Vodacom, MTN revolution
It is generally accepted that local cellular rates are high, that wholesale termination rates of the mobile providers should come down and that data and SMS prices can be reduced. One only has to look at the massive profit made by Vodacom and MTN to see that they basically have a licence to print money.
But having said that, one has to appreciate what the mobile providers in South Africa have achieved. Sitting on a farm in rural Mpumalanga – around 20km from a main road – and being able to connect to the internet is magic. Providing mobile internet access is one of the few areas in the telecommunications industry where South Africa is globally competitive and we have the cellular providers to thank for that.
Even the farm owner, an eccentric artist who left Johannesburg many years ago to live the quiet life, has an HSDPA modem connected through a wireless router to his iMac to serve his internet needs. Needless to say, there was not a Telkom line in sight and he relies entirely on mobile services for his communication needs.
In the nineties Telkom was ‘obliged' to roll out new services to rural communities – a project which was doomed from the start and unsurprisingly failed miserably – but it was the two mobile providers who came to the fore and aggressively increased their footprints to cover a large part of the country.
Vodacom and MTN were also quick to adopt and roll out new 3G-HSDPA technologies – a multi-billion rand investment – to bring true mobile broadband to South Africans. Local users were of the first in the world to use HSDPA which is now available in all major cities and most large towns.
Taking on Telkom
The two cellular providers are however not sitting back and admiring their mobile successes, but are rather eyeing an even larger piece of the telecoms pie by expanding into the fixed line and content sectors.
South Africans have waited for far too long for competition to enter the fixed line space, and despite Neotel's official licensing back in 2005 the second national operator has yet to launch commercial offerings to consumers and businesses.
Vodacom seems as tired of waiting for better services at lower rates as most consumers, and has indicated that they will be investing a few billion in rolling out their own fixed-line network. They have set a deadline for the end of the year for the launch of ADSL and WiMax to the consumer market.
The cellular provider also launched Vodacom Converged Solutions, a company which will compete directly with Telkom, Internet Solutions, Verizon Business and others in the telecoms space.
MTN is not sitting back and waiting for change either. They are building their own fibre network in the Sandton and Rosebank areas.
MTN SA is currently dependant on Telkom for much of their fixed-line network infrastructure and Tim Lowry, the new MTN-SA MD, said that it is a very costly part of its operations especially if it factors in the added burden of a backlog of installations which has the potential to become a problem.
"Transmission services delivered through Telkom are currently one of MTN's largest operational costs. Telkom cannot meet full market demand and this impacts on our ability to expand MTN's voice and data footprint," Lowry said.
Self provisioning can alleviate some of the problems that MTN are currently experiencing. The company added that it is one of the avenues that it is considering in order to improve their service delivery. "Self-provision is becoming more important as an element of our growth and sustainability strategy," Lowry said.
The lines between the mobile and fixed telecommunication sectors are fading, and the two larger mobile providers are well suited to take advantage of the benefits that new legislation brings.
So while the wheel seems to turn slowly when it comes to Telkom and Neotel, they may soon face direct competition from their more agile rivals, Vodacom and MTN.
If Neotel is not careful it may even be consigned to become a wholesale bandwidth peddler rather than a true competitor in the South African retail telecoms market. It is basing all its SMME and residential services on wireless technologies – namely CDMA and WiMax – but this is wireless territory where Vodacom and MTN can run circles around them.
In the marketing and sales department these two cellular giants are tough to beat. Vodacom and MTN both have well established distribution chains which are sure to be difficult to compete against, just ask Cell C or Virgin Mobile.
Many people are looking towards Neotel to drive down the price of fixed line telephony and broadband services, but it may just be the mobile providers who prove to be Telkom's biggest competitors in future.
Let's hope that Vodacom and MTN spend their billions in profit on useful projects which will benefit us all, like building competing fixed-line infrastructures, driving down the price of bandwidth in South Africa and of course dropping the cellular rates.
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