Competition Brings Big Changes to South Africa's Telecom Sector

South Africa's telecom market is in the midst of a dramatic change, as incumbent fixed-network operator Telkom SA faces increasing competition not only from mobile voice and data services but also from competitive fiber network buildouts, according to a new report from Pyramid Research.

South Africa is the largest telecom market in the Africa & Middle East region in terms of revenue and is one of the most advanced in Africa in terms of penetration rates, notes Yejide Onabule, Analyst at Pyramid Research and author of the report. "The high penetration rates, however, make it one of the slowest growing markets in the region, driving operators to seek new ways to distinguish themselves and develop new revenue streams," she says.

Telkom SA, the incumbent fixed-network operator, is feeling the pressure. "Fixed voice revenue has been declining in the past few years and this trend is expected to continue; revenue is expected to fall from $2.7 billion in 2008 to $2.1 billion in 2014, mostly due to the falling cost of mobile telephony," says Onabule. "Telkom's revenue will decline by 20 percent in the next five years due to a continuation of fixed voice revenue's downward trend and competing operators' plans to build out fiber networks that will cut into Telkom's business service revenues," Onabule adds.

The need for high-capacity networks has triggered a wave of WiMax and other fixed-wireless access (FWA) capex, allowing operators to bypass Telkom's former monopoly of the last mile. "Operators that previously relied on Telkom's network such as MTN and Vodacom are now building their own national fiber-optic networks, contributing to Telkom's revenue decline over the forecast period," explains Onabule. "Telkom also lost its monopoly in fixed communications when the newly established second national operator Neotel was licensed in 2005," she adds. Neotel, has finally launched services over fixed-wireless CDMA and WiMax networks, while smaller ISPs, such as MWeb, have made some inroads in the high-growth DSL market.

Posted to the site on 9th April 2009