Angus Robinson
Angus Robinson

2008: The year that changed telecoms in South Africa

Next year will be one of the most significant in the history of the South African telecoms market — possibly on par with 1994 when the two initial mobile operators surfaced. And it can’t get here fast enough.

So, what are we in for (I think)?

Let’s start with Telkom. It’s fairly widely known that Telkom is in talks that will result in radical changes. The fixed-line business will be acquired by MTN, and its stake in Vodacom will be sold to Vodafone. MTN will then be able to use Telkom’s fixed-line expertise to service enterprise customers in South Africa (instead of having to relay its own infrastructure), and probably more importantly, to build out better infrastructure in Africa.

I’ve seen a number of “Fibre access in eight weeks” billboards around Sandton, so these are the first signs of life after the much-discussed fibre “pipe” that MTN has laid between Rosebank and Sandton.

There is also the option to start aggressively pushing MTN’s products to the Telkom fixed-line base. The glaring omission is MTN’s content and media strategy. It may well have chosen not to go there, but with Vodacom and Telkom moving aggressively into that space, I wonder what MTN’s response will be? HCI/e.tv, Primedia, Kagiso, anyone, want to be a little yellow? Maybe not.

Standard Bank’s deal with the Industrial and Commercial Bank of China is a sign that the Chinese want to do more in Africa. There have been rumours about China Mobile being interested in MTN. That would be a colossal mobile and fixed-line operation in Africa, the Middle East and Asia. Stranger things have happened. And their colour is yellow.

Telkom Media will probably remain an independent entity. If it didn’t and MTN went for the quad-play of mobile, fixed-line, broadband and broadcast television services, it will have been an interesting journey — born from within MultiChoice (MIH/Naspers) and ending up potentially being its biggest direct competitor.

Vodacom will list separately from Telkom and be free to challenge MTN head-on in Africa once the shareholding favours Vodafone. Access to Vodafone’s infrastructure, balance sheet and content will make it stronger than being restricted by the Telkom shareholding.

This leaves Vodacom to launch Vodacom Media — an entertainment, content (mobile radio and TV) and advertising play that is built to use the broadband capacity in Vodacom’s 3G/HSDPA network. We may even see closer ties between Vodacom and MultiChoice/Naspers. They have content distribution deals as well as retail-package distribution deals. It seems that they have a stronger relationship than MTN does with MultiChoice. Anyway, MTN may be in the same playpen as Telkom Media.

Enter iBurst. Vodacom already has a 25,1% stake in iBurst. There is already joint marketing, and iBurst has definitely benefited from Vodacom’s involvement — its marketing, distribution channel and technical resources (especially in the SMTP department) have made iBurst a contender as a “dial-up” replacement. The jewel in iBurst’s crown is its WiMAX license. This goes nicely into having high-speed, pervasive connectivity that the likes of Vodacom Media will want. Will iBurst/WBS end up being swallowed entirely by Vodacom in an equity deal for Blue Label Investments at the time of the Vodacom listing? Time will tell.

Neotel already has enterprise customers and is surely to launch its consumer offering in 2008. This will be a serious contender for consumers and small businesses that have given up on Telkom installation delays, as well as those who will move to Neotel on principle. There are already Neotel fan groups on Facebook. The demand is there; now for the delivery.

A key project for Neotel will be its involvement in Seacom, the new undersea cable on Africa’s eastern seaboard that they will manage in South Africa. An aside — it’s landing at Mtunzini in KwaZulu-Natal. I am from Zululand, and know that this will be Mtunzini’s crowning glory! Move over, sugar barons, here come the nerds.

I have changed my thoughts about Cell C and its “broadband strategy”. It has stated that it will not compete in the 3G/HSDPA space, but will stick to Edge (enhanced data over GSM). Initially I thought this was suicidal. However, it may just be what the majority of South Africa needs. By providing a high-quality network (with a steady 100kb throughput), and by getting really inexpensive Edge modems into the country, its data offering can service users that need email and basic internet access. The 3G/HSDPA tub-thumping, entertainment-rich, high-speed connectivity may just be overkill for many.

To illustrate the point. I was in rural Mpumalanga recently and needed to do some work on my laptop. I have SIM cards from each of the networks. The only one that gave a decent signal and allowed decent (stable and steady) throughput was Cell C’s Edge network. Suddenly high-speed broadband wasn’t so clever any more.

As I’ve stated before, I think that the MyWireless customer base will be sold to someone. If not Sentech as a whole (MTN may want Sentech’s WiMAX licence), then something has got to give when considering MyWireless. It was first to market, but certainly didn’t take advantage of that position. Not sure I know anyone that uses it any more.

On the device side, iPhone version two and the 3G version will come as a welcome improvement. But more importantly, the Android platform from Google and its Open Handset Alliance will appear (on phones) in the middle of 2008. As a new mobile OS, it is sure to challenge Symbian et al.

While we are talking about Google — it has arrived in South Africa and is making all the right noises about lobbying for more, better, cheaper broadband access. Go Google.

All in all — we will get more choice, better handsets, more throughput, better coverage and, hopefully, lower prices. It has to be a great year.

Remember, this is conjecture and a little guess work. So don’t quote me.

  • Oupoot

    I am no expert on the ICT arena and only a relative newcomer to keeping a watch on what is happening. I think 2007 has already been quite an eventful year, at least compared to all previous years, even combined. IMO, the first half of 2008 will be a consolidation of the changes and promised changes from the private sector. the latter part of 2008 and 2009 will most likely see the most drastic changes in ICT in SA, with both SEACOM and hopefully EASSy coming online, and MTN, Vodacom and Neotel local infrastructure finally bearing fruit and hopefully resulting in significant price decreases as competition takes hold.

    As for Mtunzini – the SAFE cable already lands there but has little to no impact. Thus, the local businesses and governments should do more to benefit from this asset.

  • http://www.thoughtleader.co.za/mobilite Angus Robinson

    Imagine Mtunzini, with the biggest pipe in the country becoming the hosting farm of choice.

    A scenario I didn’t cover in the initial post – a Neotel/CellC alliance. Any takers on that possibility?

  • steve

    Oupoot, I doubt that Neotel’s entrance into the arena will result in any significant price decreases. The bar has already been set by Telkom and all the others (think of iBurst’s cheapy that’s measured in mega rather than gigabytes). What company would come into the market and seriously reduce prices when they could, say, offer slightly higher speeds, better service, and maybe double the existing caps for the same amounts we’re charged currently. Especially to the general SA public who haven’t experienced broadband as it is in Europe or the States. Look at the price complicity that occurs in banking, mobile telecoms, car sales and even bread-making. I think we’re headed for the usual great SA ripoff.

  • Oupoot

    I was thinking along those lines while reading your post – CellC focussing on the lower end retail and market while Neotel focus on corporate and higher income market. But any deal here will only happen once the Telkom – MTN deal is known.

    I dont see how the Competition Commission will allow MTN and Telkom to strike a deal, even if ICASA allows it. Though the unknown risks are great, I prefer to think Telkom will use all that cash from selling their stake in Vodacom to buy CellC outright as their mobile strategy. If we are lucky, we will have 4 telephony companies roughly equal in size in 3 years: Vodacom, MTN, Telkom and Neotel. With the ECA’s new licences, they will be able to start competing against each other directly, i.e. there wont be difference between fixed line, fixed wireless or mobile.

  • http://www.malusi.com Moosa Gani

    Since Mbeki’s state of the nation addres like 3/4 years ago very little has happened. The time used between then and now, our international counterparts are readying themselves with triple play technology, 100MB broadband lines, unlimited usage, You-Tube to you TV, all in one solutions, TiVo via broadband, practically everything via broadband.

    Here in SA we catching up to where they were! With out highest speed connection @ 4MB and capped @ 3GB. Might aswell give us a Formula 1 Vehicle with 3 Litres of petrol. You’ll barely make it out the Pit

    And when the next Telecommunications revolution starts again we’ll be catching up to that one aswell.

    My point is that we lack the vision, leadership and most of all skills to achieve greatness. Broadband has the potential to educate and create mass amounts of employment and economical benefit in every sector of the economy. Unfortunately our Leaders in place have come up with poor policy to direct us into the digital revolution. They focused too much on the financial and political sides of the Telkom, ICASA, DoC, Cell Operators. Instead of looking for ways to free us from a monopoly they’ve practically entrenched it for a good couple of years.

    The other sad part is that there is a terrible attitude amongst telecoms companies to charge high prices. They’ll make deals so complicated next time, between Mtn, Voda and Telkom that you’ll find it hard to choose from a free data contract with 10 GB limit and a free playstation3 compared to Telkoms Super Duper Wimax with a Nintendo Wii, and the kicker is they’ll nail you to the wall with a contract and legalities. All the while you’ll probally only utilize 2/3 of its usage coz 0.5/3 will go to eskom for no lights and the othe 0.5 for the link between JHB And Hong Kong in Rosebank went down…

    Next year will be exciting. Things will get cheaper and smiles all around. Its just sad that the potential this opportunity (broadband) has, is being squandered and where we are and where we should be is very dissapointing. All that was needed was the right guidance and leadership.

  • http://www.thoughtleader.co.za/mobilite Angus Robinson

    Moosa – you make a good point. We need some visionary leadership from regulators and law makers.

    Easier said than done.

  • http://www.malusi.com Moosa Gani

    I agree it is easier said then done, but there is no excuse for such poor performance. Telecoms and broadband is fuelled by people like us so called “Geeks”. We know how to use a computer properly. From development to media to general online gaming. We know the benefits of broadband.

    The beauty of technology is that it changes everyday. And with all that change countries around the world are adopting the next best tech. If there was no politics 12 months from now everyone could have an unlimited 1GB connection in their house. People might argue the fact of funding for such a project. I can guarantee you that if GVT truly opened up the Telecoms arena you would get more then enough people investing both local and international. Unfortunately the powers that be due to lack of vision, foresight and technical knowledge argue over who should get what piece of the pie. Technology is easy to implement. The problem is the human factor. As they say people kill people, not guns!