More spectrum delays, revenue decline and economic stagnation are among the biggest challenges facing mobile network operators (MNOs) in 2017.
Meanwhile, growth in the fibre and Internet of things (IOT) markets and the path towards 5G will provide positive headlines this year, say industry experts.
Analysts predict a booming year for fibre deployments, IOT rollout and more mobile virtual network operators (MVNOs) hitting the local market.
"Last-mile investment (fibre-to-the-x or FTTX) will see the country rapidly catching up to the developed world, allowing for increased provision of quad play across the South African market," according to the digital transformation team at Frost & Sullivan Africa.
"Companies like Telkom, Vumatel, Vox and others will be leaders in this space. Service providers will reap the rewards of increased investment in infrastructure and customer penetration."
George Kalebaila, IDC senior manager for telecoms, media and Internet of things in Africa, agrees FTTX will stand out in rollout and increased adoption in 2017, especially in the consumer segment.
"This adoption, fortunately, won't be at the expense of mobile, as these are expected to co-exist to provide ubiquitous connectivity," adds Kalebaila.
Frost & Sullivan predicts the MVNO sector will continue to develop and progress, off the back of increased participation by MTN and Cell C ? and increased competitiveness will drive growth. 2017 will also see convergence from associated markets like financial services and retailers providing telecoms services via MVNOs.
"We expect 2017 to be a big year for IOT, with the expected rollout of low-power IOT networks that will bring the cost of connectivity down and drive adoption of IOT in SA, especially in utilities, public sector, automotive, agriculture and manufacturing sectors," says Kalebaila.
"Video-on-demand and IPTV services will see a significant boost in demand this year. With increased FTTH, consumption of content is set to increase across the market. Competitors in the space will differentiate themselves according to their content and service delivery model. We can expect more trial partnerships between players, according to content and delivery models," Frost & Sullivan adds.
Spectrum stalemate
However, the year will present a number of difficulties for telecoms operators, and Kalebaila says spectrum will continue to dominate the discussion, especially as operators seek to transition to data-centric business models.
"We expect a compromise solution to be found to enable allocation of the spectrum in 2017 and faster rollout of 4G networks. Pressure on government will mount, especially from consumers and telcos to stabilise the regulatory environment to unlock investment in 4G networks to provide cost-effective data services," he notes.
IDC expects 4G spectrum to be allocated in the later part of 2017.
Last September, the ministry of telecommunications and postal services obtained an interdict to halt the Independent Communications Authority of SA's (ICASA's) progress on a planned spectrum auction scheduled for May this year.
"I would love to say that I think this issue would be finalised and that the operators would finally gain access to the much-need spectrum. However, the more likely scenario is that the lack of clarity in the regulatory environment will see the allocation being delayed at least until the last quarter of 2017," points out Richard Hurst, director of enterprise research at Africa Analysis.
Policy problems
Hurst believes 2017 could bring "a more middle-ground approach being adopted by all parties concerned" when it comes to a controversial ICT White Paper published by government last year.
Mobile operators and analysts raised concerns about the White Paper and its radical changes to spectrum allocation by calling for an "open access regime" through the deployment of a wireless open access network (WOAN). The suggested WOAN will be "a public-private sector-owned and -managed consortium", but operators and analysts criticised the lack of clarity on how it will actually work.
"We expect progressive and less contentious parts of the White Paper to garner support and possibly be implemented, while more radical parts are further discussed and refined. Progress is expected to be slow; however, 2017 might see major breakthrough in terms of stabilising the regulatory environment," according to Kalebaila.
Telecoms industry expert Spiwe Chireka is less positive about the potential implementation of the policy document, saying that "without resolving the spectrum issue and the much-needed strengthening of ICASA as the 'police' of the White Paper" there is likely to be little progress.
"The actual implementation is likely to be delayed as the country faces a Cabinet re-shuffle and strong opposition from other political parties. In the end, the legislation derived from the adapted policy will be very different from original intentions," Hurst believes.
Tough times ahead
Kalebaila says stagnation in the South African economy and global factors will continue to weigh heavily on telcos in 2017.
"Decline in voice revenue will accelerate and operators will continue to struggle to plug the gap from data and other services. OTTs [over-the-top services] will continue to erode value from traditional services such as voice and SMS."
Hurst agrees that sluggish economic growth will mean operators will need to be creative to try and squeeze additional revenue from businesses and consumers already under pressure.
"Handling the pressure on profitability in light of growing demand on investments into infrastructure and new services (mainly digital services) and increasing price pressure on current profit pools of data and voice created a need for telcos to start focusing beyond voice and data and onto digital," says Chireka.
Kalebaila adds that cost containment and efficiencies will remain a challenge.
"Digital transformation will continue to impact telcos in both the way they serve customers but also how they respond to shifting and changing business models to remain profitable and competitive."
Operator vs operator
"Operators are likely to battle each other for subscribers and market share. While some have secure positions in their respective markets, the arrival of new services may give the smaller operators an opportunity to quickly win new subscribers from opposition networks," says Hurst.
Kalebaila says key battles will be around data bundling strategies and pricing.
"We will see more transparent and flexible pricing as providers seek to respond to changing consumer usage patterns."
Frost & Sullivan believes increased customer fightback, and campaigns such as #datamustfall, will actively apply pressure on MNOs around their engagement of customers and pricing of services ? "requiring greater input into justification of their pricing standards and associated services".
"Competition around fixed broadband will intensify, especially in the enterprise segment, as adoption of cloud services increase. Although the consumer segment will generate most of the headlines in terms of FTTX and PR value, the key segment in terms of value will remain the enterprise segment, which will drive further convergence of telco and IT. We will see further consolidation in the fixed broadband environment but some smaller providers may survive the onslaught from major providers," adds Kalebaila.
4G and 5G
Kalebaila says 4G LTE will be a major focus for telecoms operators this year, while vendors will start pushing 5G onto the executive agenda for telcos.
"Most of the discussions will centre on how telcos can ensure smooth transition from 4G to 5G. We may start seeing some pre-5G feature pilot implementations, but mainly for PR value."
"South Africa and the wider region are heading towards adopting 4G/5G, but it is limited to metro areas, catering to markets that can afford the service," according to the Frost & Sullivan team.
"That said, the market is some way away from wide adoption of the technology beyond metropolitan areas, diminishing justification for the requisite investment to support the technology. Many parts of the region still make significant use of 2G/3G and this may be expected to remain for some time," they add.
"Operators in SA are going to 'sweat' their 4G investments, and as a result, we are still about two years from any notable moves towards 5G. 4G will be the buzz and likely take up the bulk of incremental capital investment this year, if only to meet the increasing demand for high-speed and quality connectivity as data and digital service adoption grows," concludes Chireka.
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