While 2005 brought deregulation and the licensing of the second national operator (SNO), South African telecommunications users are set to experience tariff reductions as a result of regulatory changes and increased competition for fixed-line, mobile and data operators in 2006.
The South Africa Foundation believes that consumers’ phone bills may fall by up to 30%, but this would require steps such as the adoption of per-second billing by fixed-line monopoly Telkom, cost-based pricing by Vodacom and the MTN Group as well as the regulation of costs of internet traffic on undersea cables.
Furthermore, the foundation recommends a host of other steps, including a reduction in interconnection fees on the mobile communications front.
Commentators expect the lucrative mobile business to shift towards a user-centric environment in the face of stiff competition as the battle for customer acquisition and retention heats up. This battle will mainly stem from policy changes, mobile number portability due for implementation on July 1 and the entry of Virgin Mobile South Africa — 50/50-held by Cell C and Richard Branson’s United Kingdom-based Virgin Mobile.
Telkom, on the other hand, is set to face competition on the voice and data markets when the SNO finally gets off the ground during the second half of 2006. Another potential threat to Telkom and cellular operators’ revenue streams is a possible ministerial determination allowing value-added network service (Vans) operators to self-provide infrastructure.
In a surprise move, Minister of Communications Ivy Matsepe-Casaburri said Vans providers — such as MTN Network Solutions and others — are required to obtain telecommunications facilities from the fixed-line licensees “until a certain [future] date”.
The minister’s statement dashed hopes that the so-called big bang of 2005 entailed self-provision by the Vans market.
SNO network
According to Independent Communications Authority of South Africa (Icasa) councillor Tracy Cohen, the roll-out of the SNO network will have “a quicker impact” than deregulation in terms of competition and lower telecommunications tariffs — but such an impact may only be felt from 2007.
According to research house BMI-TechKnowledge’s (BMI-T) forecasts, the arrival of the second operator will not help improve the country’s tele-density of 4,8-million lines. Despite a duopoly, it seems unlikely the number of landlines will break above five million before 2009, BMI-T said.
In contrast, the number of fixed lines in operation five years ago stood at 5,5-million, or a tele-density of 12,8%, when Telkom was still a monopoly.
BMI-T anticipates that the number of cellphone users would reach 28-million by the end of 2006 and 32-million in 2009.
Virgin Mobile
Apart from Icasa’s much-anticipated move to force mobile price cuts stemming from a formal complaint by a lobby group in May 2005 coupled with the government’s opposition to high tariffs, cellular consumers can also expect some respite with the arrival of Virgin Mobile South Africa — a service provider that is also seen as a quasi-mobile virtual network operator (MVNO).
“In the mobile cellular space, the advent of full-blown MVNOs in future could herald in a new era of competitive activity in this domain,” BMI-T director Brian Neilson said in a report.
MVNOs are entities that do not own infrastructure such as base stations, but piggy-back on the networks of “traditional” mobile operators. They buy airtime at wholesale prices from existing operators and resell it to their own customers at discounted tariffs. Altech-owned Autopage — keen on becoming a virtual operator — is one of the players awaiting clarity on whether MVNOs would be legal in South Africa this year.
An MVNO status, if legalised, would enable potential licensees to compete with South Africa’s traditional mobile operators — Cell C, MTN and Vodacom.
New Act
A notable legislative development in 2006 will be the replacement of the Telecommunications Act of 1996 by the long-awaited Electronics Communications Act. The new Act will hail a converged communications environment, open up the market and accelerate competition.
“There is likely to be increased participation of metropolitan councils with private telecommunications networks, while government at national level is also investigating rolling out network infrastructure, or engaging in public-private-partnerships, to the end of narrowing the digital divide,” BMI-T noted in its outlook report.
Another initiative to bridge the digital divide would be a second round of licensing of rural-based telecommunications operators that would raise the number of rural operators to 21 from the current seven, which includes Thinta Thinta of KwaZulu-Natal and the North West’s KaraboTel.
Other universal access projects include the distribution of 500 000 cellphones by MTN and Vodacom as part of their 3G licensing obligations. Cell C will continue rolling out community-service telephones, while the SNO is required to provide internet connectivity to 5 000 centres — 50% of which would be rural public clinics.
In the corporate sector, MTN and Vodacom are expected to carry out black economic empowerment (BEE) deals, given the conclusion of the BEE Codes of Good Practice.
The two operators have in the past avoided discussing the issue of BEE equity ownership. But with speculation rife that three black firms are vying for a stake in Vodacom South Africa and an imminent conclusion of the sale of a Transnet holding in MTN, empowerment transactions in these cash-flush groups seem likely in 2006.
Cell C, dual-listed Telkom and the yet-to-be-named SNO already have BEE equity credentials. — I-Net Bridge