Converged Services in Sub-Saharan Africa: Are we past the hype?

Converged Services in Sub-Saharan Africa

Are we past the hype?

Lehlohonolo Mokenela, Research Analyst

ICT

11 April 2013

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Functional Expertise

Four years of accounting experience in the telecoms industry at Vodacom Lesotho . This research and

development expertise, which include more than 20 international conference presentations in the

telecommunications industry.

Industry Expertise

Experience in the analysis of Cloud Computing Services, Telecommunications Wholesale market.

Particular expertise in:

- Cloud Computing Services and Models

- IP Wholesale, Data Wholesale and Voice Wholesale markets and strategies employed in the

wholesale market

- Network Convergence technologies and strategies in Sub Saharan Africa

- Customer loyalty programs in the Telecommunications market in Europe and South Africa

What I bring to the Team

• Forecasting experience and financial performance analysis

• Solid analytical and strategic assessment skills

• Expertise on infrastructure deployment strategies and key financial drivers and metrics

Career Highlights

Financial Reporting for one of the largest Telecommunications companies in Africa.

Prior to joining Frost & Sullivan, Lehlohonolo also worked in procurement liaising with the operations

department on their CAPEX needs and working closely with suppliers of equipment.

Education

MSc in Economics from Università della Svizzera Italiana, Lugano, Switzerland

BCom Hon (Financial Analysis) and MComm (Business Management) from University of Stellenbosch,

Cape Town, South Africa

Post-graduate diploma in Finance, Banking and Investment Management from Kwazulu-Natal

University, Pietermaritzburg

Lehlohonolo Mokenela

Lehlohonolo MokenelaResearch Analyst

Frost & Sullivan Africa

Cape Town

South Africa

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Focus Points

1. Market Overview

2. Key market Drivers and Restraints

3. Regional Market Assessment

4. Competitive Landscape

5. Conclusions and Strategic Recommendations

4

`

Increasing competition is driving the move towards

convergence as capacity continues to improve

Increasing bandwidth due

to undersea cables

Intensifying competition in

voice and data markets

Operators are facing

declining ARPUs

Convergence becoming a

key differentiator

Emerging Trends (2010+)

Limited Coverage

Bulk of telecoms provided

via wireless infrastructure

Limited international

capacity & connectivity

Past Trends (-2010)

Restrictive regulation

Source: Frost & Sullivan.

5

The path towards convergence requires the convergence

of networks and devices and the bundling of services

Service

Convergence

Services bundled

under dual, triple

and quadruple play

offerings.

Network

Convergence

The adoption of

next-generation

networks is leading

to IP multimedia

systems.

Device

Convergence

Any terminal can

receive voice,

video, or data

PDA, Laptop, Tablet, TV, Mobile Phone

FMC


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Key Market Drivers and Restraints

Increasing

Employee

MobilityMore Affordable

Broadband

Services

Faster Internet

Speeds

Regulatory

Inefficiencies

Low

Disposable

Income

Limited

Infrastructural

Access


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Sub-Saharan Converged Services AdoptionA

do

pti

on

Ra

te

Low

HighIntroduction Growth Maturity Decline

Pay TV

DR

Data

Voice

DTT, IPTV,VoD,

OTT

Dual Play

Triple Play

Pure Play

Time

Converged Services Market: Product

Lifecycle, Sub Saharan Africa, 2012


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Market Assessment – Kenya

2011

2017


Market

Development

• The new licensing regime

by the Communication

Commission of Kenya

(CCK) in 2008.

• Investment in fibre to the

curb by telecom operators

and ISPs in Kenya has laid

the platform to provide IPTV

and VoIP services.

Converged Services Market: Competitive

Landscape, Kenya, 2012

Competitors 12

Tier I Telecom operators and ISPs

Tier II Cable TV providers

Degree of

RivalryHigh

Barrier to

Entry Medium

1%

13%

5%

0 0.05 0.1 0.15

Broadband Pentration

Smartphone Penetration

Pay TV Penetration

Penetration Rate (%)

Market Penetration Rate, Kenya, 2012

9

Competitive Landscape – Kenya

Converged Services Market: Competitor

Benchmarking, Kenya, 2012

Internet Dual Play Triple Play FMC

Wananchi

Telkom Kenya

Jamii

Safaricom

Strong

Weak/ None

• Along with Wananchi and Jamii, Telkom Kenya has also launched a FTTH

service, which it is expected to leverage in order to provide IPTV services and

bundle it with data and VoIP


10

Market Assessment – South Africa

2011

Competitors 17

Tier I Telecom Operators and ISPs


Degree of

RivalryMedium

Barrier to

Entry High

2017



Landscape, South Africa, 2012

12%

33%

36%

0 0.1 0.2 0.3 0.4



Pay TV Penetration


Market Penetration Rate, South Africa, 2012

Market

Development

• South Africa has the highest

number of broadband

subscribers, a precursor to

successful triple play

services.

• With access to four major

undersea cables, South

Africa has in excess of

80Tbps of international

capacity.

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Vodacom

Telkom SA

MTN

Neotel

Competitive Landscape – South Africa


Benchmarking, South Africa, 2012

Strong

Weak/ None

• Operators have largely focused on providing converged services for the SME

segment, with little traction on dual and triple play services for the consumer

segment

• Telecom operators Vodacom and MTN are expected to pilot IPTV services

over the next two years as they prepare to offer triple play solutions


12

Market Assessment – Nigeria

2011

2017

2017



Landscape, Nigeria, 2012

1%

16%

8%

0 0.05 0.1 0.15 0.2



Pay TV Penetration


Market Penetration Rate, Nigeria, 2012

Competitors 13

Tier I Telecom Operators and ISPs


Degree of

RivalryMedium

Barrier to

Entry Medium

Market

Development

• Nigeria overtook South

Africa as the country with

the highest number of

mobile subscribers (93

million).

• With a record 75 million

Internet

users, Nigeria, surprisingly,

has very low broadband

penetration rates (about

0.6%).

13

Competitive Landscape – Nigeria


Benchmarking, Nigeria, 2012


Globacom

MTN Nigeria

ICT Convergence

Strong

Weak/ None

• The convergence market in Nigeria is still fairly limited, due to regulatory and

socio-economic factors. However, the market is expected to grow, due to push

for digitalisation of broadcasting services

• VoIP services play are expected to play a key role in Nigeria in the move

towards converged services as a significant portion of the country’s

international traffic is through VoIP


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Conclusions

Service

BundlingIntegration/FMC

Unified

CommunicationsVerticalisation

One provider

One service package

One invoice

One number

One Voicemail

One application set

Seamless

communication

One terminal

device

Va

lue

fo

r c

us

tom

ers

While Kenya has moved to a higher convergence level with triple play, South Africa is

trending towards FMC. However, convergence in Nigeria is still at a nascent stage.

Progressing convergence

Converged Services Market: Convergence

Roadmap, Sub Saharan Africa, 2012


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Key Market Opportunities – Enterprises and Consumers

2011

Low Market

Potential

Converged Services: Consumer

Adoption and Market Potential,

2012

Cost of bandwidth

will influence the

ability to bundle

services

Employee mobility

will be a key driver

for the adoption of

services


VoIPIPTV

Triple Play

BroadbandDual Play

High Market

Potential

Low

AdoptionHigh

Adoption

Low Market

Potential

Internet Connectivity

VoIP

Managed Services

FMC

High Market

Potential

High

Adoption

Converged Services: Enterprise

Adoption and Market Potential,

2012

Low

Adoption

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Strategic Recommendations

Infrastructure• Quality of service is a major concern for customers particularly in the

enterprise segment

• Operators can gradually migrate their core networks to IP/MPLS platforms

Services

• Affordable broadband services will be an important differentiator

• IPTV should play a central role in the converged service offering

• Operators should develop FMC solutions for the enterprise segment

Devices

• By providing affordable smartphones, operators in Africa will be able to boost the uptake of converged services

• Partnerships with device manufacturers and software may be required in the development of FMC solutions


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For Additional Information

Christie Cronje

Corporate Communications

Africa

(+27) 21 680-3566

[email protected]

Lehlohonolo Mokenela

Research Analyst

ICT

(+27) 21 680-3567

[email protected]

Mani James

Regional Director

Growth Partnership Services

+27 21 680-3208

[email protected]

Merwin Grootboom

Account Manager

Growth Partnership Services

+27 21 680-3294

[email protected]