South African cellular subscriber numbers took a dip in the last quarter of 2009, leaving analysts to ponder if the market has reached saturation.
Frost & Sullivan analyst Spiwe Chireka says that for the first time, SA saw a 2% drop in overall subscriber numbers in the last three months of 2009, to 49 120 511. This represented a quarter-on-quarter decrease of 4% and an annual decrease of 2%, she explains.
“We do believe that the bulk of this decrease is attributed to RICA [the law requiring registration of SIM cards], which has slashed net additions for operators quite drastically. So, the overall impact is that the overall number of new connections since the implementation of RICA in Q2 2009 has been low.
“Given that churn is a natural process in any mobile network that operators have limited control over, the overall impact is that the new connections, minus churn, have now become negative, namely resulting in lower subs numbers,” she says.
Arthur Goldstuck, MD of World Wide Worx, also attributes any drop in subscriber numbers to RICA, which means fewer people are in possession of multiple SIM cards and, furthermore, fewer people are buying pay-as-you-go starter packs, another factor that buoyed subscriber numbers.
These analysts now question whether sub-Saharan Africa is no longer the final frontier for cellular subscriber growth.
“In SA, there is definitely a slow down in growth as some 72% of the population, excluding the very young and the very old, have SIM cards. The situation in SA, therefore, looks as though it is definitely stabilising. However, in the rest of Africa, there is definitely room to grow,” Goldstuck notes.
World Wide Worx estimates the total South African subscriber SIM cards at around 50.2 million, a slight increase from the 50.02 million a year ago. The current number is based on Cell C and MTN numbers for the period ending March 2010, with 6.9 million and 16.4 million, respectively, and Vodacom for the period ended January, at 26.9 million. Vodacom is due to release updated numbers on 17 May.
Chireka points out the fact that cellular operators are seeing lower revenue and profit.
“Zain, a traditional market leader, reported losses of on average $20 million in all but three of its 15 operations in the region. EBITDA [earnings before income tax, depreciation, and amortisation] margins for market leaders such as Vodacom, MTN and Zain all decreased and in some cases were negative,” Chireka says.
In SA, MTN reported a 7% rise in subscriber numbers and Cell C recently said its market share had grown from 13.4% to 14.5%. The change in cellular network operating models has also been noted; Cell C is investing R5 billion to install a 4G network and Vodacom recently launched a campaign to get subscribers to increase data usage.
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