Enterprise Ireland

Africa's leading market analysts in IT, telecoms and banking

By Tertia Smit

SA Telecoms Industry Briefing

29th March 2006

OverviewOverview

Who is BMI-T

SA Telecoms Industry

Fixed Line Market

Fixed/Mobile market

Mobile Market

Broadband

Opportunities…..

Who is BMI-T? … A Trusted SourceWho is BMI-T? … A Trusted Source

Africa’s leading provider of market intelligence and research-based advisory services

More than 15 years of experience, focusing exclusively on the

– IT industry– Telecoms industry– Banking and financial services industry

Pan- African representation– Successfully completed in-country research in over 40 African countries

BMI-T/ IDC PartnershipWorld-class Methodologies and InsightBMI-T/ IDC PartnershipWorld-class Methodologies and Insight

BMI-T is the African representative of IDC, the world's leading market intelligence and advisory firm in ICT

Our research is fully compliant with IDC’s international methodology and definitions

BMI-T forms part of IDC’s EMEA region- Enables BMI-T to conduct global projects - Responsible for providing IDC’s Africa research More than 775

About IDC- Research offices in more than 50 countries- More than 775 analysts in a global information network- More than 40 years experience analysing ICT markets

Telecoms Telecoms CustomersCustomersTelecoms Telecoms CustomersCustomers

TechnologyTechnology AdoptionAdoption

TechnologyTechnology AdoptionAdoptionConvergenceConvergenceConvergenceConvergence

Mobile Data Mobile Data Solutions and Solutions and ApplicationsApplications

Mobile Data Mobile Data Solutions and Solutions and ApplicationsApplications

Telecoms in Telecoms in AfricaAfrica

Telecoms in Telecoms in AfricaAfrica

Voice, Data and Voice, Data and Value-Added Value-Added

ServicesServices

Voice, Data and Voice, Data and Value-Added Value-Added

ServicesServices

RegulatoryRegulatoryRegulatoryRegulatory

Telecoms Research Areas

WirelessWireless

Telecommunications - Core ResearchTelecommunications - Core Research

BMI-T’s Custom Research BMI-T’s Custom Research

Market segmentation

Customer acquisitionand retention research

Competitor analysisand positioning studies

Channel anddistribution analysis

Branding and positioning

Concept optimisation

Market demandand pricing strategies

Technology/product/serviceadoption and substitution analysis

Customer satisfactionand loyalty surveys

Custom Research

Telecommunications – Custom WorkTelecommunications – Custom Work

Major projects:

Investment Motivation Support for Nigerian Fixed Wireless Operator

Major Multi-country Fibre Network

Nigerian Operator Due Diligence

SNO Due Diligence

Mobile Data Solutions

MVNO market entry assessment

Assessment of a Telecoms platform for the SA weather service

….and others

Enterprise Ireland

Africa's leading market analysts in IT, telecoms and banking

SA Telecoms Industry Overview

SA demographicsSA demographics

Population of about 47 million (30 million households)

SA GDP 2005, R1,340,billion (€ 174 billion)

Telecoms industry in 2005, R85,000 billion (€ 11.1 billion)

Telecoms about 6.34% of GDP spend

4.6 million fixed line users (about 2 million are business lines)

31 million cell phone subscriptions (about 25 million unique users)- penetration over 50%

1.5 million internet subscribers, 4 million users

Fixed vs. mobile growthFixed vs. mobile growth

SA Operators and Service ProvidersSA Operators and Service Providers

Service Provider Type Name Subscriber

National fixed line network operator

Telkom SA Ltd 4.6 m

Second network operatorLicensed in Nov 2005, but not operational yet

0

Mobile operator 1 Vodacom 17.3 m

Mobile operator 2 MTN 10.4 m

Mobile operator 3 Cell C (Virgin coming in a sand MVNO) 3.3 m

Fixed Mobile data carriers Sentech and Wireless Business solutions 20,000

6 Under serviced Licensees Various 20,000

5 Tier 1 ISPsVerizon, Internet Solutions, SAIX, MTN Network Solutions, DataPro

200 Tier 2 ISPS

65 Various WASPS Content providers, aggregators,

ARPUs can be sustained to some extentARPUs can be sustained to some extent

2004Rm

2009Rm

CAGR 2005-2009

Total mobile cellular services (all players)

51,557 76,842 8%

Fixed line and fixed wireless services

28,193 29,384 1%

VANS and other higher growth services

5,611 10,902 16%

Total telecoms services (Rm)

84,936 117,128 7%

Euros (million) 11.1 15.2

Note: Scenario based, using traditional service categories

Factors that could sustain ARPU in future:

Pent-up demand for bandwidth in general

– Access/ lines– VPNs

Price elasticity of demand for certain types of voice services

Triple play / TV Massive growth in

broadband services and bandwidth …

Telecommunication services revenue forecasts, Rbn, 2004-2009Telecommunication services revenue forecasts, Rbn, 2004-2009

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2004 2005 2006 2007 2008 2009

ISPs, VANs and other services

Fixed line and fixed wirelessservices revenues

Total mobile cellular services(all players)

Note: Scenario based, “most likely accelerated competition scenario”

Still some growth left in the market even under

“most likely accelerated

competition scenario”

An even more accelerated scenario could claim some

of the revenue growth … but …

Enterprise Ireland

Mobile market outlook

Mobile RevenuesMobile Revenues2005 2006 2007 2008 2009

Mobile voice

52,517

57,367

60,917

62,983

65,120

Mobile data cellular operators

3,475

4,400

5,400

6,500

7,824

Reseller mark-up (independent players)

1,518

1,606

1,658

1,668

1,678

Subtotal mobile cellular operators

55,992

61,767

66,317

69,483

72,944

Value-added services WASP/CSP (other players)

1,170

1,463

1,755

2,018

2,220

Total mobile cellular services (all players)

59,962

66,009

70,923

74,420

78,155

Endusers

Mobile devices

SPs, Billing

& CRM

Network operators

Gatewayproviders

Content aggregators& wasps

Infrastructure & solution providers

Content providers

Voice vs. Data Revenue Growth ( RM)Voice vs. Data Revenue Growth ( RM)

Source: Vodacom, MTN, Cell C, BMI-T forecast

52,517

57,36760,917

62,983 65,120

5,4004,4003,4756,500 7,824

6.2%

7.1%

8.1%

9.4%

10.7%

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2005 2006 2007 2008 2009

0%

2%

4%

6%

8%

10%

12%

Mobile voice Mobile data cellular operators % data of revenue

Mobile Revenues (including handsets)-RmMobile Revenues (including handsets)-Rm

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Value-added services WASP/CSP (other players)

Reseller mark-up (independent players)

Mobile data cellular operators

Mobile voice

Note: “Accelerated competition scenario”Upside potential exists

Assumes some limited regulatory impact on interconnection pricing

Service and Solution Providers for Mobile Data and Banking ApplicationsService and Solution Providers for Mobile Data and Banking Applications

Endusers

Mobile devices

SPs, Billing

& CRM

Network operators

Gatewayproviders

Content aggregators& wasps

Infrastructure & solution providers

Content providers

Pre-paid vs. post-paid per operatorPre-paid vs. post-paid per operator

5,102

6,950

459556

1,168

1,3911,420

1,872

1,702 1,932

6,377

10,941

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Cell C Mar '04 Cell C Mar '05 MTN Mar '04 MTN Mar '05 Vodacom Mar'04

Vodacom Mar'05

Note: Lighter shading - contract subscribers

Postpaid -15% Prepaid - 85%

Cell phone application awareness and adoptionCell phone application awareness and adoption

0%

20%

40%

60%

80%

100%

Send SMS

Take PhotosU

se MM

SSM

S voting, competition

Dow

nload a new ringtone

Dow

nload something else

Browse the internet

Listen to music

Cellphone banking

Access your email

Info subscriptions.Video C

allsG

ambling

Used at some stage Maybe in the future Never

Potential growth opportunity

Enterprise Ireland

Broadband South Africa

“Broadband” access technologies in SA“Broadband” access technologies in SA

Fixed Line

Digital subscriber line (DSL)- Telkom

3G Wireless access

3G TD-CDMA - Sentech & WBS

3G WCDMA - MTN & Vodacom

HSPDA- Vodacom and MTN

Niche (in SA) & emerging technologies

CDMA 2000 EV-DO- USALsPower line communication (PLC)WiFi - UniNet Pre-WiMax – City of

Johannesburg

BMI-T :SA Wireless Access and Broadband Market Report, July 2005

Broadband household penetration (end of 2004)Broadband household penetration (end of 2004)

55.0

44.0

32.0

28.0

21.0

17.0

14.0

11.0

6.0

3.2

2.5

1.7

1.0

0.8

0.4

0.2

(0.68)

0.20

68.0

0 10 20 30 40 50 60 70 80

Korea

Hong Kong

Canada

Japan

USA

France

UK

Germany

Estonia

Slovakia

Hungary

Lithuania

Poland*

Czech Republic

Romania

Slovenia

Croatia

SA LSM 7-10

SA Total

Household penetration (%)

Based on all households

Based on households with

high living standards

India: 0.12%

Brazil:2%

Source: IDC and BMI-T, 2005

Worldwide home broadband services average revenue per subscriber by region, 2005–2009 Worldwide home broadband services average revenue per subscriber by region, 2005–2009

SA

? SA 300

100South Africa

North African countries

North African countries

-50% in 2 years-50% in 2 years

Source: IDC and BMI-T, 2005

Entry level (incl ISP fee)

We are now here

Worldwide , 2004.Total = 145.7 millionSource: IDC 2005

Worldwide , 2004.Total = 145.7 millionSource: IDC 2005

Broadband services by technology

S A: 2004Total = 41, 614 3G WCDMA

1,000 , 2%

TD-CDMA, 4,614 , 11%

ADSL, 36,000 ,

87%

S A: 2009Total = 870,000

UMTS TDD and TD-CDMA

100,000 11%

CDMA2000 1x and 1xEV-DV 100,000

11%

WiMAX Active (Scenario A)

50,000 6%

3G WCDMA/HSDPA

260,000 30%

ADSL, 360,000

42%

Could be much higher if Telkom

pursues aggressively and

LLU

SA PC broadband access trendsSA PC broadband access trends

Download speeds will increase dramatically Entry-level service prices will decline by 50% within two years Broadband Internet access using PCs currently 100 000 connections, growing to 870 000 in 2009 ADSL will continue to account for the majority of all broadband connections over the forecast period (and could be accelerated further) Mobility needs will drive 3G broadband connectivity in SA The net result being accelerated broadband penetration, but still well below what could happen in an even more accelerated competition environment where prices come down even faster

Source: BMI-T, Wireless Access and Broadband Market, June 2005

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Music downloads

Purchasing goods online

Game downloads

Video Downloads

Chatlines

Chat forums

VoIP like Skype or QQ

Use a Webcam

or Videocam

Blogging

Gambling

Online gaming

Used at some stage Maybe in the future Never

Adoption by of Internet ApplicationsAdoption by of Internet Applications

Potential growth opportunity

Enterprise Ireland

Opportunities in the Telecoms sector

Opportunities in the fixed line marketOpportunities in the fixed line market

Second Network Operator just been licensed, VSNL, India is a majority shareholder

IP converged network for incumbent operator, Telkom, offering IP TV etc.

Triple play services

VOIP services

Broadband internet services and applications

Opportunities in the mobile marketOpportunities in the mobile market

Virgin going to be an MVNO in SA con CellC’s network

3 G networks with HSPDA just being launched allowing for mobile broadband, and increased download speeds

Mobile banking, payment purchasing

Mobile TV currently being launched by Vodacom

2010 world cup in SA

Other opportunities in the telecoms market market ,cont……Other opportunities in the telecoms market market ,cont……

Solutions for the 2nd economy- previously disadvantaged, poor digitally excluded

TDD CDMA networks will be able to offer voice, therefore handsets, therefore all applications and services that go with it.

VANS can self provide now, so thus opens up the landscape

Municipal networks are starting to proliferate

Government contemplating their own telecoms network

Opportunities into Africa

Good websites for referenceGood websites for reference

Telecoms

BMI-T.co.za

ITWeb.co.za

ICTWorld.com

Cellular.co.za

MyADSL.co.za

Waspa.org.za

Business

Moneyweb.co.za

Fm.co.za

Busrep.co.za

Businessday.co.za