South Africa Telecommunications Report Q3 2012

BMI's Q312 report on South Africa's telecommunications market contains in-depth analysis of market data published by leading South African service providers including Telkom South Africa, Vodacom and MTN. It also includes forecasts for the country's mobile, mobile ARPU, fixed-line and internet markets through to YE16 based on analysis of the country's markets and macroeconomic, and regulatory factors.

Our new forecast for South Africa's mobile market is based on YE11 market data published by the country's two largest mobile operators.

Based on the strong performance for Vodacom and MTN, which account for more than 83% of the South African mobile market, we estimate that South Africa's mobile customer base grew to 64.630mn at the end of 2011, with penetration of 128.8%. Our new five-year growth forecast envisages the number of customers rising to over 82.5mn by the end of 2016. This should result in South Africa having a mobile penetration rate of around 156.5%. We observe that that the introduction of compulsory SIM registration does not preclude the existence of multiple SIM owners in the South African sector.

Noteworthy developments in South Africa's telecoms sector include the suspension of the much-awaited framework for the allocation of spectrum for mobile broadband services. The telecoms regulator, ICASA, took the decision in March 2012 to suspend the process pending the publication of the government's revised broadband policy, which could influence its policies on the use of available spectrum. In many countries, policies on new spectrum allocation are often designed to facilitate the extension of wireless broadband services to rural areas. We expect this to be a key focus in the South African government's policy. However, there is no time frame yet for the publication of the government's policy the revision. BMI is concerned that an extended delay in this process poses a downside risk to the growth outlook for broadband services in the country and the development of commercial LTE services, for which the operators need spectrum and licence to roll out.

There are no changes to our growth expectations for South Africa's fixed-line and internet sectors, although we upgraded our 3G forecast to reflect strong take-up of mobile data services as reported by Vodacom and MTN. Vodacom reported 11.4mn data users on its network as of December 2011, while MTN reported 10.9mn. However, a significant proportion of these subscribers use basic GPRS/EDGE-based data services and are, therefore, not classified as regular internet users. We retain our estimate of 7mn regular internet users in South Africa at the end of 2011 pending the publication of revised internet usage data by the regulator or the ITU.

South Africa remains in first position in BMI's latest set of Risk/Reward Ratings for Sub-Saharan Africa. South Africa's Industry Rewards score remained unchanged and is the highest Industry Rewards scores in the region and scores above the regional average in all the categories surveyed by BMI.