Telecoms market 'fraught with uncertainty`

Johannesburg, 27 Jun 2005

SA`s telecoms market structure is still fraught with uncertainty, with the regulatory environment in particular posing major uncertainties, says an industry analyst.

According to Richard Hurst, an analyst with BMI-TechKnowledge and co-author of a report entitled New Directions in the SA Voice Market, there are also a number of other issues that may be regarded as wild cards within the sector.

"These include such issues as the position of the future second national operator (SNO) and its relative strength compared to the incumbents and challengers such as budding virtual network operators as well as the traditional value-added network service (VANS) providers, post convergence legislation," says Hurst.

"Currently the local telecoms market is in the early adopter phase of VOIP, although this is expected to change as network operators and enterprises begin to realise the benefits of the new technologies," he says.

"However, we expect the impact to take up to three years to be truly felt - with the exception of accelerated tariff rebalancing between international outgoing, national long distance and local calling rates."

Hurst says a lack of access to broadband service in the residential sector will mean that there will be slow adoption of VOIP in this area, especially as the current low penetration rate means that even under an accelerated broadband scenario, relatively few households will have broadband in the short- to medium-term.

"As an early prediction, VOIP revenues are expected to grow from R30 million in 2005 to R630 million by 2009, representing 3% of all fixed line voice revenues or, alternatively stated, only 0.8% of total voice, fixed and mobile combined," he says.

"The fixed line voice services market has been relatively flat over the past two years growing from R17.1 billion in 2001 to R20.1 billion in 2004 and is expected to grow slightly to R21.1 billion in 2009, representing almost flat growth."

He also points out that growth in voice calling revenues has in fact been negative in recent years, if the positive impact of dialup Internet call charges is eliminated.

"Despite its extremely slow start, the advent of VOIP has certainly sparked off huge interest from corporate users, many of which have initiated new voice optimisation studies since the advent of liberalisation on 1 February," says Hurst.

"Although the bulk of the real VOIP action will come from corporate customers, the small and medium enterprise market also appears to be hungry for alternatives, and players in this sector are also very keen to talk to a future SNO."