WhatsApp is not Vodacom and MTN’s doomsday: analyst

Parliament’s Portfolio Committee on Telecommunications and Postal Services recently held hearings into the possible regulation of over-the-top (OTT) services like WhatsApp, Skype, and Facebook.

The Independent Communications Authority of South Africa is also planning to launch an inquiry into the impact of these services on the cellular data market.

Vodacom and MTN argue that OTT services like WhatsApp and Facebook have to be subjected to the same compliance rules as local telecoms networks.

Cell C, in turn, argues that regulating OTT services would impose new costs, which may prompt OTT players to withdraw their services from South Africa, or push up prices for consumers.

“What MTN and Vodacom are trying to do is not address the big issue. They simply want to protect what they have and they are happy to sell the consumer out to get that,” said Cell C.

Speaking on Business Day TV, Nadim Mohamed, an investment analyst at First Avenue Investment Management, said he does not think Vodacom and MTN are only trying to defend their profits, as alleged by Cell C.

“All the operators in South Africa have realised that OTTs are the future, and that there is a symbiotic relationship between the network and the OTT provider,” said Mohamed.

“There is room to discuss how these OTT services can be regulated, and that is really what the discussion is about.”

Mohamed said OTT providers drive demand for data, with services like Netflix and Facebook fuelling content adoption.

Voice revenue is an issue for mobile operators

“The trouble is that when you look at voice, with OTT services like WhatsApp and Viber offering free calling, it becomes an issue,” he said.

The crown jewel in the telecommunications networks’ offering was always voice, which drove big revenues and profits.

OTT applications offer consumers a much cheaper way to make voice calls, which can hurt voice revenues.

Mohamed dismissed arguments that an “even playing field” should be created. He said the biggest concern to mobile operators is that if a number of mobile subscribers start to use WhatsApp calling, their networks may not be ready to support that much data.

“The longer they can delay the mass uptake of WhatsApp and other OTT voice calling, the better for them.”

Mohamed said the golden period of mobile operators is gone. “I do not think you will see double-digit growth again from them in future.”

Not the end of Vodacom and MTN

“If you take a typical WhatsApp call, a minute uses roughly one MB of data. One MB of data can cost consumers anywhere between 15 cents and R2,” said Mohamed.

With standard cellular calls costing between 66c and R1.50 per minute, there will be some revenue decline for operators when people use WhatsApp calling.

When a user gets onto a smartphone, though, there are a lot of other services which they start using. This, in turn, will drive data demand, he said.

“OTT uptake is therefore not a real doomsday scenario for mobile operators. They will most likely see their voice revenue decline, which will hopefully be made up for by data use.”

More on OTT regulation

WhatsApp and Facebook should not be regulated to death in SA

Cell C launches free WhatsApp calling