Third cell operator can make it happen

BMI-TechKnowledge has just published the first in-depth study of the mobile market in South Africa "3^rd Cellular Operator Opportunities in South Africa". This report, based on over 2500 interviews with current and potential cellular subscribers, shows not only where these opportunities are but how they can be unlocked.

The opportunity is rather complex, not nearly as straightforward as when MTN and Vodacom launched their respective networks in 1994. We found that the opportunity is defined by five parameters:

• Quality
• Price
• Coverage
• Value added services
• Technology platform

The research showed that there is no one single value proposition that meets the needs of the business, the personal contract, the prepaid and the potential subscribers. A different mix of the parameters that make up the value proposition is required to address the needs of the different market segments.

For example: Affordability has always been a market issue but with the growth and challenge of penetrating the mass market, affordability has become even more important. Potential subscribers are prepared to trade national coverage for lower tariffs while in general a business subscriber is less likely to make this trade. Some 44% of potential subscribers indicated that they would choose regional coverage at lower tariffs compared to national coverage at the existing tariffs. Businesses want national coverage and in general are prepared to pay higher tariffs. Only 29% of businesses would select regional coverage at lower tariffs.

We have analysed the customer base of the existing cellular operators by defining whether a subscriber is loyal, indifferent or likely to switch.

• Loyal - defined as customers who indicated that they will not switch to a new operator
• Indifferent - defined as customers who are indifferent about who their network operator is
• Switch - defined as customers who most likely will switch to the new operator

The overall "rule of thumb" we developed was that 35% of existing subscribers should remain loyal to the existing network operators while 20% indicated that they would most likely switch. Some 45% of subscribers are indifferent about their network operator!

Understanding why there exists this large indifferent customer group is key to both the existing network operators and the new entrant. The existing network operators have the advantage within this customer group, as the new entrant needs to demonstrate through their value proposition to this group why they should switch to the new operator.

We expect to see more innovative offering emerge from the existing network operators targeted at this group to keep them on the existing network.

Is there significant growth left in the market? Yes! By the end of 1998 there were2.3 million net subscribers and the growth from 1997 to 1998 was dominated by prepaid service, which grew by 161%. We estimate that the market should reach 3.2 million net subscribers by the end of 1999 and some 5-6 million subscribes by 2004.

Currently the market is worth R7-R8 billion and this will grow to around R15 billion by 2004.

I only gave you a taste of what`s in our 200-page report. Trying to convey all the findings would lead me to writing some 10 pages. Please e-mail me should you wish to find out more about the 3^rd Cellular Operator Opportunities in South Africa.