Amid a strong mobile phone sales market and good growth by local cellular service providers, research house World Wide Worx says SA`s mobile subscriber base has been routinely overstated by at least 20%.
According to its research report, "The State of the Mobile and Wireless Services Industry in South Africa 2005", the size of the mobile subscriber market, widely assumed to have reached the 18 million mark in March 2004, was only around 14.5 million.
The 20 million mark, thought to have been passed at the end of September 2004, will not be breached until well into 2005, says the report.
"It is still an astonishingly successful industry, but that success can be undermined by over-hyping it," says Arthur Goldstuck, MD of World Wide Worx.
The study is the first of a six-phase World Wide Worx research project entitled "Mobility 2005", covering mobile and wireless technologies in SA.
Cell C and a new mobile strategy think-tank, the Mobile Institute, are sponsoring the first three phases.
The research covers cellular, wireless and radio technologies, and mobile commerce. The next three phases, sponsored by First National Bank and Sentech, will include market research among corporations, small and medium enterprises, and consumers.
The first phase of the study shows there has been widespread controversy within the industry around the question of what constitutes "active customers". Most networks use the definition of "Active Three", for subscribers who have generated activity on the network in the past three-month period. However, networks have been "fluid" in their choice of definition, hopping between Active Three, Active Six (subscribers who have been active in the past six months), Active Seven, and even Active Nine.
"The networks are very honest about their churn rates, as well as their definitions of active customers, but industry observers and analysts tend to ignore these for the sake of talking up the numbers," says Goldstuck.
"At the same time, though, we have also identified numerous other factors behind the overcounting - by both networks and analysts."
These include:
* Prepaid starter packs cause churn through "arbitrage" - buyers spot the discount between the cost of starter packs and the cost of recharging existing accounts. Once they use up the airtime on such starter packs, they discard them but are still counted as active subscribers.
* Active contract subscribers purchase new contracts when they spot a bargain in the price of a contract versus the combination of free phone and free gift, such as shopping vouchers or TV sets - they continue using their existing contracts, but are counted twice by the networks.
* The top echelon of prepaid customers tends to match the handset upgrade behaviour of contract customers, who upgrade their phones every two years. These upper-income prepaid customers prefer to keep their old numbers but take out new prepaid bundles every time they want an upgrade, and are again counted twice by the networks.
* Analysis of churn patterns - as many as 45% of prepaid customers change or drop networks every year - indicate that many prepaid subscribers are counted on more than one network.
* Retailers believe that many handsets with prepaid airtime are being bought by foreign visitors.
* Around 10 million new SIM cards for cellphones are expected to be issued in 2004 - three times the amount of new subscribers expected by the networks. This alone indicates huge movement between and within networks, and casts significant doubt on how many of the new subscribers really are "new".
Goldstuck says these findings are not seen as all bad news for the industry.
"The numbers show that there is in fact more growth to be had out of the market before it reaches saturation," says Jonathan Newman, head of strategy at Cell C.
The total market potential continues to be estimated at between 26 million and 33 million mobile subscribers, depending on whether industry representatives are making conservative or aggressive forecasts.
Mobile sales grow
The report coincides with the release of Gartner research showing that worldwide mobile phone sales surpassed 167 million units in the third quarter of 2004, a 26% increase from the third quarter of 2003.
"Historically, the third quarter is seldom strong," says Carolina Milanesi, analyst for mobile terminals research at Gartner. "The industry expected sales to be flat in preparation for Christmas demand. However, all regions apart from Japan registered year-on-year growth.
"New handset models and decreasing prices fuelled replacement sales in mature markets such as Western Europe and North America. In Asia, Central Europe and the Middle East, emerging markets continued to add new subscribers."
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