South Africa’s mobile operators are all investing in LTE network (often, incorrectly, referred to as 4G), offering higher speeds, lower latency and better spectral efficiency than older 3G technologies. However, this LTE investment may have it drawbacks.
“In Korea, they are data crazy. We have unprecedented demand. We cannot handle it. But the issue we have is that they are not willing to pay enough. So, the fundamental problem is, can we make any money out of it?” asked Suk-Chae Lee, the head of KT Corp.
“The traffic increases but the revenue does not necessarily follow,” said SK CTO Jae W Byun. “We have seen about a $13 increase in average revenue per user compared with 3G. So, it is good money but it may not be enough to justify the huge investment needed in LTE.”
South African LTE investments
Vodacom, MTN and Cell C are deploying LTE network by re-farming spectrum. With the Department of Communications dragging its feet on handing out scarce spectrum, local operators did not have a choice other than to use existing spectrum.
Without access to enough suitable spectrum, South African mobile operators are at a big disadvantage in deploying LTE when compared to their international counterparts.
This raises the question whether local operators will be able to make money from their investment in LTE.
We need to roll out the best technologies: Vodacom
Vodacom spokesperson Richard Boorman said that it is definitely their plan to make money from LTE.
“It’s important to understand that much of the investment (e.g. transmission) would have happened irrespective of rolling out LTE. Overall, it’s early days so difficult to speculate on the potential returns,” said Boorman.
Boorman added that Vodacom has to continue to invest in the best technologies to serve its customers.
“I’m not sure that there’s a choice on whether to roll out faster technologies – we need to ensure that we’re giving customers the best possible experience and support the latest developments in handsets and other mobile devices,” said Boorman.
“LTE also brings other benefits in terms of increased efficiency and alleviating the issue of cell shrinkage during peak demand periods.”
Form a consortium to roll out LTE: Cell C
Cell C spokesperson Karin Fourie said that the comment by KT Corp speaks to Cell C’s longstanding position on LTE in South Africa.
“If the private sector is allowed to form a consortium with government entities to rollout LTE, it will overcome two key challenges: Capital expenditure and spectrum,” said Fourie.
Fourie highlighted that capital expenditure determines network rollout and cost, while spectrum determines speed and price.
“The more spectrum a single entity has and can offer services through wholesale structures to other operators, the more cost and spectrum efficient the network deployment becomes.”
This, argued Cell C, then translates to lower capital and operational costs and allows the industry to offer better pricing with higher data speeds and delivers higher volumes of data.
“A national wholesale broadband network would address these challenges as spectrum would be allocated to that single entity. Capital expenditure per company would also be significantly less,” said Fourie.
Incremental LTE investment not significant: MTN
Serame Taukobong, MTN’s Chief Marketing Officer, said that LTE is currently being rolled out in the 1800 MHz band, and that the incremental investment required to provide the service is minimal when compared to a new “greenfields” installation.
“We are confident that the current and future value propositions that LTE presents to our customers will be compelling enough for good adoption which gives impetus to our business model,” said Taukobong.
Taukobong added that MTN does not view LTE in isolation, but as an extension of the current data network, which is to provide additional capacity for the growing demand that is prevalent today.
“In order to stay ahead of the explosion in data services and bandwidth requirements, MTN continues to invest substantially in its network. The roll out of LTE and our fibre network addresses this demand,” explained Taukobong.
“We believe that the allocation of frequency spectrum for LTE is fast becoming a necessity, for the benefit of South African consumers and economy.”
8ta was asked for comment about their LTE network investment, but the company did not respond by the time of publication.