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BMI-T forecasts little growth in SA telecoms revenue

Staff Writer
By Staff Writer, ITWeb
Johannesburg, 23 Jul 2015
BMI-TechKnowledge predicts flat revenue for SA telcos for the foreseeable future.
BMI-TechKnowledge predicts flat revenue for SA telcos for the foreseeable future.

South Africa's telecoms market looks set to see flat revenue for the foreseeable future.

This is according to research consultancy BMI-TechKnowledge which forecasts that the SA telecoms market will grow at a compound annual rate of only 1.4% over the next five years.

BMI-T's recently published report, "The Changing SA Telecoms Landscape", explains that high growth segments such as data centre services and cloud IT or software-as-a-service make up for continued decline in some commodity market segments.

"Operators are also actively migrating customers to integrated voice and data plans, in the face of declining voice revenues, which in turn is partly due to declining wholesale prices (termination rates), along with increasing competition," says BMI-T in a statement.

"While we did see a trend earlier in 2015 in which three of the four mobile operators increased prices selectively, BMI-T notes that the general trend is still towards giving more for less, which plays in the consumer's favour. Mobile service bundles are a part of this trend," according to BMI-T director Brian Neilson.

Overall service revenues are showing flat growth. Despite this, operators are still investing heavily in their networks, to keep up with the burgeoning volume of data traffic. Mobile operators are actively growing the number of smart devices on the network, in a bid to drive usage of data services. This as South Africa follows in the growing global smartphone revolution.

"Individual usage of mobile data continues to rise to an average of a third of a GB per user per month," adds BMI-T.

According to Ericsson, by 2020, 90% of the world's population over 6 years old will have a mobile phone and global smartphone subscriptions are expected to top 6.1 billion. BMI-T estimates that there are already more than 20 million smartphones in service in South Africa, representing one in every three active SIMs. The company also found that SA is nearing a 50:50 split between feature phones and smartphone ownership at an individual level.

Competition, consolidation and change

BMI-T says the best way to describe the current state of the telecoms market is: "Competition, consolidation and change." Neilson says another interesting trend to watch is the fixed line space where aggressive price competition is continuing for broadband pricing, once again supported by falling wholesale prices.

"Fibre to the home (FTTH) is a particularly interesting trend to watch, and again aggressive price offerings are the order of the day, some of which are now comparative with DSL price points," adds Neilson.

BMI-T still sees FTTH as a wildcard in respect of actual deployment and uptake, due to uncertainty as to the sustainability of deployments in the face of vigorous competition and depressed prices. Overall, BMI-T forecasts a solid growth rate in home Internet revenues, whether they be based on fibre, traditional copper lines or wireless connections.

While new wireless technologies such as LTE Advanced (LTE-A) are opening up new possibilities for fixed line replacement, BMI-T believes that fixed line connectivity will benefit from the trend towards video on demand (VoD).

"While this is still at an early stage of adoption in South Africa, the recently completed Digital Lifestyle Predictor consumer survey shows that rapid growth can be expected in the next three years, driving demand for uncapped services - which favours fixed lines."

The BMI-T survey found that 25% of metro respondents surveyed, across all household income groups, said they are interested in VoD services. Nearly 80% indicated they would use VoD in addition to subscription TV, rather than as a substitute.

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