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The year 2009 took a heavy toll on the telecommunications industry as economic pressures were brought to bear on operators in Africa.
Margins in South Africa have become razor thin and expansion into the rest of Africa has been challenged by the recession and other factors.
Declining average revenue per user (ARPU) rates have also had an effect on returns.
It was a tough year.
But it hasn’t been all doom and gloom.
New opportunities
Nigeria has proven to be a highly lucrative market for MTN, while Altech has made great advances into East Africa, reporting healthy and consistent growth for the group.
And while traditional revenue streams have come under fire, new opportunities have presented themselves, especially in mobile data.
And 2009 also saw a new listing from the telecommunications sector as Vodacom entered the JSE in May.
The group was off to a rough start with the Independent Communications Authority of South Africa (Icasa) making a last-ditch attempt to halt the listing, prompted by trade union federation Cosatu.
At the heart of the matter was the sale of Telkom’s shareholding in Vodacom to British cellular giant Vodafone.
The R22bn deal was something Icasa said it would not intervene in, but its mind was changed by its trade-unionist friends.
The eleventh-hour legal battle that ensued went in Vodacom’s favour.
Telkom disposed of its shareholding and Vodacom finally listed on the JSE.
The year that followed was, however, a tough one for Vodacom.
A little North, a little worse
Its African operations outside of Mozambique and Tanzania have been severely challenged, especially in the DRC where the declining economy created a severely limited market for cellular providers.
Vodacom also faced the prospect of legal action by its partner in Vodacom Congo, Congolese Wireless Networks (CWN), which accused Vodacom of unfairly repatriating profits from the company.
CWN said it had lodged papers with the public prosecutor in the DRC, but these have not yet been produced.
Vodacom has also committed to upgrading its network in South Africa with new infrastructure from Chinese provider Huawei, but has been forced to hold back on new deployments both in South Africa and other markets given its declining profit.
Data, on the other hand, has shown substantial growth and Vodacom claims to have more broadband subscribers in South Africa than any other company.
Growth in Vodacom’s data operations jumped more than 33% during the 9-month period to end December 2009.
MTN has also shown a growth in data usage and spent much of 2009 gearing up its marketing campaigns for the 2010 Fifa World Cup in South Africa; the group being a primary sponsor.
The group posted positive results for the most part, but has seen declines in the South African market where it has lost subscribers, faces reduced margins and other pressures of a mature cellular market with high penetration rates.
Rica roll-out
The new Rica act, which requires prepaid cellular subscribers to register identity documents and proof of residence with the cellular operator they use, have also impacted on the networks.
But in Africa MTN has performed well, especially in Nigeria where it sports a massive margin.
In 2009, MTN and Indian cellular giant Bharti Airtel returned to the negotiating table to discuss a potential merger.
The proposed agreement would have featured a share trade and the creation of the biggest telecommunications company in the developing world.
However, it was not to be, as the merger would have contravened legislation in both India and South Africa.
The decision not to merge was greeted with favour by the market where investors clearly saw it as a bad move.
More recently Bharti Airtel has entered into discussions with Zain Telecoms for the acquisition of the latter’s African operations.
Talks are ongoing at time of writing, but a successful agreement would position Bharti as a primary competitor for MTN in Africa.
Back home in South Africa both MTN and Vodacom face growing competition from third network operator Cell C, which has revealed its plans to scale up its network to compete more evenly.
It will spend over R5bn in 2010 and has similar amounts planned for subsequent years.
Telkom troubles
Incumbent telecommunications network Telkom also had a busy year in 2009 as it continues to face an open market in which its monopoly has crumbled.
Telkom has committed billions to its entry into the mobile market where it plans to compete with MTN, Vodacom and Cell C as South Africa’s fourth mobile network operator.
To this end it will spend R5bn on network roll-out in 2010 and plans to form a roaming agreement with either Vodacom or MTN giving its subscribers national coverage.
As the predominant landline operator in the market, Telkom has also focused on beefing up its domestic network.
But regulatory changes and open market pressures face Telkom in the future.
Growing competition in both local networks and from undersea cable projects has forced Telkom to change its strategy with company restructuring itself into three operating units to tackle the South African, international and datacentre markets.
The Altech group had a positive 2009 with healthy returns, maintaining solid cash reserves.
South/East
The group has focused on East Africa, leveraging acquisitions and shareholding to make it a major player in the region where telecommunications is growing explosively.
With a good grip on domestic infrastructure and agreements in place with undersea cable companies Seacom and Teams, Altech has geared itself for healthy growth on the east coast.
Back at home, the effectively deregulated telecoms market in South Africa has led to a flurry of activity in the sector and growing competition for listed telecoms entities. The effect of reduced interconnect fees and other regulatory and legislative pressures will make it an increasingly tough market for the big guys, while allowing many smaller players to gain market share.
In 2010 analysts expect some recoveries in the expansion of telecommunications networks.
All eyes are also on the Department of Communications under the guidance of Minister Siphiwe Nyanda, along with Icasa as these parties have promised that they’ll make the move necessary to promote competition and reduce prices of telecommunications services in SA.
Margins in South Africa have become razor thin and expansion into the rest of Africa has been challenged by the recession and other factors.
Declining average revenue per user (ARPU) rates have also had an effect on returns.
It was a tough year.
But it hasn’t been all doom and gloom.
New opportunities
Nigeria has proven to be a highly lucrative market for MTN, while Altech has made great advances into East Africa, reporting healthy and consistent growth for the group.
And while traditional revenue streams have come under fire, new opportunities have presented themselves, especially in mobile data.
And 2009 also saw a new listing from the telecommunications sector as Vodacom entered the JSE in May.
The group was off to a rough start with the Independent Communications Authority of South Africa (Icasa) making a last-ditch attempt to halt the listing, prompted by trade union federation Cosatu.
At the heart of the matter was the sale of Telkom’s shareholding in Vodacom to British cellular giant Vodafone.
The R22bn deal was something Icasa said it would not intervene in, but its mind was changed by its trade-unionist friends.
The eleventh-hour legal battle that ensued went in Vodacom’s favour.
Telkom disposed of its shareholding and Vodacom finally listed on the JSE.
The year that followed was, however, a tough one for Vodacom.
A little North, a little worse
Its African operations outside of Mozambique and Tanzania have been severely challenged, especially in the DRC where the declining economy created a severely limited market for cellular providers.
Vodacom also faced the prospect of legal action by its partner in Vodacom Congo, Congolese Wireless Networks (CWN), which accused Vodacom of unfairly repatriating profits from the company.
CWN said it had lodged papers with the public prosecutor in the DRC, but these have not yet been produced.
Vodacom has also committed to upgrading its network in South Africa with new infrastructure from Chinese provider Huawei, but has been forced to hold back on new deployments both in South Africa and other markets given its declining profit.
Data, on the other hand, has shown substantial growth and Vodacom claims to have more broadband subscribers in South Africa than any other company.
Growth in Vodacom’s data operations jumped more than 33% during the 9-month period to end December 2009.
MTN has also shown a growth in data usage and spent much of 2009 gearing up its marketing campaigns for the 2010 Fifa World Cup in South Africa; the group being a primary sponsor.
The group posted positive results for the most part, but has seen declines in the South African market where it has lost subscribers, faces reduced margins and other pressures of a mature cellular market with high penetration rates.
Rica roll-out
The new Rica act, which requires prepaid cellular subscribers to register identity documents and proof of residence with the cellular operator they use, have also impacted on the networks.
But in Africa MTN has performed well, especially in Nigeria where it sports a massive margin.
In 2009, MTN and Indian cellular giant Bharti Airtel returned to the negotiating table to discuss a potential merger.
The proposed agreement would have featured a share trade and the creation of the biggest telecommunications company in the developing world.
However, it was not to be, as the merger would have contravened legislation in both India and South Africa.
The decision not to merge was greeted with favour by the market where investors clearly saw it as a bad move.
More recently Bharti Airtel has entered into discussions with Zain Telecoms for the acquisition of the latter’s African operations.
Talks are ongoing at time of writing, but a successful agreement would position Bharti as a primary competitor for MTN in Africa.
Back home in South Africa both MTN and Vodacom face growing competition from third network operator Cell C, which has revealed its plans to scale up its network to compete more evenly.
It will spend over R5bn in 2010 and has similar amounts planned for subsequent years.
Telkom troubles
Incumbent telecommunications network Telkom also had a busy year in 2009 as it continues to face an open market in which its monopoly has crumbled.
Telkom has committed billions to its entry into the mobile market where it plans to compete with MTN, Vodacom and Cell C as South Africa’s fourth mobile network operator.
To this end it will spend R5bn on network roll-out in 2010 and plans to form a roaming agreement with either Vodacom or MTN giving its subscribers national coverage.
As the predominant landline operator in the market, Telkom has also focused on beefing up its domestic network.
But regulatory changes and open market pressures face Telkom in the future.
Growing competition in both local networks and from undersea cable projects has forced Telkom to change its strategy with company restructuring itself into three operating units to tackle the South African, international and datacentre markets.
The Altech group had a positive 2009 with healthy returns, maintaining solid cash reserves.
South/East
The group has focused on East Africa, leveraging acquisitions and shareholding to make it a major player in the region where telecommunications is growing explosively.
With a good grip on domestic infrastructure and agreements in place with undersea cable companies Seacom and Teams, Altech has geared itself for healthy growth on the east coast.
Back at home, the effectively deregulated telecoms market in South Africa has led to a flurry of activity in the sector and growing competition for listed telecoms entities. The effect of reduced interconnect fees and other regulatory and legislative pressures will make it an increasingly tough market for the big guys, while allowing many smaller players to gain market share.
In 2010 analysts expect some recoveries in the expansion of telecommunications networks.
All eyes are also on the Department of Communications under the guidance of Minister Siphiwe Nyanda, along with Icasa as these parties have promised that they’ll make the move necessary to promote competition and reduce prices of telecommunications services in SA.
