Eyeing the top spot
That view, says BMI-T telecoms analyst Tertia Smit, is bolstered by (among other factors) fixed line incumbent Telkom’s failure to cope with demand for its pricey ADSL offering and the phenomenal subscriber response to iBurst’s broadband offering, which over the past 18 months has netted close to 30 000 subscribers.
Such has been the encouraging response from subscribers to SA’s broadband offerings that cellular network operator Vodacom had bagged close to 90 000 3G and HSDPA data card users by October, a 374% increase against 19 000 subscribers as at October 2005.
Encouraged by the uptake, Vodacom managing executive for products and services Chris Ross says the cellular group is now strategically positioning itself to exploit this fledging market. Barely two weeks after taking a 10% stake in iBurst, Vodacom has concluded a deal to acquire a 26% stake in G-Mobile, holding company of SA Wi-Fi hotspot operator WirelessG, to add to its growing broadband portfolio.
Says Ross: "The fact that service providers are battling to cope with demand is so far the best indication that this is a growing market." With Vodacom’s HSDPA currently confined to mainly urban areas, plans are afoot to spread its broadband offerings throughout its network.
Ross says its stake in WirelessG will provide a catalyst for Vodacom’s broadband roll-out plans. WirelessG has around 400 Wi-Fi hotspots – many managed on behalf of existing partner Telkom – spread throughout SA in shopping malls, conference centres and in hotels, including venues such as Southern Sun hotels, News Cafés and Sandton City.
Says Ross: "Though WirelessG’s infrastructure will further add to our broadband distribution channels, the major benefit that WirelessG brings to our stable is its Wi-Fi hotspots. Wi-Fi ideally complements our 3G HSDPA mobile broadband service, as it provides both an alternative means of access and also enables a cost-effective extension of coverage of high-speed Internet access."
WirelessG CE Carel van der Merwe says the company’s tie up with Vodacom will not only bring a host of benefits to its subscribers but will transform SA’s broadband landscape.
"In addition to strong management capabilities, WirelessG has class-leading infrastructure and core products and services that are already being widely used."
Van der Merwe says that Vodacom’s capital injection will enable WirelessG to intensify its nationwide roll-out of Wi-Fi hotspots. The Vodacom/WirelessG deal also stands to benefit Vodacom’s existing client base. "Vodacom’s customers will benefit from a wider range of services extending beyond that of cellphones, in that they’ll have access to a complementary means of high-speed connectivity enabling fast Internet access using different devices (ie, PDAs)."
Vodacom’s HSDPA service theoretically provides subscriber download speeds of up to 1,8Mbps and upload speeds of up to 384Kbps. But in reality subscribers can expect download speeds of between 400Kbps and 800Kbps, with peaks of approximately 1,4Mbps (peak upload speeds of 128Kbps), says Van der Merwe.
While appreciating that the Vodacom/WirelessG deal would benefit both companies, Africa Analysis analyst André Wills says that the tie-up is unlikely to have a significant impact on SA’s broadband industry. Wills says that the stakes Vodacom has acquired in iBurst and WirelessG wouldn’t likely compel it to massively invest in both companies’ broadband infrastructure roll-out plans.
Says Wills: "If it were not solely for the purpose of nullifying interests from competitors – such as MTN and Cell C – I doubt that Vodacom has a genuine interest in iBurst or WirelessG.
What’s even more worrying is that it isn’t the Vodacom holding company but a venture capital group within Vodacom that’s been involved in both acquisitions. I can’t rule out the possibility of Vodacom just becoming a passive investor, because that’s what venture capital groups are about."
It will be interesting to see how WirelessG and Vodacom attempt to create value from the deal for both companies. And how Vodacom packages WirelessG’s services in such a way that customers see an economic reason to use it.
Finweek
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