{"id":8333,"date":"2012-03-27T00:15:12","date_gmt":"2012-03-26T22:15:12","guid":{"rendered":"http:\/\/businesstech.co.za\/news\/?p=8333"},"modified":"2012-11-14T16:37:51","modified_gmt":"2012-11-14T14:37:51","slug":"will-8ta-die","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/mobile\/8333\/will-8ta-die\/","title":{"rendered":"Will 8ta die?"},"content":{"rendered":"

New Cell C<\/a> CEO, Alan Knott-Craig<\/a> said that there is no place for a fourth cellular operator \u2013 hence 8ta<\/a> \u2013 in the local market. In an interview with Business Times, Knott-Craig said that the South African market can only support three cellular operators.<\/p>\n

“There will have to be consolidation. I think three’s a pretty good number, competitive-wise. I don’t think you can have four in the South African industry, it’s just too small,\u201d Knott-Craig told Business Times.<\/p>\n

Knott-Craig is not the only cellular executive which feels this way. A high-level executive at Vodacom<\/a>, who spoke to MyBroadband BusinessTech off the record, said that he expects 8ta to be dead within the next few years.<\/p>\n

Analysts weigh-in on the issue<\/strong><\/p>\n

World Wide Worx<\/a> MD, Arthur Goldstuck<\/a> argued that there is more room for operators in South Africa, given that these companies are willing to settle for more modest profits.<\/p>\n

\u201cThe unstated question that tends to be used as the basis for incumbents’ arguments is whether the market can support four mobile operators making very large profits – and the answer there is, probably, no. So, from a shareholder’s point of view, the market cannot support more operators. However, there is plenty room for smaller operators willing to get by on more modest profits,\u201d said Goldstuck.<\/p>\n

\"\"<\/a>

Arthur Goldstuck<\/p><\/div>\n

Goldstuck said that the factor that is often ignored in the debate is the huge number of people changing their phone numbers, or renewing contracts every year.<\/p>\n

\u201cUp to 5-million users a year renew or upgrade their contracts, while contract churn is close to 10%, or a million contract users a year looking for a new contract provider. Pre-paid churn is above 40%, or at least 10-million accounts a year. The churn in the contract base alone makes for a viable entry by a fourth operator who finds a way to attract a chunk of those potential customers,\u201d said Goldstuck.<\/p>\n

BMI-T<\/a> director, Brian Neilson<\/a> said that 3 to 4 mobile operators is the optimum number for South Africa, given the market size and affordability levels.<\/p>\n

\u201cWhether a fourth player can survive depends on how the market is managed. For this, one needs regulatory conditions that are simultaneously pro-competitive and investor friendly, i.e. do not destroy the sustainability of the players in the market,\u201d said Neilsen.<\/p>\n

Neilson argued that Cell C was not given an easy time due to the high mobile termination rates, and it has taken long for these to be managed downwards.<\/p>\n

\u201cAlthough it is late in the day, and 8ta is entering the market when the big players are entrenched and also coming under pressure as the market matures, there are still other market structure changes lying ahead that could come into play, e.g. the introduction of LTE, and how this is going to be managed,\u201d said Neilson.<\/p>\n

Will 8ta survive?<\/strong><\/p>\n

Goldstuck pointed out that 8ta already has well over a million active customers. \u201cBearing in mind that, when the industry was first initiated in 1994, the maximum customer base envisaged was two-million, that suggests a healthy user base is available, even to latecomers,\u201d said Goldstuck.<\/p>\n

\u201cAbout 20% of 8ta’s user base is contract, passing the quarter-million mark six months ago – again healthy in its own right, even if exceptionally small relative to other networks.\u201d he said.<\/p>\n

Goldstuck said that 8ta\u2019s growth suggests sustainability, but that profitability is probably a good few years away. \u201cGiven their cash reserves, however, Telkom are able to sustain 8ta until it becomes profitable. The question is whether they will find it strategically viable in the longer term,\u201d said Goldstuck.<\/p>\n

Neilson said that well-planned partnerships can boost 8ta\u2019s sustainability. \u201cAnother obvious factor determining sustainability is how well the operators execute, and how they partner. I think it is too early to make predictions about 8ta at this stage. At the very least, the company can be driven into a sustainability though partnering,\u201d said Neilson.<\/p>\n

Telkom responds<\/strong><\/p>\n

Telkom said that there is enough value in the market for four players. \u201cThe market is sizable with a SIM card population in excess of 60 million, and a very sizable revenue base,\u201d Telkom said.<\/p>\n

\u201cIn the case of SA, the timing of players entering the market is a more relevant issue. The question, or challenge, is thus more one of \u2018can third and fourth entrants find profitable niche markets or services?\u2019,\u201d asked Telkom.<\/p>\n

\u201cThis has shown to be difficult elsewhere in the world, and also in South Africa. There are, however, examples of successful late-entry by third or fourth operators in competitive markets. We believe the fundamentals support a profitable 4th entrant with the right focus, as proved in a number of other markets.\u201d<\/p>\n

Telkom explained that its entry as a mobile operator should be seen in the context of its position as the leading fixed line operator in South Africa. \u201cOur objective is to become the leading provider of broadband services in South Africa. To achieve this objective we have to offer fixed and mobile services, and we believe we can do so profitably.\u201d<\/p>\n

Telkom also disagrees with Knott-Craig that there will be consolidation in the market. \u201cFor this to happen, it is difficult to envisage any other scenario than the financial demise of the third or fourth player, or an amalgamation of the third and fourth entrant. It would be unwise to rule out either scenario but it appears unlikely over the medium term,\u201d said Telkom.<\/p>\n","protected":false},"excerpt":{"rendered":"

New Cell C CEO, Alan Knott-Craig says that there is not a big enough market in South Africa to support four cellular operators.<\/p>\n","protected":false},"author":2,"featured_media":8413,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[34],"tags":[407,43,843,1025,2094,42,26,28,65,27,607],"class_list":["post-8333","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mobile","tag-8ta","tag-alan-knott-craig","tag-arthur-goldstuck","tag-bmi-t","tag-brian-neilson","tag-cell-c","tag-headline","tag-mtn","tag-telkom","tag-vodacom","tag-world-wide-worx"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/8333","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=8333"}],"version-history":[{"count":11,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/8333\/revisions"}],"predecessor-version":[{"id":26540,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/8333\/revisions\/26540"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/8413"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=8333"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=8333"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=8333"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}