwC, 2016. Communications Review, s.l.: PwC.

Research Nester, 2017. Internet of Things (IoT) Market : Global Demand, Growth Analysis & Opportunity Outlook 2023. [Online]
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[Accessed 22 April 2017].

VOA News, 2017. British FM Makes Rare Visit to Somali Capital. [Online]
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[Accessed 23 April 2017].



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