Growing pressure on voice and SMS revenues and soaring data use have put mobile operators in the do-or-die position of having to forego maximisation of traditional services and focus on innovation for new revenue streams.
While SA's operators have been criticised for being slow off the mark, network investment and innovation in value-added services - in particular from leading players Vodacom and MTN - are now on a definite upward climb.
This week, Ericsson and Ernst & Young launched a Growth Codes report that looks at the evolvement of operators with regards their networks and their business models. Certain operators that have been classified as "frontrunners" enjoyed a 9.6% compound annual growth rate (CAGR) - while competitors in their markets achieved just about a third of this (2.7% CAGR) between 2010 and 2014.
The report also revealed a number of ways in which these "frontrunners" are similar ? including their views on connectivity and services as differentiators rather than commodities, and their focus on innovating new revenue streams rather than maximising old ones.
"Some have been more successful than others," says Ericsson, which identifies three distinct strategies adopted by frontrunners:
1. Quality-led progression: "These frontrunners differentiate through high-performing networks and high brand preference."
2. Market-led adaptation: "Includes frontrunners that differentiate through quick adaptation to market conditions."
3. Offering-led transformation: "Refers to frontrunners that differentiate by being first to market with uniquely designed offerings."
Network attention
BMI-TechKnowledge director Brian Neilson says, in SA, Vodacom and MTN have been leaders in network implementation, being among the first to roll out each new generation of access technology.
"They are also progressively upgrading their backhaul in an effort to keep up with demand for data services, although customer satisfaction does take a knock insofar as network issues flare up from time to time."
Last week, ITWeb reported that many mobile consumers are dissatisfied with the level of service they receive from SA's mobile network operators' customer care units. SA's operators responded, saying they were continually upping service levels. Vodacom said the dissatisfaction level was a reflection of how users' relationships with their mobile devices has changed.
As for the two smaller players, Neilson notes Telkom, too, has taken advantage of its own strong national network infrastructure and well-endowed spectrum assets, and leapfrogged into long-term evolution (LTE). The company is also now deploying LTE-Advanced selectively. "Cell C was similarly innovative, albeit only within its means, especially when it rolled out HSPA."
Africa Analysis analyst Ofentse Mopedi says SA's mobile operators are continually evolving their networks and business models. "In particular, when looking at Vodacom, it is clear the operator is no longer satisfied with just being a player in the mobile space. This is underscored by the operator's intent to add fixed-line infrastructure to its assets through the acquisition of Neotel."
He says the Neotel bid is also indicative that Vodacom plans to be a serious player in the small and medium enterprise market, while also increasing presence in the fibre-to-the-home/business market. "Smaller operators are also aware of the need to adjust to the ever-changing market conditions, hence Telkom and Cell C are both pursuing radio access network sharing deals with MTN to remain competitive."
MTN is in talks with Telkom around outsourcing of the latter's mobile radio access network, as well as potentially expanding the roaming agreement between the two to include bilateral roaming. Reports that Cell C was exploring an infrastructure-sharing deal with MTN also emerged last year, but these have not been verified.
Value moves
Neilson notes SA's operators have been innovative in value-added services recently, most with notable success in mobile payments. "South Africa is better endowed with options than countries in East Africa; however, the gap was not as large for them to exploit here - for example with Vodacom's M-Pesa."
Content services have also been an area of innovation from time to time, he says, although the global over-the-top services are generally able to trump home-spun ones. "That said, MTN's latest moves into video-on-demand and music services are a great attempt to fight back."
Mopedi says, far from being under the delusion they sustain business by maximising traditional revenues, SA's operators are well aware that voice and SMS revenues will continue to decline. "Hence they are exploring various ways - including e-commerce, money market, machine-to-machine and fixed broadband services - to supplement declining traditional revenue streams."
He says generally, all of SA's operators could be deemed frontrunners, although Vodacom has "a slight advantage" over its competitors, scoring higher than its competitors on the three criteria highlighted by Ericsson.
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