ICTworks

As mobile phone data plans drop in cost and more cheap smartphones flood the African market, what is the future of the Internet cafe? Could mobile data kill off cybercafés completely? Or are cybercafes still viable businesses?

Isabelle Gross recently interviewed Gregory Eid, CEO of Teledata ICT to ask him about his Internet cafe business and how Teledata ICT is countering this new competitive threat, and even expanding from 500 cybercafes running under its brand “Cafes Club” to 1,000 cafes in one year time.

Bandwidth

As mobile data plans drive down bandwidth prices, Teledata has responded with an interesting (and cheap) sales model:

In Teledata’s “Cafes Club”, Gregory Eid explains “every Internet user gets 1MB/s and is charged 1Ghanaian Cedi per hour (US$0.65). Teledata charges in turn a wholesale price of 0.40 Ghanaian Cedi per hour (US$0.26) to cybercafé owners”. This translates into a 60% margin for the cybercafé owner while the end users are assured of getting 1MB capacity which allows for quality browsing and acts further as a customer retainer for cybercafés. Giving end users more speed doesn’t necessarily translate into in heavy downloads. At the start Teledata forecasted peak bandwidth usage around 100MB but data feeding back from the cybercafés indicates more a peak bandwidth usage around 7MB.

The 1MB Internet bandwidth is certainly a market differentiator. While mobile data is widespread, it’s also rather slow. 3G is rare outside city centers, and even then, 3G data is not reliable. In Dar es Salaam, the mobile operator Airtel can only offer EDGE data consistently.

Value Added Services

Teledata is also offering Internet services that will help create repeat customers. Just think of all the other services a cybercafe can offer someone who buys a domain (hosting, website design, etc)

Anyone can come to a Cafes Club cybercafé and buy an annual domain registration for 25 Ghanaian Cedi (US$16). Teledata also provides to cybercafés owners an integrated billing platform allowing them to issue pre-paid vouchers to Internet customers and to monitor properly their sales. The billing platform with its printed vouchers has the potential to evolve into an e-payment platform enabling customers to purchase vouchers for topping up their pre-paid electricity meter, to buy top-ups for their mobile phone or any other e-commerce services.

I wonder if Teledat is using Mkahawa, the Open Source Internet cafe billing and management software?

Non-Internet Services

What was surprising to me was the lack of any discussion around the non-Internet related services that are usually the main income generator for Internet cafes. ICT training, document copying, international calls, and even typing and basic graphic designing usually bring in an equal or greater revenue than pure Internet access.

Business Training

I was happy to hear that Teledata ICT is focusing on building the business acumen of cybercafe owners. This is usually the weakest link, especially when NGOs or IT technicians run cafes instead of entrepreneurs.

Cybercafés closing at 6pm, charging less than the cost of paper and ink for copies, not accounting for depreciation, these are but a few of the common business mistakes made by inexperienced cafe owners that can lead to quick bankruptcy.

More Business Models

There are several efforts to increase the sustainability of Internet cafes around the world. Teledata would be good to see the work of Telecenter.org and the Business Growth Initiative. Also, Internet kiosks are a new alternative as well.