Did we really see true broadband in 2009?

Hilton Tarrant

Hilton Tarrant is production editor at Moneyweb. He also project manages new website launches for the company and covers ICT issues, chiefly through his weekly...

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Broadband’s big prediction for 2009 was that you’d see true, high-speed internet this year. In some ways, our connectivity has improved, but there remain bottle-necks.

Let’s revisit our predictions made a year ago and, for a change, we got almost all correct…

1. After the unbundling of Vodacom, Telkom will surprise everyone with a key appointment to its mobile division. Using its marketing muscle (what’s a few million between friends?) it will aggressively capture a decent portion of the market. It can afford to (and will) undercut the prices currently in the market. The price war will mean Vodacom, MTN and Cell C will be forced into cutting prices. Many of Telkom’s fixed-line subscribers switch to a roaming mobile/fixed converged solution, and the company will likely use MTN as its roaming partner.

Correct (mostly). It made two surprising appointments – Pinky Moholi returned from a stint at Nedbank to run its South Africa business (including its new mobile operation). Jeffrey Hedberg, the former Cell C boss, has been dispatched to Nigeria to fix the disaster that is Multi-Links. Telkom hasn’t quite launched its mobile service – we had hoped for it to move slightly quicker. Competition is increasing in the mobile space though, with fairly ruthless competition for market share.

2. Vodacom will look ever more like Vodafone. It will become more aligned to its UK parent and its strategy in Africa will become clearer than it’s been up till now. Don’t be surprised if the Vodacom logo turns red or if the company rebrands or dual-brands most (if not all) of its operations. Why would you surrender the marketing opportunity that the 2010 Fifa World Cup brings by marketing yourself as “Vodacom”? Vodacom Business will continue to struggle in a heavily contested space.

Correct (mostly). The two brands are converging, but not at the extent that we had predicted. The company’s debut results presentation saw generous use of red. Stores are becoming more and more dual-branded – especially those at airports. The Africa strategy is clearer than the mud it was. And yes, Vodacom Business is struggling.

3. MTN has a voracious appetite to keep growing and entering new markets. However, with credit all but dried up, it’s going to find it difficult to acquire a significant player in emerging markets. It may well try, but we’re likely to see a merger – if corporate action is a route MTN chooses to follow. What we will see is the acquisition of a smaller operator, perhaps only active in a single country on the continent. MTN may also announce its own submarine cable project – it needs the capacity along the west coast of Africa.

(Almost) correct. The deal to end all deals never happened. MTN and Bharti Airtel danced around each other for months, then extended the talks, fought with governments and then both parties walked away. It seems that MTN has more pressing problems with its operations and needs to focus on these, rather than digesting new operators. It is a major player in the consortium building WACS (West African Cable System).

4. Neotel will continue to struggle in the consumer space. Sources put the amount of subscribers in the early thousands. However, there is every chance Neotel may just launch a product that truly captures a decent chunk of the broadband connectivity market. Its enterprise division will continue to be the company’s star.

Correct. South Africa’s second operator is struggling in the consumer space. It has over 30 000 subscribers, hardly a roaring success, but it is gathering pace. Its NeoFlex and NeoGo products are capturing decent userbases. Enterprise is where the money is at.

5. Middle-eastern operator Zain will enter the South African market. It’s active in dozens of countries across the continent and in many of them is competing head to head with MTN. Zain has been eying SA for a while and the group has deep pockets. Its entry may be in the form of a tie-up with Telkom, although this is unlikely as it will want to operate under the “Zain” brand. It may try to buy Cell C from Saudi Oger – if the money’s right, Oger will sell.

Wrong. Zain is still circling this market unsure of what to do – if anything. It’s had to deal with shareholder problems of its own during the year, with African operations for sale one minute, and off the chopping block the next.

6. iBurst will continue to do well in outlying areas (ie, not the major metros). Vodacom will not be happy with its shareholding and will try to increase it, or buy the company outright. How tough the competition hurdles will be is anyone’s guess.

Half correct. iBurst is growing in the outlying areas, but needed a major shake-up with a new CEO installed. Vodacom is not happy with its shareholding, but instead of wanting to increase it, it has considered offloading it.

7. Seacom will land. That’s the easy part. The internet won’t suddenly become ten times faster overnight, though. This effect will trickle through and we’ll gradually see massive increases in speed. Congestion on the SAT-3 cable will be a thing of the past, which will make for a much better browsing experience all round. Those YouTube videos will load immediately – no more buffering. What people aren’t expecting is the price drops. Sure, the price of wholesale bandwidth will drop by 80-90%. This will give network operators a massive range to discount the price of data connectivity. Caps will increase far beyond the current 3GB or 5GB limits. R2 per MB anyone? That default pricing yardstick won’t exist by the end of the year.

Half-correct. Another slow-to-start prediction. We are seeing increases in speed. The simple arrival of Seacom has forced Telkom to compete. Telkom and its shareholders in SAT-3 have increased capacity on that system significantly. Prices are falling, with ADSL bundles dropping dramatically.

8. An operator or ICT player will stumble and make a serious misstep. This could be something like a badly-timed or ill-advised investment in infrastructure, a data leak, or a near-catastrophic network failure. This player will have to abandon other significant projects to fix what went wrong.

Correct. One could argue that MTN’s South African operations have stumbled. Its subscriber base and market share have both dropped. It’s made naïve calls, such as running a R7.50 per SMS birthday competition (“lottery”) which garnered tons of bad press. Seasoned-hand Karel Pienaar has been dispatched to fix the business.

9. Altech (JSE:ALT) will buy something. It has R1.5bn cash on hand, and with the market and economy depressed, there are just too many opportunities. Vox Telecom’s (JSE:VOX) market cap is around R1bn at the moment. Sure, shareholders would want a significant premium – but what’s to stop a half cash, half stock deal worth R2.5-3bn? Dimension Data’s (JSE:DDT) Internet Solutions will also hunt for acquisition opportunities, but its corporate structure means deal-making will be much more complex.

Correct. It didn’t quite buy something new. Instead, Altech upped its stake in KDN – the east African business that holds tremendous promise for the group. It seems the promise of consolidation in the local market has all but disappeared.

10. Ivy Matsepe-Casaburri will be gone! And all shall rejoice. Current deputy minister Roy Padayachie, who’s been forced into her shadow for far too long, will take the reigns of the Department of Communications (as expected). But, the new deputy minister and director-general appointments will be inspired and will demonstrate that government is finally serious about ICT.

Correct (Almost prophetic). Instead of continuity, we saw the appointment of General (ret.) Siphiwe Nyanda – a total outsider. The choice by President Jacob Zuma has been inspired, and the General has done more in six months than the previous Department of Communications achieved in nine years.

Seven-and-a-half to eight-and-a-half out of ten – depends on how you count it! Not bad… Now to beat that with predictions for 2010.

What do you predict for 2010?

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