SA economy unlikely to affect teleco sector

Despite the struggling South African economy, global growth consulting firm Frost & Sullivan expects continued strong performance in the telecommunications sector.

“Overall, the competition within the sector has increased as the industry matures, and it is anticipated that more intense rivalry within the industry will lead to convergence,” said Ian Duvenage, ICT business unit leader at Frost & Sullivan Africa.

He noted that the major network operators, including Vodacom and MTN, have come under increased pressure as the regulator (Icasa) has introduced asymmetric pricing, which will benefit operators with less than 20% market share – the likes of Cell C, and Telkom Mobile.

“However, while the major operators’ interconnect revenues will decrease, this will be offset by continued growth in data revenues,” the analyst pointed out.

Looking at Vodacom’s revenues over the past 5 years, Duvenage’s reasoning is clearly laid out, as data revenues have grown almost every year – while interconnect revenues have slipped.

Vodacom revenue breakdown – 2009-2013

Year Revenue from Data (Rbn)
Revenue from Interconnection (Rbn)
2009 5.973 25.48%* 8.632 8.64%*
2010 4.614 -22.75% 8.075 -6.45%
2011 6.18 33.94% 7.23 -10.46%
2012 7.639 23.60% 6.71 -7.19%
2013 8.882 16.27% 4.916 -26.73%

* From 2008

F&S says that fixed line Internet service providers will increasingly develop customer value propositions focused on niche markets to try and grow the fixed line market.

“Typically, the prime focus will be on entertainment and media-related services. The development of more fixed-mobile convergence (FMC) solutions will be another key development in 2014, with the negotiations between Vodacom and Neotel signalling the mobile operator’s intentions in this regard,” F&S said.

Duvenage says that the mobile penetration rate, which is currently around 135%, indicates that we will not see a massive jump in consumer mobile activations.

Rather, the rapid uptake of M2M (machine to machine) products and services will continue to drive growth in the sector and open additional opportunities.

According to the State of Broadband Report, the proportion of individuals with access to the Internet has jumped from 21% to 41% between 2012 and 2013. This is a very positive sign as it makes the development of online consumer products and services more viable.

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SA economy unlikely to affect teleco sector