2013-09-20 08:58:43 - New Fixed Networks market report from Business Monitor International: "South Africa Telecommunications Report Q4 2013"
Intense competition in South Africa's mobile market due to increasing market saturation and cuts to the mobile termination rate (MTR) is taking its toll on mobile ARPUs, with available data showing a sharp decline in ARPUs in H113. As there is no end in sight to the ongoing price competition in the basic voice segment, we expect mobile network operators to increase their focus on von-voice services, including mobile data and corporate solutions, in order to sustain revenue growth. The continued delay in the implementation of local loop unbundling (LLU) in the fixed-line sector poses a downside risk to investment and growth fixed voice and data services.
* The mobile market contracted by 0.2% q-o-q in Q113 following net
subscription losses by the two biggest mobile network operators.
* The fixed-line incumbent operator, Telkom SA, reported a 4.9% y-o-y decline in subscriptions, offsetting positive growth recorded by alternative operators.
* Total ADSL subscriptions grew by 5.2% in the year to March 31 2013.
* Market blended ARPU contracted by 6.5% in Q113 on the back of intense price competition in the voice segment.
Full Report Details at
- www.fastmr.com/prod/673262_south_africa_telecommunications_repor ..
South Africa regains first position in this quarter's update to BMI's Risk/Reward Ratings for Sub-Saharan Africa, with an aggregate score of 55.7 compared to the regional average score of 43.2. South Africa remains the region's largest economy and operators boast a healthier subscriber mix than much of the rest of the region, keeping its scores above the regional average. However, its more mature mobile market means that growth prospects are slower than many of its neighbours and we expect operators to diversify their revenue streams in order to sustain revenue growth.
Key Trends & Developments
* Cell C plans to invest ZAR5.7bn in network expansion and upgrade as part of its strategy to challenge the dominance of its bigger rivals. The operator's majority shareholder Oger Telecom is providing ZAR3.5bn, while Nedbank and the Development Bank of South Africa are proving the remaining ZAR2.2bn. Cell C claims that traffic over its network doubled in the 12 months to March, a development likely due to tariffs reductions and promotional offers.
* Neotel plans to launch an LTE network in South Africa in September 2013. Following trials started in November 2012, Neotel said LTE services will initially be launched in the Gauteng area, with 50 base stations on the 1800MHz frequency band. Neotel is an 'anchor tenant' on the SEACOM submarine cable system and has developed more than 15,000km of long distance fibre-optic cable and 8,00km of metro cable, all of which we expect to facilitate its LTE network services. The operator claims its network delivered speeds of 70Mbps during trials on its campus in Midrand.
* In June 2013, Telkom announced its decision to impair the value of its carrying assets by ZAR12bn (US $1.1bn), following a review from the board. Telkom's decision was prompted by the fact that its shares have been trading at a significantly lower price than their net asset value (NAV). Also, as the fixed-line sector continues to decline and the mobile data and broadband segments grow, Telkom's fixed-line network assets will drop in value relative to its broadband network, which is in need of major upgrades.
Moreover, when local loop unbundling finally goes through, increased competition with other fixed-line operators will apply further pressure Telkom's fixed-line market share. After the impairment, the net asset value per share will be around ZAR34, compared to a NAV of ZAR57 in September 2012. However, the impairment charge is non-cash and will have little impact on the company's cashflow (EBITDA).
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