SA consumers buoy cellular market

The South African cellular market appears to be buoyant and little affected by the global economic downswing, but growth in the market should slow as it nears saturation, analysts say.

Local research firm BMI-TechKnowledge today said the number of unique cellular users in SA should rise to 42 million by 2013, from the current 35 million. At least 15 million of those users should be accessing the Internet over their handsets by that year, it added.

Gartner says sales in Eastern Europe, the Middle East and Africa reached 57.8 million units in the third quarter of 2008, representing an increase of 13.1% year-on-year.

The international research firm, which does not mention numbers for Africa specifically, says several countries in Eastern Europe, including Russia, Hungary, Ukraine and Romania, were hit hard by the financial crisis toward the end of the quarter. However, this did not translate into a large downturn in the devices market.

“Emerging markets, especially in Africa, continued to display healthy growth,” says Annette Zimmermann, senior research analyst for mobile devices at Gartner. “We expect the continued economic pressure to have a negative impact on handset sales in these regions in the fourth quarter of 2008, even though consumers will benefit from lower food and energy prices.”

The link between food and energy prices and the ability to afford a handset is a close indicator of the health of consumer spending in emerging markets, because for many of those consumers it is an “either or” situation with their disposable income.

However, the indispensability of cellular phones to the South African consumer is highlighted, as it is for many the most important, if not the only, means of telecommunications. For this reason, the consumer has to continue to spend on handsets and mobile services. But consumers are modifying their behaviour somewhat.

“There's definitely an economic downturn at the moment, but not in all the subscribers and not in all of our markets,” says Dot Field, chief communications officer for network operator Vodacom.

Field says, with regards to contract customers, people do tend to spend a little bit less. Traditionally, when they buy a bundle of minutes they would spend the bundle early in the month, and then go outside the bundle and spend more.

“These days, what we find is that they control their bundle spend much more across the month, and tend to not go out of the bundle.”

On the prepaid side, Field says Vodacom has seen the average revenue per user rise.

“For prepaid subscribers, the telephone has really become a part of their lives; it's become a tool in empowering them. So even in these difficult times, they use their cellphones to make them part of the economy,” Field says.

Ryan Smit, consumer market analyst at BMI-TechKnowledge, says handset trends such as media-oriented handsets, navigation handsets and touch-screen interfaces indicate consumers are demanding higher functionality from their handsets, with convergence becoming increasingly prevalent.

“New operating systems, such as iPhone OS and the Android platform, have opened up many possibilities, especially when viewed in combination with their application stores which offer the user the ability to buy and install applications directly from his handset,” he says.

So, while there may be a slowdown in handset sales, this is not necessarily due to an economic downswing and it is not expected to be significant, as new consumers are still entering the cellular market and making use of new services.

Lindsey Mc Donald, an analyst at international consulting firm Frost & Sullivan, says: "It is important to remember that handset sales growth is likely to show a slowdown given that the market is not coming off as low a base as it did the year before.

“In Africa, we expect to see a slowdown in growth, but this is not as a result of the economic downturn. While there is likely to be some impact, we do not expect it to be significant."

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