The R10-billion network game – winners and losers

To build and operate a true national mobile network is so expensive that only two companies in South Africa have the money to do it – MTN and Vodacom.

Without very deep pockets, it is simply not possible to roll out and maintain a mobile network which covers the whole country.

So large is the required network investment that Cell C CEO Douglas Craigie Stevenson admitted that they cannot compete against Vodacom and MTN.

This leaves the smaller operators like Cell C and Telkom with only one choice – partner with large operators through a roaming agreement.

While it is not ideal for a smaller operator to rely on network resources from a direct competitor, it is the only way for Telkom and Cell C to offer country-wide coverage.

Network investments and network quality

To understand why it is necessary to invest billion in a network to remain competitive, you only have to look at network performance.

MTN invested around R30 billion in its network over the past three years (R10 billion per year), and it is currently ranked first in all objective South African network quality benchmarks.

Vodacom, which invested around R27 billion in its network over the same period, is a close second to MTN.

Telkom and Cell C, which only invested R7.3 billion and R5.3 billion respectively, can simply not compete against MTN and Vodacom in network quality.

The table below provides an overview of the network investment and network quality of the four major network operators in South Africa.

South African Mobile Operators
Operator Network Investment (Capex) Network Quality Score (Q2 2019)
MTN R29.8 billion 9.78
Vodacom R26.9 billion 8.24
Telkom R7.3 billion 6.16
Cell C R5.4 billion 5.35

Why it is so expensive to run a network

To run a mobile network in South Africa is very expensive for many reasons, including rolling out new sites, coping with vandalism and theft, power backups, and a lack of spectrum.

But even if all of these things are taken care of, mobile operators still have to consistently upgrade their networks to offer the latest mobile services and cope with increasing data demand.

Deploying advanced antenna technologies like 4×4 MIMO, 3CC (3 Carrier Combining), and advanced features such as 256QAM all come at a cost.

The smaller operators will cut back on the latest network technologies to reduce their costs, which is why Vodacom and MTN reign supreme in network performance.

The good news for South Africans is that the fierce rivalry between Vodacom and MTN means that we have two world-class mobile networks in the country.

Network quality is a big differentiator for Vodacom and MTN, which is why they continue to pump close to R10 billion into their networks each year.

Now read: Cell C seeks more network access from MTN

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The R10-billion network game – winners and losers