A wireless solution

We have seen tremendous development in wireless solutions for a host of applications ranging from wireless data through to wireless local loop. Telkom has awarded some R2 billion in WLL DECT tenders over the past year.

An overall analysis of the worldwide contracted wireless local loop main lines awarded in 1997 was 124% up on 1996. Asia, Eastern Europe and Africa accounted for some 72% of all contracted WLL lines. This shows a significant investment by emerging countries that are deploying new infrastructure to meet the demand for dialtone.

Many wireless solution providers claim that a WLL line costs between $500 to $1 000, whereas a wired line can cost $1 000 to $1 500. In Africa, we find that the cost of a wired line costs two to three times more than the world average at around $2 000 to $3 000. The latest cost of a WLL I have seen reported is around $850 (May 1998).

Can operators afford to invest in wireless technologies?

Analysis of the investment strategies shows that African operators invest an equivalent of 30% of the revenue in their networks. What is interesting to observe is that African operators have not yet managed to leverage their infrastructure to generate revenue other than from basic telephony services.

Currently SSA operators see an increase in revenues equivalent to their main line growth. Operators from developed countries leverage their infrastructure to deliver revenue streams from the value-added services provided by the networks. SSA operators are caught up in their need to meet the basic demand for telephony that they have not invested in intelligent network platforms, Frame Relay, ATM or any of the sophisticated technologies that will enable them to leverage their infrastructure. This means that the ability of an SSA operator to grow their revenue stream faster than their main line growth is limited.

This places pressure on the operator to invest in technologies that are cost-effective.

To deploy more main lines per dollar invested forces the operator to consider technologies that require the lowest capital investment per line. Under this scenario, WLL is in a league of its own given its low cost per subscriber investment.

Therefore, operators cannot afford to not invest in wireless technologies.

So what is the WLL market value for sub-Saharan Africa?

To answer this question we need to construct a model that shows the main line growth, the estimated cost per WLL and estimation of what percent of lines will be wireless.

SSA, excluding South Africa, has seen a CAGR of 7.4% in main line growth over the past few years (1990 to 1996) as shown in the following diagram:

Assuming that the main line growth can be estimated using 7.4% CAGR yields the following annual growth in main lines:

Now let us assume that 50% of these new lines are WLL lines. Furthermore, let us assume that the average cost of a WLL line is around $800. Telkom will most likely install 60% to 70% of its 2.7 million lines as WLL lines.

Using these parameters, we can forecast a WLL cumulative market growth as shown in the following diagram:

Therefore, we have a potential cumulative WLL market value of between $500 to $600 million cumulative market value by 2003.

This is the key question. Many operators are faced by a number of wireless solutions using different protocols. Furthermore, to use a wireless solution requires that frequency to be made available for that wireless solution. A further complicating factor that strongly influences the type of wireless solution purchased are the purchase conditions tied to bilateral aid.

Often a country that provides finance to a developing country requires that country to spend that finance with companies from the donor country. This country actually uses the finance as an economy stimulant in their own country. The country receiving the finance is trapped and cannot afford not to accept the aid.

As a parting comment, I firmly believe that we have now reached the point where there is a wireless solution for almost any telecoms problem. This kind of technology, where properly deployed, can only better the lives of those who have never had access to dialtone!