2011 South Africa - Telecoms, Mobile, Broadband and Forecasts

The continent’s leading telecoms and digital media market

South Africa’s telecom sector boasts the continent’s most advanced networks in terms of technology deployed and services provided. In a virtually saturated voice market, four mobile networks – Vodacom, MTN, Cell C and Telkom SA – are competing for market share in the next growth wave, mobile broadband. 3G/HSPA mobile broadband services now rival available DSL fixed-line offerings in terms of both speed and price, and have consequently taken the upper hand in terms of subscriber numbers. All four operators are preparing the introduction of the next generation of mobile technology, LTE (also referred to as 4G), but are being held back by delays with suitable frequency spectrum allocations.

While emerging as the country’s leading broadband providers, the major mobile operators are also branching out into fixed-lines, fibre backbone networks, international fibre connectivity, mobile banking and entertainment in a rapidly converging environment. Fixed-line incumbent Telkom SA has reacted by launching its own 3G mobile network and the country’s first commercial WiMAX service, but various competitors are hard on its heels rolling out the same technology, including second national operator Neotel.

Following years of delays with its licensing, second national operator (SNO) Neotel is gaining market share in competition with fixed-line incumbent, Telkom. This, in combination with other sweeping liberalisation measures – also delayed by years – has changed the country’s telecoms landscape fundamentally and brought prices down. In addition, the government has created Broadband InfraCo, a national infrastructure company to provide cheap backbone network capacity to service providers. Despite the significantly increased competition between different service providers, many municipalities in South Africa, including the country’s largest cities, are implementing their own fibre and wireless broadband networks.

Under a converging regulatory regime, hundreds of alternative service providers are pushing into the market with converged services. The legalisation of VoIP Internet telephony in 2005 marked the beginning of a fundamental change in the country’s telecoms landscape. Billions of dollars are being invested into IP-based next-generation networks (NGN) that are capable of delivering converged services more efficiently. Telecom carriers and ISPs are moving into delivering audio and video content over their networks, while in turn the traditional electronic media carriers have discovered the potential of their infrastructure for telecommunications service delivery.

Key regulatory events currently shaping the market are the auctioning of WiMAX and LTE spectrum, the unbundling of the local loop (ULL, or LLU), the staged reduction of interconnect charges, and the new requirement for mobile subscribers to register their personal details with service providers.

All of the major players are involved in various international submarine fibre optic cables that have reached the country in the past three years. Following the end of Telkom’s monopoly on international submarine fibre optic cables, the arrival of Seacom as the second international cable in 2009 has brought down the cost of international bandwidth dramatically. A third international cable, EASSy landed in 2010, followed by ACE and WACS in late 2011.

South Africa’s Internet and Broadband market has finally taken off after years of stagnation due to an expensive operating environment created by Telkom SA’s dominance in the fixed-line and international bandwidth market. The new converged licensing regime has created hundreds of companies licensed to offer Internet services. There has been consolidation in the sector which is expected to continue.

With its relatively well developed and diverse infrastructure, South Africa is also taking a regional lead role in the convergence of telecommunication and information technologies with the media and entertainment sector, promising reductions in telecommunication costs and better availability of information and services. Digital media and social media have reached a level of development to foster an associated advertising and marketing industry. The FIFA World Cup held in the country in 2010 has showcased these developments. While South Africa lags behind other countries on the continent in the development of e-government, e-health and e-learning applications, it is a regional leader in the areas of electronic banking and mobile banking services and social media.

Market highlights:

• After market disruptions, mobile penetration is back above 100%;
• 3G mobile broadband continues to surge ahead of DSL;
• More LTE trials, but commercial service delayed by spectrum allocation;
• Staged reduction of interconnect charges 2011-2013;
• Local loop unbundling nearing completion;
• Two more international fibre links landed in 2011;
• Forecasts to 2013 and 2016 for the mobile, Internet and broadband market.

Estimated market penetration rates in South Africa's telecoms sector – end-2012

(Source: BuddeComm based on various sources)