Lesley Stones
5 January 2009
Johannesburg — THE Competition Tribunal will begin hearings tomorrow to decide whether MTN should be allowed to take over cellular retail distributor iTalk.
The event, just six days into the new year, is the first in what will be a year of aggressive growth for the main telecoms operators - MTN, Vodacom, Zain and Telkom.
Each is poised for dramatic change this year, planning fresh acquisitions and an expanded range of services to ensure they remain strong enough to be the acquisitors, not the acquired.
It is impossible to predict which will be the most active, with each determined to achieve geographic expansion and a morphing of their operations, since their strong growth in SA cannot be sustained indefinitely.
Zain is promising major pan-African expansion with a short-term goal of launching in at least three more countries this year. Since few countries are issuing fresh licences, that will mostly come by acquiring smaller players.
Zain Africa's CEO, Chris Gabriel, predicts that consolidation among Africa's 100-plus cellular networks will be so intense that only three to five will survive. Smaller players will come under pressure to be absorbed by those behemoths if they offer telecoms or technology-related services.
Vox Telecom in particular made itself a takeover target through its disastrous association with the Dealstream brokers, sending its shares plunging from 225c in September to 84c. Although Vox is not courting offers, shareholders may be tempted by a bid, especially if their faith in the Vox leadership has been pummelled.
MTN has several balls in play. As well as bidding for iTalk, it faces a Competition Tribunal hearing into its R1,4bn acquisition of Verizon. MTN would become SA's third-largest internet service provider for corporate clients if it absorbed Verizon's local operations, which supply voice and data services in SA, Zambia, Namibia, Kenya and Botswana. MTN would fold those into its own internet arm, Network Solutions, adding 140 staff to the contingent of 90.
Rival companies oppose the deal, fearing MTN would extend its strengths as a cellular operator into data networking too -- which is precisely what MTN aims to do.
Since Vodacom and Telkom are following the same strategy, the scene is set for all three to become serious players in the data market.
Towards the end of last year, Vodacom completed its deal to absorb Gateway Telecommunications SA, making it a supplier of voice, data and internet services in 40 countries at a single $700m stroke.
"Vodacom has sustained double-digit growth for more than a decade. As mobile phone penetration levels increase in SA, we are actively repositioning Vodacom as a total communications provider with new avenues for growth," says CEO Pieter Uys.
Gateway supplies network infrastructure to African and international telecoms companies, and Uys expects the deal to make Vodacom the partner of choice for multinational businesses and international telecoms players connecting into Africa.
Telkom has also swung into action by spending $63m to acquire MWeb Africa and 75% of MWeb Namibia to help it become a pan-African voice and data supplier. Those are modest moves , but once Telkom pockets about R10bn from selling out of Vodacom, more dramatic action is expected. One possible move is to expand its deal with MWeb to buy that company's local internet operations.
MWeb scrapped a plan to auction that unit when financial turbulence battered markets, but striking a quiet deal with Telkom would be eminently sensible.
Africa is frequently cited as the most attractive market for telecoms growth given its low penetration rate for telecoms services. Yet analysts are predicting similar expansion and absorption fireworks around the world.
Tomi Ahonen Consulting predicts that 3-billion people will be using cellphone services this year, or 45% of the planet. As many people have more than one handset, Ahonen says the operators will serve 3,95-billion accounts. Of those, 1,7-billion will use media content including mobile internet access and multimedia messaging.
The mobile telecoms industry was worth $1-trillion last year, with a quarter of the traffic revenue coming from data services. Every operator expects that to climb this year, fuelling their efforts to conquer the data markets as revenue from voice calls wanes.
Strand Consult believes this year will be a moment of truth for many, when the most important skills will be stringent cost control, a high level of focus and the ability to reinvent themselves.
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