SA telcos dabble with digital transformation
The digital transformation of SA's telecommunications operators is in an early stage of development when compared to those in developed markets.
This is according to market analyst firm Frost & Sullivan, which notes that in more developed markets like the US, Europe and Asia Pacific, IT spending in the telecommunications sector lags behind that of media, healthcare and the banking sectors.
Frost & Sullivan states digital disruption is set to be the norm across industries as they look to transform to keep their business relevant amid the ever-changing technological landscape. It believes the implementation of enabling technologies such as low-cost sensors, cloud computing, advanced data analytics and mobility are expected to drive this revolution.
IT spend in 2016 stood at 3.9% of operators' revenue in developed markets, while it made up between 2.3% and 3.3% for South African operators during the same year, says Frost & Sullivan.
It points out this is predominantly due to the country's relatively lower connectivity rate, which is a crucial element to the digitisation process.
The development of the mobile communications market (with a penetration rate of 159.4% during 2016) is, however, contributing towards the growth of digital transformation in SA, the market analyst firm says.
SA's telecom sector boasts one of Africa's most advanced networks in terms of technology deployed and services provided.
Nevertheless, the fixed-line infrastructure for many years suffered from under-investment by the monopoly incumbent Telkom, and the poor level of service encouraged the growth of the mobile sector for the provision of voice and data services. Neotel has since also entered that market.
The major mobile network operators ? Vodacom, MTN and Cell C ? have also moved into the fixed-line and national fibre sector under a converged, service-neutral licensing regime. In addition, many municipalities in SA, including the country's largest cities, are implementing their own metropolitan fibre and wireless broadband networks.
SA's mobile operators have been calling for additional spectrum for years, but there has been little movement towards auctioning the spectrum.
Deepti Dhinakaran, senior research analyst for the digital transformation practice at Frost & Sullivan, says local mobile operators are rigorously leveraging the well-established mobile communications distribution network to expedite the reach of their business-to-consumer digital offerings; including video-on-demand (VOD), e-commerce, mobile payments, and other mobile app-based ICT solutions.
"Driven by the need to explore new revenue streams, and to adapt to changing market dynamics, South African operators are embracing digital transformation to a large extent," she notes.
However, she points out that legacy IT systems, disjointed IT stacks, and lack of integration between business support systems as well as operations support systems are limiting the flexibility of the operator to offer digital services.
In terms of digital strategy, Dhinakaran says, Vodacom focuses largely on consumer offerings, and mobile-based entertainment, education, agriculture and healthcare solutions for consumers - leveraging its large mobile subscriber base and mobile network coverage in SA.
Telkom-owned FastNet is more focused on machine-to-machine (M2M) and point-of-sale solutions, while Telkom's acquisition of BCX has given it a strong footing in enterprise services. Its extensive data centre and fibre infrastructure in the country is facilitating the growth of its integrated offerings, says Dhinakaran.
MTN, on the other hand, is looking to position itself as the preferred ICT partner for SMEs, while also rolling-out consumer-based services.
"If MTN succeeds in acquiring MultiChoice Africa, it will be even more inclined towards a largely consumer-focused strategy. Additionally, it will have ownership of the leading pan-African pay-TV services, DStv and GOtv, as well as VOD and ShowMax, further strengthening its footprint across Sub-Saharan Africa."
Earlier this month, reports surfaced saying MultiChoice Africa was in talks with the MTN Group over its possible acquisition.
According to Dhinakaran, MTN is solidifying its presence in e-commerce, digital content and fibre segments, and is leveraging its large pan-African mobile subscriber base.
Telecommunications operators are considering internal organisational restructuring in order to more effectively execute their digital strategies, she explains.
"This is evident from the fact that Vodacom and MTN have set up dedicated digital units to accelerate the growth and development of their digital consumer offerings. Telkom has also integrated its enterprise unit into BCX, and rebranded it to the BCX unit, to bolster the enterprise offerings of both under a single and larger entity."
Frost & Sullivan also observes that market consolidation is rampant in the South African telecommunications services market, as operators are looking to build the capabilities required to position themselves as end-to-end ICT and digital solutions providers.
Typical examples include the acquisition of BCX by Telkom to boost its end-to-end ICT enterprise offerings; and Vodacom's acquisition of XLink, an M2M solutions provider, to expand and strengthen the operator's IOT services portfolio.
"During the next three years, telecommunications operators will be seen making significant investments in areas such as software-defined networks, network functions virtualisation, IOT, M2M, fibre, e-commerce, and big data analytics so as to accelerate their digital transformation journeys, while further enabling them to enhance the agility needed to offer dynamic, innovative and diversified services in the future."
She points out that operators like Telkom, Vodacom and MTN are constantly evolving and innovating while making steady progress in their digital transformation journey.
"It is evident that aggressive service diversification, increasing market consolidation, and organisational restructuring are crucial to enabling SA's telecommunications operators to transition towards becoming exceptional end-to-end digital services providers."