The South African telecommunications is currently moving towards greater liberalisation – but it is still unclear whether this will result in more competition or fizzle out as a damp squib.
BMI-TechKnowledge has announced the publication of its latest report, "SA Telecommunications Services Changing Landscape", which focuses on the changing telecoms regulatory environment in South Africa and the resulting changes in the market.
According to Fezekile Mashinini, co-author of the report, the telecoms market can be said to be in "the second wave of sector reform", a stage that is normally characterised by a more vigorous move towards greater sector liberalisation.
However, the question that may be asked is whether this will induce a radical shift in competition levels, or a somewhat muted reaction from the industry, which some players have called a "damp squib".
While the market outlook for telecommunications services is looking positive and competitive – for instance like broadband services have enjoyed significant price cuts over the past year and a half, coupled with new services from Neotel and Telkom – the danger remains that heightened takeover activity could be seen in the near term as bigger players attempt to consolidate their market positions.
Icasa has been busy with licence conversions and issuing of draft regulations on issues such as market definitions and pricing, the report states.
The biggest recent development was the Pretoria High Court's ruling that former Value-Added Network Service providers (VANS) must be allowed to self-provide. While the industry applauded the ruling as a majot step towards liberalisation, it remains to be seen if and how the market will open up in light of this development.
It is significant that not all VANS will be able to afford their own networks, with a likely scenario being a combination of own network and a leasing model.
Although the self provision ruling has a potential of increasing competition in the market, BMI-T believes that – due to the already heightened levels of competition in the market and the high cost of network roll-out – very limited new rollout will be seen from the new I-ECNS licensees.
Global experience has shown that infrastructure-based competition is most effective in terms of bringing down rices in telecoms markets, but Icasa will also need to speed up services-based competition by means of its facilities leasing regulations coupled with favourable wholesale pricing, according to the market researcher.
The overall market outlook is positive, says the report, with all the different segments forecast to exude growth over the forecast period.
Combined fixed and mobile revenues for out of bundle minutes are forecast to grow at a CAGR of 4,5% with the individual fixed and mobile segments growing at -1,9% and 7,2% respectively.
Expectations are high that with the pending commissioning of the Seacom undersea cable in June 2009, international bandwidth prices will be reduced thereby allowing service providers to either reduce their retail prices or offer significantly more bandwidth at the existing prices.