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Zain’s local cell interest worth watching

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The announcement by Kuwait’s Zain Group that it is interested in a fourth mobile licence in South Africa raises some interesting questions, says research firm Frost & Sullivan.

The South African mobile market is nearing saturation on the voice side, it adds, with market leaders like Vodacom claiming market penetration rates of 90% and it will be fascinating to see what strategies Zain intends to put in place to compete in this environment.
“It took Cell C close to seven years to turn a profit and Cell C entered the market before it was anywhere near saturation and the economy was growing more strongly than it is now,” says Frost & Sullivan analyst Spiwe Chireka. “Similarly, Virgin Mobile, after two years in the market, is yet to hit the 350 000 subscribers mark.”
Chireka points out the South African mobile market will be challenging to enter, especially as the top three operators are aggressively defending their market shares and vying for a piece of the largely untapped mobile services pie. This environment is in stark contrast to other mobile markets such as Iran, where MTN entered the market in 2006 with 154 000 subscribers and managed to grow this to six million in 2007.
Those types of growth rates are no longer likely in the South African mobile voice market. There are, however, significant opportunities in markets in Africa north of South Africa, and perhaps Zain is seeing the country as an entry point.
Chireka suggests that Zain may need to introduce a disruptive technology or an aggressive data or VAS offering to grab a significant share of the local market.
“The only area that still has high growth potential in South Africa is the mobile data space,” Chireka says. “But with the likes of Telkom making inroads into that sector, competition is likely to be cut-throat.”