Sa Telecom Industry Analysis

South Africa - Important Economic Parameters (2011)

Economic Parameter Value

Population (2011) 49.004 million

Population Growth Rate (2011) -0.38 percent

Unemployment Rate (2011) 25 percent

GDP (PPP) (2010) USD 527.5 billion

GDP - Real growth rate (2010) 3.0 percent

FDI inflow (2010) USD 1.3 billion

Telecom Industry Overview

South Africa's mobile subscriber base is thirteen times the size of its fixed-line subscriber base at the end of 2010.

South Africa's telecom sector is the most developed and advanced in Africa. The growth in telecom services has been primarily driven by the mobile sector, and South Africa's mobile penetration rate grew to 105 percent in 2010, a total of 51.6 million subscribers. Fixed-line access has been falling since 2004, and now accounts for less than 7 percent of the market, while ADSL subscribers grew by 15 percent in 2009 from 4.59 million in 2008 to 5.3 million, according to Worldwideworx.

The fixed-line market was monopolised by Telkom, former State owned incumbent who had a 50 percent stake in mobile operator Vodacom which was re-assigned in early 2009, but was joined in August 2006 by Neotel, owned by a group consisting of Tata Communications, Nexus Connexion, Comunitel and Two Consortium. This has brought competition to the broadband market, though bandwidth prices remain high. Telkom has also now entered the mobile arena with its own 8ta offering.

Table 2: South Africa - Telecom Industry Snapshot(2010)

Segment Subscribers(millions) Penetration

Mobile 51.6 million 105%

Internet 6.80 million 13.8%

Fixed 3.70 million 11.0%

The country has people from diverse origins and recognises 11 languages as official and another eight as non-official languages.

However, South Africa faces some major problems, such as a lack of economic empowerment and an unbiased education system, which are a result of the apartheid era in the country. Some other issues of concern in the country are crime, corruption and high rates of unemployment. South Africa also faces the problem of prolonged droughts and HIV/AIDS, and such factors have been hampering the country's developments.

Table 1 provides an overview of the country's key economic parameters.

Table 1: South Africa - Important Economic Parameters (2011)

Economic Parameter Value

Population (2011) 49.004 million

Population Growth Rate (2011) -0.38 percent

Unemployment Rate (2011) 25 percent

GDP (PPP) (2010) USD 527.5 billion

GDP - Real growth rate (2010) 3.0 percent

FDI inflow (2010) USD 1.3 billion

Telecom Industry Overview

South Africa's mobile subscriber base is thirteen times the size of its fixed-line subscriber base at the end of 2010.

South Africa's telecom sector is the most developed and advanced in Africa. The growth in telecom services has been primarily driven by the mobile sector, and South Africa's mobile penetration rate grew to 105 percent in 2010, a total of 51.6 million subscribers. Fixed-line access has been falling since 2004, and now accounts for less than 7 percent of the market, while ADSL subscribers grew by 15 percent in 2009 from 4.59 million in 2008 to 5.3 million, according to Worldwideworx.

The fixed-line market was monopolised by Telkom, former State owned incumbent who had a 50 percent stake in mobile operator Vodacom which was re-assigned in early 2009, but was joined in August 2006 by Neotel, owned by a group consisting of Tata Communications, Nexus Connexion, Comunitel and Two Consortium. This has brought competition to the broadband market, though bandwidth prices remain high. Telkom has also now entered the mobile arena with its own 8ta offering.

Table 2: South Africa - Telecom Industry Snapshot(2010)

Segment Subscribers(millions) Penetration

Mobile 51.6 million 105%

Internet 6.80 million 13.8%

Fixed 3.70 million 11.0%

Mobile Market

South Africa has a vibrant mobile market that has seen rapid uptake since competition was introduced to the sector in the 1990s. With market penetration around 100% in 2010, the network operators - Vodacom, MTN, Cell C and Telkom SA - are increasingly forced to find innovative ways of distinguishing themselves from the competition in order to gain and retain customers. In addition, Virgin has entered the market as a MVNO. 3G/HSPA mobile broadband services now rival available DSL fixed-line offerings in terms of both speed and price, and consequently subscriber numbers. 2010 also saw the first trials of the next generation of mobile technology, LTE (also referred to as 4G) in South Africa.

While emerging as the country's leading broadband providers, the major mobile operators are also branching out into fixed-lines, fibre backbone networks, international fibre connectivity, mobile banking and entertainment in a rapidly converging environment. Fixed-line incumbent Telkom SA has reacted by launching its own 3G mobile network.

Market Size

The total number of mobile subscribers in South Africa at the end of June 2005 was 25.18 million, with a corresponding penetration rate of 56.7 percent. Pre-paid customers constituted approximately 85 percent of the total subscriber base.

The number of mobile subscribers in South Africa increased from 17.17 million at the end of 2003 to 51 million at the end of 2010. This growth is expected to increase approximately over 67.6 million by the end of 2014. Moreover, the number of 3G subscribers, which accounted for only 5 percent of the subscribers in 2005, is expected to constitute more than 42 percent of the total subscribers in 2011.

Table 3 shows the forecasts for mobile subscribers in South Africa for the 10-year period from 2002 to 2011.

Table