South Africa: South Africa Communication Profile

Mergers and acquisitions in Africa’s leading telecoms market

South Africa’s telecom sector boasts the continent’s most advanced networks in terms of technology deployed and services provided. In a virtually saturated voice market, four mobile networks – Vodacom, MTN, Cell C and Telkom SA – are competing for market share in the next increase wave, mobile broadband. 3G/4G mobile services presently rival DSL fixed-line offerings in terms of both speed and price and have as a result outpaced them in terms of subscriber increase. Five different LTE networks have been launched, although their introduction was initially back by delays with suitable frequency spectrum allocations.

Mobile SIM card penetration is well above 100% of the people, driven by separate subscriptions for voice and data services. There has been speculation about mergers and acquisitions (M&A) part the smaller players, and major infrastructure sharing deals have been concluded. Several Mobile Virtual Network Operators (MVNO) are preparing to enter the market in 2014, although the few existing ones have so far failed to have a major impact.

South Africa’s Internet and Broadband market has taken off next years of stagnation due to an expensive operating environment created by Telkom SA’s dominance in the fixed-line and international bandwidth market. A new converged licensing regime has created hundreds of companies licensed to offer Internet services. There has been consolidation in the sector which is expected to continue. Wireless broadband services have carved out market share from existing ADSL offerings, but several WiMAX networks are presently being shut down as consumers migrate to 3G and 4G mobile services.

While emerging as the country’s leading broadband providers, the major mobile operators are as well branching out into fixed services, fibre backbone networks, international fibre connectivity, mobile banking and entertainment in a rapidly converging environment. With its fixed-line network reaching less than 10% of the people, Telkom has reacted by launching its own mobile network. Following years of delays with its licensing, second national operator (SNO) Neotel has been gaining market share in competition with the fixed-line incumbent. It is using wireless technologies such as CDMA-2000, WiMAX and LTE to provide alternatives to Telkom’s copper access network. Neotel is presently in the process of being acquired by Vodacom, the country’s leading mobile network operator.

All of the major players are involved in various international submarine fibre optic cables that have reached the country in the completed few years, despite regulatory hurdles. Following the end of Telkom’s monopoly in this area, this has brought down the cost of international bandwidth dramatically. Several additional terabit cables are scheduled to go live in 2014, connecting Africa due to the Americas. In addition, the government has created Broadband InfraCo, a national infrastructure company to provide cheap backbone network capacity to service providers. Despite the significantly increased competition between different service providers, a lot of municipalities in South Africa, inclunding the country’s major cities, are implementing their own metropolitan fibre and wireless broadband networks. Several Fibre to the Home (FttH) deployments are underway.

With its relatively well developed and diverse infrastructure, South Africa is as well taking a regional lead role in the convergence of telecommunication and data technologies with the media and entertainment sector, promising reductions in telecommunication costs and better availability of data and services. Telecom carriers and ISPs are moving into delivering video and other entertainment content over their networks, while in turn the traditional electronic media carriers have discovered the potential of their infrastructure for telecommunications service delivery. Triple play offerings are available that combine voice, data and IPTV services. The migration to DTT is scheduled to be completed by 2014/15.

Digital media and social media have reached a level of development that is fostering an associated advertising and marketing industry. The FIFA World Cup held in the country four years ago has boosted these developments. While South Africa lags behind other nations on the continent in the development of e-government, e-health and e-learning applications, it is a regional leader in the areas of online retail, electronic banking, mobile banking, social media and cloud computing.

Estimated market penetration rates in South Africa's telecoms sector – end-2014

(Source: BuddeComm based on various sources)