Southern giant

South Africa is by far the most significant telecoms market on the continent from the perspective of its domestic market as well as with regards the influence being exercised by at least two of the country’s three operators across Africa. With a penetration rate exceeding 77% at the start of the year, competitive jostling in the domestic market now stands at a new level of intensity.

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By  Administrator Published  July 3, 2007

It is no surprise that a recent report compiled by market research company The Mobile World included South Africa's two largest mobile operators - Vodacom and MTN - within its top five network operators across the Middle East and Africa in terms of subscriber numbers at the end of 2006.

South Africa's Vodacom topped the chart with 23.9 million subscribers at the end of 2006 having altered its subscriber counting methodology. STC's Al Jawal was ranked second, though its growth rate appears to be slowing as the telco's subscriber base grew by 374,000 during the quarter. This was nearly 1 million fewer than the growth a year earlier, bringing its subscriber base to 13.4 million at the end of 2006.

Iran's TCI climbed to third place, overtaking MTN South Africa, with 13.39 million subscribers at the end of December 2006.

MTN's South African operation boasted 12.4 million mobile subscribers at the end of 2006 followed by its operation in Nigeria, which counted 12.28 million users. Rival Nigerian operator Globacom now ranks sixth largest mobile operator in the region, up from tenth at the end of 2005, and counted 10.75 million subscribers at the end of 2006.

Combined, the region's top 10 operators by subscriber number counted 121 million users, representing just under 44% of the region's total subscriber base at the time.

Cell C

South Africa's smallest mobile operator Cell C has been the centre of mounting speculation regarding the long terms participation of its current shareholders in the company. In April rumours swelled that Oger Telecom, the majority shareholder in Cell C, was potentially looking to exit the operation, which is yet to turn a profit since launch in November 2001.

"No final decision has been made in relation to how to handle all the shareholder interests in acquiring a stake in Cell C," Oger Telecom CEO Paul Doany told CommsMEA.

"Shareholders will need to make a decision about this and continue to support the operator while expressions of interest are considered," he added. Cell C shareholders consist of Oger Telecom, with a 75% indirect stake, and the remaining stake being held by local empowerment group Cellsaf and South African securities company Lanun Securities.

Shareholders are expected to reach a decision regarding their longer-term plans for Cell C within the coming year or so, and have already been instrumental in effecting change on an operational level at Cell C in order to improve the company's financial performance.

In May 2006, Cell C replaced long-term CEO Talaat Laham with Jeffrey Hedberg, a former CEO and chairman of Deutsche Telekom USA, and at the time Oger Telecom suggested the change in management could also see a change in strategy, with the South African operation becoming a springboard to other investment opportunities in Africa.

So while the longer-term future of Oger Telecom's presence in Cell C is fluid at this time, Doany said that for the meantime at least, Cell C remains an important asset for Oger Telecom, on a continent that has a lot of expansion opportunities. He believes Cell C operates in one of the most important countries in Africa, if not the most important one, with respect to sourcing of resources. "So in that sense Cell C is a strategic asset and there is lots of opportunity including retaining Cell C within our group and using it as a springboard for alliances with other companies and there are discussions along those lines as well. So all options remain open at this point," Doany stated.

Emphasising the acquisition spotlight being shone on the operator, Orascom Telecom chairman Naguib Sawiris recently ruled out his company bidding to buy Cell C because he considered the South African operator to be too small. Cell C counts more than 2 million subscribers on its network in a market of 35 million users.

"We are not interested, not as a third player," Sawiris is quoted as saying. "When you miss your chance to become really dominant, it's very hard to come back."

Sawiris said he would be more interested if Vodacom or MTN were for sale, though he would not be interested in all their footprint but only in large, populated markets.

He also said he was in discussions with unidentified partners about setting up a pan-African operator to which Orascom could contribute its Zimbabwe assets.

"There are discussions now to create a pan-African player to which we can contribute our assets," Sawiris is quoted as saying.

Vodacom

The growth of South African market leader Vodacom has continued to surge by more than 20% in all key areas of business, an important indicator of how well the South African economy is performing, chief executive officer Alan Knott-Craig said when announcing the Group's annual financial results for the year ended March 31 2007.

"Total customers increased 28.2% to 30.2 million and profit from operations by 22.5% to R10.9 billion (US$1.54 billion). It is remarkable that we are still managing to achieve this growth after 13 years of operation; a rare achievement in the world of cellular networks," Knott-Craig said.

In his view, black economic empowerment (BEE) has been one of the strongest drivers of growth in the South African market. "New consumers are constantly entering the market, mostly as a result of BEE. It has been an extremely effective way of kick-starting our economy and normalising society," he said.

Commenting on the Group's pending BEE deal, Knott-Craig said a large number of applications had been received for the BEE shareholding valued at R7.5 billion. "With more than 80% of our employees from previously disadvantaged groups, this deal will also enable our staff and BEE partners to share in the success of the business."

Vodacom's gross connections in South Africa increased to 10.9 million, boosting the estimated national mobile penetration by 13 points to 84%. "We maintained our market share of 58% in a very competitive market and were not materially affected by number portability introduced last year," Knott-Craig said.

Higher growth rates were achieved in the Group's activities in younger markets outside South Africa, where Tanzania is the biggest operation with 3.2 million customers, an increase of 55.3%.

"With cellphone penetration at fairly low levels of between 9 % and 16%, these African operations still offer massive growth opportunities. The Democratic Republic of Congo increased by 67.5% to 2.6 million customers and Mozambique recorded 101.6% growth to reach just shy of a million customers. Lesotho has 279 000 customers, an increase of 35.4%."

Data revenues at the Vodacom Group increased by 64% during the year to R3.3 billion.

"By next year we can expect non-voice products to exceed 10% of the Group's revenue for the first time. In the South African market especially we will continue to focus on our non-voice offerings to maintain growth. Thanks mainly to the new SMS generation of nimble-fingered kids, our network transmitted 4.5 billion SMSs, compared with 3.5 billion in 2006," Knott-Craig said.

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