SA's murky telecoms vision
Predicting what SA's telecoms landscape will look like in the not too distant future can be likened to reading tea leaves - it's anybody's guess.
There is much afoot in the local telecommunications sector. MTN, Vodacom and Neotel are rolling out fibre. The Independent Communications Authority of SA (ICASA) recently held hearings on the conversion of VANs licences to individual ECNS licences. Seacom has started laying its undersea cable, and more such cables are on the cards. And then there are the much-anticipated WiMax licences, which ICASA has yet to issue.
The competitive landscape is dependent on licensing.Alpheus Mangale, COO for solutions: Africa and Middle East, Dimension Data
All of the above will impact the local competitive landscape quite significantly. But there are a lot of 'ifs' and 'buts' to be resolved before a clear picture of where we are headed can be established. In the interim, corporate users trying to cut communications costs, and simplify management of telecommunications infrastructures, will have to play the waiting game for a little longer.
The future, if all goes well, will include several carriers providing services to telecoms service providers that will, through a combination of their own infrastructures, reseller agreements and partnership agreements, be able to provide a one-stop service to corporates or consumers. When, or if, SA gets there in the short- or medium-term remains to be seen.
Crystal ball gazing
At present, the local market is highly fragmented and categorised by multiple small to medium-size players providing solutions on the basis of a single technology, or reselling said solutions.
"Without a shadow of a doubt, the market is consolidating," says Huge Telecom group financial director James Herbst. Acquisitions by Vox, Huge and Vodacom in the recent past provide firm evidence of this. And given the sheer number of players (500-odd VANs at last count), logic would dictate that it will continue, particularly as the bigger players strive to gain market share, and expand into service provision areas they have not previously dabbled in.
"Ideally we'd like eight or ten strong players, not four or five ridiculously strong players," says Huge Telecom CEO Anton Potgieter. "Currently the big four or five are segmented so they don't really compete, even at the operator level."
These niches are entrenched by the current licence regime. Says Alpheus Mangale, Dimension Data COO for solutions: Africa and Middle East: "The service provider competitive landscape is dependent on licensing and licence parameters in terms of what they are allowed to do."
Hopes are high that the ECS and ECNS licences, ie, the horizontal licensing framework, as provided for by the Electronic Communications Act, will open this up.
Says Spescom Telecommunications CEO Thomas Makore: "Service-based or horizontal licences will come in now once the [VANS licence] conversion is done. What it means is that the divisions between mobile and fixed operators is going to disappear going forward. Mobile will do fixed, fixed will do mobile, etcetera. It also means that there is a high degree of probability that VANs licensees will be able to self-provide the access network (but not the core or long-distance network). If this is the way it we will be in a year or two years' time, it means there will be more choice for customers, consumers, SMEs as well as corporates. It means there will be providers on a national scale that are able to provide fixed, mobile, voice, video, data, mobility - the whole menu of services that are currently fragmented because of the licensing regime."
"Many of the key VANs players have a strong view that they are legally entitled to convert [to ECNS licences]," says Connection Telecom chairman Dave Meintjies. "If that ends up being the case it would facilitate market forces, because even if they do not put infrastructure down, the fact that they are entitled to do so will keep players honest in terms of pricing regimes."
"The key thing to look forward to as the licensing process reaches a positive resolution is that many of the major VANS will become fully fledged telecoms operators," says Gateway Communications CEO Mike van den Bergh.
"There will be a greater variety in products, services and solutions. As a result of this, we expect to see two initially almost opposing trends. Firstly, we'll see a large number of new entrants coming into the market. However, in order to survive they will need to find a niche. We will conversely also start seeing large amounts of consolidation. In the telecoms market, it normally holds true that critical mass wins through. Those that can adapt fastest, have critical mass, a good profitable business plan, can adapt and innovate, focus on constant value proposition improvement, and have ways to generate cash flow will win through."
Van den Bergh also highlights the quality issue as a major determinant of which providers will win, as well as the ability to provide connectivity to wherever customers are. "With the expansion of South African companies as multinationals across the continent, the telecoms companies that will win through are those able to deliver a footprint across the entire continent."
"We decided upfront not to follow anyone, and to try to create a different landscape in the market," says Neotel enterprise sales head Stefano Mattiello. "The market doesn't need another LCR, GSM, etc, provider. We took the decision upfront to build a next generation network (NGN), which to a large extent allows us to deliver converged services for the first time into the local market.
"We're trying to change the landscape [to get to a point] where people no longer buy point to point solutions; they buy a service. To a large extent we need to go through an educational process," he states. "Today people take what they have [in terms of bandwidth] and build a business around it instead of tailoring their bandwidth to the business. This is the kind of stuff we'll start seeing in the next few years as we start connecting customers at Gigabit level."
Neotel already has about 60 enterprise customers signed, with more on the cards, and fibre roll-outs continue.
Another factor that needs to be considered when contemplating the local market is the metropolitan municipalities. Says Mangale: "The municipalities are investing in rolling out broadband networks, and looking at business models where they can offer spare capacity to consumers. The challenge there is that running a service provider is not as easy as running a municipality. The metros need to look at partnering with tier two providers like IS and MTN NS so that they can bundle an offering and offer it in partnership with those providers. Digital cities and connected homes may become a reality depending on the roll-out," he notes.
As mentioned, there are a lot of 'ifs' and 'buts' as far as the future of the local telecoms market goes. Sources close to the process have told ITWeb that ICASA may have changed its mind on giving ECNS licences to VANS, and that the regulator is now of the opinion that they are not entitled to these licences. The ultimate outcome remains to be seen, but if this is ICASA's decision, it is reasonable to expect a flurry of court cases.
The one thing this industry desperately needs is a sufficient degree of certainty to be able to move forward, in a clear direction, without the grey areas that have characterised the so-called liberalisation process to date.