Despite a potential acquisition that may count against would-be mobile virtual network operators (MVNOs), a regulatory landscape that does not foster new mobile players, and the silo mentality of SA's network operators, Orange sees a clear market for its entry as a meaningful competitor in the future.
This is according to Orange Horizons MD S'ebastien Crozier, speaking about market consolidation within SA's telecoms sector, spectrum and MVNO opportunities in the country.
Orange Horizons is the subsidiary set up at the beginning of the year - a bid by Orange to seek out new opportunities in countries where the group is not already present as a mass-market telecoms provider.
Leveraging its sponsorship of the Africa Cup of Nations from January to February this year, Orange started making inroads in SA - initially without investing in infrastructure - via an online presence, a retail partnership with Nashua Mobile, and a limited number of telecoms products for travellers.
Since then, says Crozier, and after gauging local consumers' reactions and the French telecoms giant's potential place in the market, Orange has grown optimistic about its chances of realising its ultimate South African goal: becoming a fully-fledged MVNO with a range of mobile, Internet and value-added services on offer.
Regulation reform
This, he says, despite lingering hurdles for emerging players in SA's telecoms market.
Crozier points out cumbersome regulation as one of the barriers to entry - a topic on which he has long been engaging with the Independent Communications Authority of SA (ICASA). Crozier previously told ITWeb that Orange is looking into offering Internet Protocol television, mobile money and Internet services to the local market, but said there would have to be a shakeup in regulation for this to be possible.
He says Orange wants regulation in SA to be such that becoming a full MVNO with decent market share and the power to offer independent services is possible. "Usually a country will have regulation that allows new players to enter the market, but in SA there is no regulation for MVNOs and we don't want to be just another brand licence MVNO - we want to be able to introduce new services and offers."
One of the problems with local telecoms regulation, which Crozier says is "disturbing", is that wholesale prices are allowed to be higher than retail prices in the market - a fact, he says, that makes it near-impossible to compete as a new player. "It is unfair to have on-net prices under wholesale prices. [As it stands] if you are an MVNO in SA, you cannot compete. Regulation needs to change."
Niche market
In the meantime, Crozier says the South African market has taken to Orange's online store and local content portal extremely well. "Our online store has done better than we expected. There is clearly demand for high-end products in the local market."
The company's travel products, too, have seen significant uptake, according to Crozier. "There is a niche market in SA, we have discovered. People going abroad need products that help them avoid bill shock and if we become an MVNO this is a space [we can differentiate ourselves] in."
In a similar vein, Crozier says Orange has decided to invest in WiFi and is looking to service visitors to Cape Town - SA's tourism hub - with WiFi. "We want to offer our own customers from Europe coming to SA (especially Cape Town) WiFi. [The technology] is common in Europe and visitors expect to have access to it."
He says a strong brand is needed to offer WiFi services as European visitors prefer to use a brand they are familiar with. "So this is a good opportunity for Orange in Cape Town."
New products will be introduced every two to three months in SA, says Crozier. "We will continue to gauge consumer reaction so we know exactly how to go forward in the country.
"Of course, we don't yet have a plan as to which part of the market we will specifically target, but now that we have presence on several parts of the local value chain, our interest in becoming and ability to launch as an MVNO is growing. We still need to wait for the conditions to be right, though."
Siloed stance
He says the way the local market works impedes ubiquitous coverage, something he believes could be addressed by infrastructure sharing among SA's network operators.
"The question, really, is not the number of players there are - but how much infrastructure there is. Regulation that urges operators to share infrastructure and up coverage would address coverage issues. SA is huge and there are some places that just don't have coverage."
He cites Orange's deal in Romania and Spain as a case in point. "We have merged our network with Vodafone and this kind of infrastructure-sharing allows for better coverage with many players, but just two or three networks."
Crozier says Orange will attempt to acquire a frequency licence in SA, but notes there are only five licences through ICASA. "If you want frequency, you have to go through ICASA and at the moment the licences belong to Vodacom, MTN, Cell C and Telkom Mobile. Less known, is that the fifth licence belongs to Neotel - even though they do not use their frequency licence much and are not currently developing their business-to-consumer offering."
He says a deal between Neotel and Vodacom - something that was confirmed by the two a couple of months ago - would be unfair in that Vodacom would acquire Neotel's frequency. "Our main concern is that Vodacom would keep the frequency, in which case too many frequencies would belong to Vodacom. This means new players won't be able to enter the market - especially given that there is no MVNO regulation in the country."
He says Orange believes Neotel - in the event of an acquisition by SA's leading mobile operator - should give its frequency back to the state. "The state can then decide who will make the best use of the frequency and award it accordingly."
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