Data applications will drive SA market

Johannesburg, 04 Oct 2004

South Africa`s mobile market penetration will improve from the present 43% to around 61% by 2010, with the growth being driven mostly by data applications, rather than human subscribers.

"The desire to communicate is so strong that mobile data applications offer a perfect match between human need and mechanical provision," says Andre Wills, a telecoms analyst at Africa Analysis.

"Data applications are going to become the next big driver in the mobile market.

"We will witness growth not just in human to human communications, but also human to machine and machine to machine - such as when a vending machine is automated to call head office when it has run out of stock."

He says Africa as a whole is a burgeoning digital mobile market, with the number of subscribers across the continent set to almost treble by 2010.

Wills expects there to be over 150 million subscribers across the continent by 2010, 99% of which will likely be prepaid, compared to the European Union, where between 60% and 80% of subscribers are prepaid.

He calculates that African operators will see their revenues increase from around $14 billion this year to around $31 billion by 2010.

"The largest growth markets will be SA, Nigeria and Egypt. These three nations will have about 41% of Africa`s total mobile market between them, which amounts to around 62 million of a total 152 million subscribers," he says.

"Despite this predicted growth, there probably won`t be too many new licences awarded. We can expect to see licences granted soon in Sudan, Sierra Leone, Namibia, Ethiopia and Rwanda, but not much elsewhere, as we have pretty much reached the bottom of the trough in terms of new licences."

He says figures show there are 113 major operators in Africa, with a further five regional operators, and that 22% of the continent`s markets are monopolistic, 50% operate in a duopoly and only 28% have fully competitive environments.

Wills says that between 1994 and 2004, African governments have earned in the region of $5.4 billion in licence revenues, but that the big question is what has happened to this money?

"The governments earned this money through licence fees, but it doesn`t seem to have made its way back into the markets, so we have to ask, where has it gone?"

He says there is always room in the South African market for another operator - whether one is talking about the second national operator or a fourth cellular operator - until the market is totally saturated, but that whoever enters the market now will have to change both their approach to the market and their role within it.

"South Africa currently has about 19 million subscribers, and we expect this to grow to around 25 million by 2010, so if a new cellular operator comes to market it will probably have to be a mobile virtual network operator," says Wills.

"This type of operator has some of its own infrastructure, but mostly it piggybacks on another operator`s network. A mobile virtual network operator differentiates itself from the competition by being strongly focused on service and tariffs, in much the same way that the UK`s Virgin Mobile has done."