of 72
8/13/2019 South Africa 20174133
1/72
TeleGeography
GlobalComms Database
South Africa
Summary Data
Total wireless subscribers (Sep 2012): 66,558,490
Population penetration: 131.6%
Average penetration in region: 70.8%
Average penetration in GDP per cap decile: 132.8%
Total broadband subscribers (Sep 2012): 1,250,000Household penetration: 9.2%
Average penetration in region: 7.0%
Average penetration in GDP per cap decile: 35.6%
Total PSTN lines (2012): 3,250,000
Household penetration: 23.9%
Average penetration in region: 22.7%
Average penetration in GDP per cap decile: 82.9%
1
8/13/2019 South Africa 20174133
2/72
Country Overview
Key Data
Area (sq km): 1,219,910
Population 2011 (million): 50.6
Households 2011 (million): 13.6
Capital: Pretoria (Cape Town, Bloemfontein)
Language: English, Afrikaans, Zulu, others
Exchange rate annual average (2012): USD 1 = ZAR 8.22
GDP 2011 (USD billion): 408.1
GDP per capita 2011 (USD thousand): 8.1
Notes: Pretoria is the executive and therefore official capital ; Cape Town is the legislative
capital and Bloemfontein is the judicial capital
Sources: BBC, CIA World Factbook, IMF, World Bank
Map
Political Profile
South Africa's democratic all-race elections of April 1994 were won by the African National
Congress (ANC) party, ending a period of white minority rule dating back to the signing of
the Union of South Africa in 1902. However, years of apartheid and conflict have inflicted
deep wounds on the country, and problems such as lawlessness, social disruption and poor
2
8/13/2019 South Africa 20174133
3/72
education will take many years to heal. HIV and AIDS are also major issues, and the country
is believed to have the second-highest number of HIV/AIDS patients in the world. It is
estimated that one in seven of the population is HIV positive, while there are thought to be
1.2 million children who have lost one or both parents to the disease. Free anti-retroviral
drugs are available under a state-funded scheme.
South Africa is a republic with a bicameral parliament and an indirectly elected president
as its head of state. The constitution of 1997 established a parliamentary political system
with three tiers of government: national, provincial and local. Each of the nine provinces
has its own government, separate executive, judiciary and legislature. In 1999 the ANC
won a second term in office, taking close to a two-thirds majority in the 400-seat National
Assembly, and Thabo Mbeki succeeded Nelson Mandela as president adopting a free-market
approach as reflected in the government's 'Growth, Employment and Redistribution (GEAR)'
strategy. In the elections of April 2004 Mr Mbeki was returned for a second five-year term
following another victory for the ANC.
However, Mbeki announced his resignation on 21 September 2008 amid claims – which he
denied – of political interference in a corruption case against the ANC leader, Jacob Zuma,
who took charge of the ANC on 18 December 2007 after defeating incumbent Thabo Mbeki
at the ANC conference in Polokwane. On 25 September 2008, the deputy leader of the ANC,
Kgalema Motlanthe, was sworn in as the new president after winning three-quarters of thevotes cast by MPs in a secret parliamentary ballot. The ANC won a 65.9% majority in the
April 2009 general election and Jacob Zuma was installed as president, just weeks after state
prosecutors f inally threw out the long-running corruption charges against him on the grounds
that there had been political interference; Motlanthe was installed as deputy president. On
18 December 2012 Zuma was re-elected as ANC leader, defeating Motlanthe by a large
majority.
The main challenge to the rule of the ANC comes in the shape of the Democratic Alliance
(DA) party, which received 16.7% of the vote in the 2009 election. Other political parties
represented in parliament are the Congress of the People, a breakaway group from the ANC
which won 7.4% of the vote in 2009, and the Inkatha Freedom Par ty, which mainly represents
Zulu voters, and secured a 4.6% share of the 2009 poll. General elections are held at least
once every five years. The most recent municipal election in May 2011 saw the ANC poll
62.9% of the vote, down from 64.1% five years before, while the DA won 24.1% (up from
16.2%). The next general election is scheduled for 2014.
Economic Development
South Africa has the largest economy in Africa and boasts an abundance of natural resources,
well-developed financial, legal, commercial and communications sectors, and a modern
infrastructure which, though at capacity, supports the efficient distribution of goods and
services throughout the country. At the end of 2007 South Africa began to experience an
electricity crisis as state power supplier Eskom encountered problems with aged plants,
necessitating 'load-shedding' cuts to residents and businesses in the major cities.
Nevertheless, growth was robust from 2004 to 2008 as South Africa reaped the benefi ts
of macroeconomic stability and a global commodities boom. Growth began to slow down
in the second half of 2008 due to the global financial crisis' impact on commodity prices
and demand, and the South African economy went into recession in May 2009 following
a sharp slowdown in the mining and manufacturing sectors. In contrast, the construction
industry benefited from a huge programme of government investment ahead of the 2010
football World Cup. Meanwhile, land redistribution is an ongoing issue, with most farmland
still white-owned. Having so far acquired land on a ‘willing buyer, willing seller’ basis,
officials have indicated that large-scale expropriations are on the cards in the near-future.
The government aims to transfer 30% of farmland to black South Africans by 2014.
3
8/13/2019 South Africa 20174133
4/72
The government's economic growth programmes have yet to reduce its high unemployment
rate, which reportedly stood at around 25.0% at the end of 2012. However, that figure only
tells part of the story, and unofficial estimates put the real unemployment rate as high as
40%. Youth unemployment remains a major problem, standing at an estimated 50%. The
lack of jobs was cited as a key factor behind the wave of violent attacks against migrant
workers from other African countries in 2008 and also protests by township residents over
poor living conditions during the summer of 2009. Chronic unemployment is an ongoing
cause for concern, and the painful reforms of the last decade – including cuts in subsidies and
tariffs – and an economic shift from mining to services has exacerbated the problem in many
communities. The country's restrictive labour laws have not helped matters, while the Black
Economic Empowerment (BEE) programme, though popular, has been accused of benefiting
only a few prominent industry cronies, rather than raising the living standards of the poor.
Inflation has fluctuated in recent years, reaching 11.5% in 2008, up from 4.5% in 2006, but
fell back to 7.1% in 2009, and by the end of 2011 the rate had dropped to 5%, with the IMF
estimating a slight increase to 5.6% by the end of 2012, but predicting a decrease to 5.2%
in 2013. Real GDP growth slipped to 3.7% in 2008, down from 5.1% in 2007 and 5.3% in
2006. GDP fell again in 2009, with the economy shrinking by 1.8%, but there was a return
to growth in 2010, with an increase of 2.9%. The IMF suggested that the economy grew by
around 3.1% in 2011 and 2.6% in 2012, with 3.0% growth projected for 2013. The country's
economic policy follows the ANC's medium-term aims of increasing economic growth viaconservative fiscal means. The government's Accelerated and Shared Growth Initiative for
South Africa (ASGISA) aims to raise the average growth rate from an approximate 4.5% in
2004-2009 to at least 6% in 2010-2014. Priorities include building infrastructure, nurturing
industry, improving skills, accelerating BEE and reducing crime.
South Africa, along with Brazil, Russia, India and China, is a member of the BRICS
association of emerging economic powerhouses. In 2010 South Africa began efforts to join
the grouping, which was then known as BRIC, and officially became a member nation on
24 December 2010; BRIC was duly renamed BRICS to reflect the expanded membership. In
April 2011 South African President Jacob Zuma attended the 2011 BRICS summit in Sanya,
China, as a full member.
4
8/13/2019 South Africa 20174133
5/72
Regulations
Regulatory Overview
Regulation of South Africa’s telecoms industry is divided between the Department of
Communications (DoC) and the Independent Communications Authority of South Africa
(ICASA), the latter of which replaced the South African Telecommunications Regulatory
Authority (SATRA) and the Independent Broadcasting Authority (IBA) in July 2000 under
the ICASA Act (No. 13). ICASA also derives its mandate from four other statutes: the
Independent Broadcasting Act of 1993, the Broadcasting Act of 1999, the
Telecommunications Authority Act No. 103 of 1996 and the Telecommunications
Amendment Act of 2001. A new regulatory framework, the Electronic Communications Act
2005 (ECA – previously known as the Convergence Bill), was drafted in February 2004 with
the aim of drawing together all sectors of the communications and broadcasting industries
and establishing a level playing field to encourage competition, but the authorities were slow
to pass it. The draft bill was released for consultation by a parliamentary committee in March
2005, but was not approved until April the following year. The new Act finally came into
force on 18 July 2006. Alongside the new ECA, the government also introduced the ICASAAmendment Act 2006, designed to redefine the body's remit in the new regulatory era and
extend its policing powers.
In November 2011 the DoC withdrew a series of proposed amendments to the 2005 ECA
following complaints that the new legislation would take power from the independent ICASA
and hand it to the DoC, specifically in the area of spectrum management and licensing.
Service providers voiced fears that state-backed operators such as Telkom could be favoured
over private enterprises when it came to awarding spectrum if ICASA was forced to adhere to
directives handed down by the Minister of Communications and the DoC. The amendments
were withdrawn for further consultation and a schedule for the reintroduction of the proposals
had not been announced at the time of writing (January 2013).
The official mandate of the DoC is as follows: 'To create a vibrant ICT sector that ensuresall South Africans have access to affordable and accessible ICT services in order to advance
socio-economic development goals, and support the Afr ica Agenda and contribute to building
a better world'. Consequently the core functions of the DoC are:
* To develop ICT policies and legislation that create conditions for the accelerated, sus tained
and shared growth of the South African economy;
* To ensure the development of robust, reliable and affordable ICT infrastructure that
supports and enables the provision of a multiplicity of applications and services to meet the
needs of the country and its people;
* To strengthen ICASA to enable it to regulate the sector in the public interest and ensure
growth and stability in the sector;
* To enhance the capacity of, and oversee, State Owned Enterprises (SOEs) in the
communications portfolio;
* To fulfil South Africa’s continental and international responsibilities in the ICT field.
In May 2005 the state published the Black Economic Empowerment (BEE) Charter for
the ICT sector. The Charter set targets to evaluate operators' BEE contributions, in terms
of equity ownership, management and control, employment, skills development, enterprise
5
8/13/2019 South Africa 20174133
6/72
development and corporate social investment. It required all domestic ICT companies to sell
30% of their equity to black investors by 2010.
Regulation Links
Wireless Key Legislation
Broadband Key Legislation
Wireline Key Legislation
Wireless Regulatory Overview
Regulatory Bodies
Independent Communications Authority South Africa (ICASA)
Private Bag X10002
Pinmill Farm
164 Katherine Street
Sandton 2146
South Africa
Tel. +27 11 3218200
Fax +27 11 4441919
http://www.icasa.org.za
Department of Communications
Ministry OfficePretoria
South Africa
Tel. +27 12 4278177
Fax +27 12 3626915
http://www.doc.gov.za
Wireless Key Legislation
South Africa is currently home to four mobile network operators (MNOs): Vodacom South
Africa and MTN South Africa (both licensed in 1993 and operational by mid-1994), Cell
C (licensed in February 2001 and operational by November that year) and Telkom Mobile
(‘8ta’, which launched in October 2010).
The 2005 Electronic Communications Act (ECA) considerably altered the regulation of the
mobile sector, permitting the entry of nationwide mobile virtual network operators (MVNOs)
for the first time and paying particular attention to the achievement of cost-based mobile
termination rates (MTRs). The country’s two major cellcos, Vodacom and MTN, both
argued that the act deterred newcomers from rolling out their own infrastructure, therefore
undermining the government’s universal access objectives. The two operators called upon the
Independent Communications Authority of South Africa (ICASA) to encourage development
6
8/13/2019 South Africa 20174133
7/72
in the sector via increased competition rather than price regulation. ICASA countered by
stating that competition between the three main operators had failed to bring mobile tariffs
down to an acceptable level so it was necessary to intervene. Despite its intentions, however,
and the publication of a draft proposal in early 2007, final regulatory measures failed to
materialise.
The controversy over interconnection rates reignited in late-2009 when it emerged that
the Competition Commission (ComCom) had been called on to investigate three claims of
possible collusion over prices in the industry. The claims specifical ly related to accusations
that Vodacom colluded with rival MTN to hike interconnection fees months before Cell C
began operating in an attempt to prevent the then-new player from establishing itself as a
credible rival to the duopoly. Cell C launched as the country’s third operator in 2001 and
heavily relied on a 15-year roaming contract with Vodacom to achieve national coverage.
Both MTN and Vodacom publicly denied the allegations.
The investigation became the catalyst which prompted the South African government to step
in to ensure that an equitable MTR structure was implemented. In October 2009 the state
ordered a cut in MTRs to be implemented by the end of November, saying it had been forced
to act because ICASA would not do so. The committee proposed that rates should be cut to
ZAR0.60 (USD0.08) per minute during peak times and then by a further ZAR0.15 annually
until 2012. At the time operators charged each other on average ZAR1.25 per minute during peak times. Carriers immediately emerged to oppose the cut, describing it as ‘drast ic’ and
‘below cost’ and began for the first time to seriously discuss an operator-led reform of rates.
On 13 November 2009 communications minister Siphiwe Nyanda revealed in a statement to
parliament that an agreement had been reached with mobile operators Cell C, Vodacom and
MTN to cut MTRs, lowering communication costs nationwide. The carriers agreed to reduce
MTRs to ZAR0.89 at peak times and ZAR0.77 during off-peak times. Vodacom and Cell
C agreed to implement the new price structure in February 2010, while MTN consented to
follow suit on 1 March.
However, in April 2010 ICASA rejected the cellcos’ proposal to cut MTRs to ZAR0.85 in
October 2011 and ZAR0.80 in October 2012, and instead proposed a steeper three-year glide
path , to ZAR0.40. A series of public hearings were held in June 2010, and four months
later the regulator published interconnection rates for the country’s two largest mobile
operators by subscribers, Vodacom and MTN, as well as for calls to Telkom South Africa’s
fixed line network. In March 2011 MTRs were trimmed to ZAR0.73 during peak times and
ZAR0.65 during off-peak times, while in March 2012 the rates dropped to ZAR0.56 and
ZAR0.52 respectively. Further, by March 2013, wholesale mobile termination rates will drop
to ZAR0.40, regardless of the time the call is made.
The new interconnection rates left the door open for South Africa's two smallest mobile
operators, Cell C and 8ta, to apply to charge higher rates than their more established
competitors. Cell C had pushed for higher call termination rates since its inception in
2001, arguing that its weak market position necessitated asymmetrical interconnection rates.
Cell C reportedly sought a rate of ZAR0.89, whilst 8ta, Telkom South Africa’s brand new
mobile unit, requested an interconnection rate of ZAR0.93. ICASA referred the issue to its
Complaints and Compliance Commission (CCC), and in February 2011 it was announced that
the interconnect fee for the two smaller players would be set at ZAR0.89.
The 1996 Telecommunications Authority Act stated that GSM-900 licence holders MTN
and Vodacom had the right to apply for spectrum in the 1800MHz frequency band and
Vodacom purchased a permanent 1800MHz GSM licence on 29 October 2004. The Act also
stipulated that mobile number portability (MNP) should be introduced by the end of 2005,
but after much uproar, in October 2005 ICASA put the deadline back to July 2006, eventually
enforcing the introduction of the service in November 2006. Meanwhile, after operators
roundly rejected the suggestion that a fixed ZAR200 fee be levied on users looking to switch
networks, the regulator dropped the plan to charge users for leaving their existing operator,
7
8/13/2019 South Africa 20174133
8/72
although a charge can be levied by the new provider that ports their number. In June 2004
ICASA awarded Vodacom and MTN temporary 3G licences, which, following limited trials,
both operators opted to upgrade to permanent concessions at a cost of ZAR6 mill ion per
annum.
In July 2009 the regulator published draft regulations regarding spectrum allocation which
outlined procedures and criteria under which vacant spectrum in the 2.6GHz and 3.5GHz
frequency bands would be distributed. The plan saw a move away from the previous process
of handing out 20MHz to each licensee and instead the regulator announced that four
operators would be allocated a national 30MHz concession in the 2.6GHz band, while
3.5GHz licences would be divided into specific geographic catchment areas, with each
operator receiving a maximum of 28MHz of spectrum per region. The spectrum licences
were to be technology-neutral, whilst in-band migration, which would allow operators to use
existing licensed spectrum to provide new services, would be employed where needed. Two
months later, in September 2009 ICASA revealed that future tenders would be judged by
seven criteria, including: company structure, participation in the country’s Black Economic
Empowerment (BEE) programme, proposed consumer benefits and the company’s track
record in the industry. However, a number of restrictions as to who can apply to obtain
frequency were also announced: a company cannot be an affiliate or hold more than 5% in
another applicant in the same band; a company cannot have already been granted a licence
in the designated band; and an applicant cannot have less than 30% direct BEE ownership.These restrictions disqualified domestic cellco Vodacom from the outset, both through its
lack of the requisite BEE ownership status and the fact that it owned 24.9% of iBurst – a
company with its own 2.6GHz spectrum, fuelling speculation that it might look to sell its
stake in the ISP. In September 2010 Vodacom sold its 24.9% stake in iBurst to majority
shareholder Wireless Business Solutions (WBS) thus falling in line with ICASA's ruling.
In June 2010 ICASA extended the deadline for companies to submit applications for
spectrum in the 2.6GHz and 3.5GHz bands until 30 July, from a previous deadline of 28 May.
Under new guidelines, bidding for the spectrum would start at ZAR750,000. The 2.6GHz
licences carried an obligation to achieve population coverage of 50% within two years of
being granted spectrum. However, just one month later, in July 2010, ICASA withdrew its
invitation to apply for spectrum licences in the 2.6GHz and 3.5GHz bands, explaining that it
had been ‘inundated’ by requests for clarity on the finer details of the licensing process since
the publication of its final High Demand Spectrum Licence Regulations. ICASA disclosed
that it was seeking an overseas auctioneer to assist it with the process , after struggling to find
an appropriately qualified candidate locally. The watchdog also noted that while WiMAX had
been the clear favourite technology for the given bands in the past, market sentiment towards
Long Term Evolution (LTE) had increased dramatically. There had been no new auction date
set by January 2013, but ICASA has announced a scheme to reallocate 50MHz of 2.6GHz
spectrum belonging to state-backed broadcasting network owner Sentech; Sentech will retain
30MHz of frequencies at 2.6GHz (it has received 1800MHz spectrum in return for part of its
allocation at 2.6GHz) and all spare bandwidth will be offered along with 800MHz ‘digital
dividend’ spectrum (technically 790MHz-862MHZ, see below) at an auction to be held in
2013 at the earliest. The new allocations are likely to be used for LTE-based networks.
According to ICASA’s 2012 annual report future licencing procedures will also take into
account the ‘re-arrangement’ of the GSM900 band.
The aforementioned 800MHz spectrum will be freed up following South Africa’s switchover
from analogue to digital television. On 30 October 2008 South Africa’s digital broadcasting
signal was switched on, marking the start of the country’s digital migration. Originally
scheduled for completion in November 2011 in line with a Cabinet decision taken in 2007,
the deadline has since been pushed back to 1 December 2013, and subsequently June 2015.
Delays have generally been blamed on former communications department director-general
Mamodupi Mohlala who entertained the possibility of South Africa switching away from its
commitments to the European standard for digital broadcasts to a hybrid Japanese-Brazilian
8
8/13/2019 South Africa 20174133
9/72
alternative. After a year of debate on the subject, during which Mohlala left the department,
South Africa settled on the second generation of the European standard.
In light of the lack of progress in licensing LTE-suitable spectrum, late-2012 saw the
incumbent operators take matters into their own hands by unveiling 4G networks which used
re-farmed 1800MHz spectrum. Vodacom and MTN launched commercial services in October
2012 and December 2012 respectively, while November saw 8ta unveil a free LTE trial in
the Gauteng province, with Cell C offering similar access in Cape Town and Durban the
following month (see Wireless Market Commentary for full details).
The Regulation of Interception of Communications and Provision of Communication-Related
Information Act (RICA), aimed at cracking down on mobile phone-related criminal activity,
was implemented on 1 July 2009. After that date all new subscribers must register their
details upon activation, while existing users were given 18 months to register or face
disconnection. Any unregistered SIM cards were initially scheduled to be cut off by the end
of 2010, but in November that year it was reported that South Africa’s mobile operators
were expected to be granted a six-month repr ieve by the government in their quest to register
the SIM cards of their respective subscriber bases. Two weeks prior to the cessation of
2010’s parliamentary session, an appeal was lodged to postpone the deadline for mandatory
SIM card registration from the end of 2010 until June 2011. The appeal was successful and
the new deadline was set at 30 June 2011. Following the expiration of the RICA deadline,the DoC reported that Cell C had registered 99.99% of post-paid customers and 97.00%
of pre-paid subscribers, whilst MTN had signed up 99.50% of its contract customers and
97.00% of its pre-paid subscribers and Vodacom had registered 98.98% of contract customers
and 95.12% of pre-paid subscribers. 8ta, which launched in October 2010, had initiated a
mandatory RICA sign-up procedure from launch, meaning that 100% of its subscriber base is
registered.
Wireless Regulatory Timeline
1993 Vodacom and MTN licensed to offer GSM mobile services; Independent
Broadcasting Act passed
March 1994 Vodacom introduces a pilot GSM network ahead of a full launch in June;
MTN launches almost simultaneously
1996 State adopts the Telecommunications Authority Act No. 103
July 2000 Government passes the Independent Communications Authority of South
Africa Act No. 13
October 2000 MTN launches HSCSD service
February 2001 Cell C awarded the third GSM licence in the 1800MHz band and secures
right to roam on Vodacom's 900MHz network
June 2001 Cell C selects Siemens to supply its core GSM network
November 2001 Cell C launches commercial service
2002 Vodacom and MTN launch GPRS services
February 2004 Government announces details of the draft Convergence Bill
May 2004 ICASA approves first seven companies for USAL licences
June 2004 MTN and Vodacom issued with temporary 3G licences; Cell C launches a
GPRS platform
9
8/13/2019 South Africa 20174133
10/72
October 2004 MTN launches limited EDGE services; regulator calls for public
comments on draft Convergence Bill
November 2004 First rural USAL operators licensed
December 2004 Vodacom launches 3G services and shuts down analogue C-450 network
March 2005 Draft Convergence Bill released for consultation by parliamentarycommittee
June 2005 MTN launches 3G services
December 2005 Cell C launches EDGE, ties up 50/50 MVNO venture with Virgin Mobile
June 2006 Virgin Mobile launches MVNO operations
July 2006 Implementation of Electronic Communications Act 2005 and ICASA
Amendment Act 2006
10 November 2006 Implementation of mobile number portability
January 2007 ICASA launches an investigation into wholesale call termination pricing in
the mobile market
June 2007 Telkom launches WiMAX services
February 2008 Telkom applies for spectrum in the 1800MHz band from ICASA
February 2008 Vodacom reveals plans to launch a converged cellular/Wi-Fi product
May 2008 Government hints that a fourth national cellular licence could be offered
in 2009
December 2008 Tender for two DVB-H mobile TV licences opened
March 2009 ICASA withdraws DVB-H tender
July 2009 ICASA releases draft wireless broadband spectrum allocation regulations
1 July 2009 Regulation of Interception of Communications and Provision of
Communication-Related Information Act (RICA) implemented
September 2009 Regulators confirm plans to auction wireless broadband spectrum in
2.6GHz band
October 2009 State orders cut in mobile termination rates (MTRs)
November 2009 Operators reach agreement on MTRs
December 2009 Cell C reveals plan to launch HSPA+ network in 2010
February 2010 Vodacom and Cell C make MTR cuts
March 2010 MTN implements MTR cuts
June 2010 ICASA extends the deadline for bids for spectrum in 2.6GHz and 3.5GHz
band to 30 July; Vodacom begins LTE trials in Midrand
July 2010 ICASA withdraws offer for 2.6GHz (suitable for LTE) and 3.5GHz
spectrum bids, citing technological issues
September 2010 Vodacom completes sale of stake in WiMAX provider Wireless
Broadband Solutions (WBS), leaving it free to bid in LTE spectrum
auction
10
8/13/2019 South Africa 20174133
11/72
October 2010 Fixed line incumbent Telkom launches mobile services under ‘8ta’ brand
November 2010 Operators call on the government to extend the SIM card registration
deadline and a six-month extension is granted
March 2011 MTRs drop further for MTN and Vodacom
30 June 2011 Deadline for all active SIM cards to be registered under the RICAlegislation
July 2011 MTN launches LTE trials over 100 base stations in Gauteng province and
Johannesburg
October 2011 WBS announces plans for LTE deployment in the 1800MHz and 2.6GHz
bands
December 2011 ICASA announces plans to free up some 2.6GHz spectrum and offer this
along with 800MHz frequencies at auction in 2012 (not achieved)
February 2012 Vodacom deploys 5,000th 3G base station, 3,000th DC-HSPA+ site
March 2012 ICASA bows to operator pressure and postpones 800MHz, 2.6GHz
spectrum auction
March 2012 Wireline SNO Neotel confirms LTE trial in Midrand
October 2012 8ta announces free LTE trial in Gauteng between Nov-12 and Mar-13
October 2012 Vodacom launches first commercial LTE service in Johannesburg
November 2012 Neotel announces successful 70Mbps LTE trial in Midrand
1 December 2012 MTN LTE network launches commercially in Pretoria, Durban,
Johannesburg
December 2012 Cell C launches LTE trial in Cape Town, Durban
June 2015 Digital dividend spectrum in 800MHz band expected to be freed up.
Broadband Regulatory Overview
Regulatory Bodies
Independent Communications Authority South Africa (ICASA)
Private Bag X10002
Pinmill Farm
164 Katherine Street
Sandton 2146South Africa
Tel. +27 11 3218200
Fax +27 11 4441919
http://www.icasa.org.za
11
8/13/2019 South Africa 20174133
12/72
Department of Communications
Ministry Office
Pretoria
South Africa
Tel. +27 12 4278177
Fax +27 12 3626915http://www.doc.gov.za
Current Status of Local Loop Unbundling: Pre-commercial
Broadband Key Legislation
In October 2005 the government’s Colloquium Working Group made a number of
recommendations regarding the high speed internet market to inform the development of a
national broadband plan, including: that the local loop be unbundled; that the use of ‘bit
caps’ be prohibited; and that the Universal Service Programme be reviewed and new targets
set. The group suggested that the government should aim for: all households to have access
to a fixed or mobile network by 2010; all public institutions to have broadband connectionswithin three years; and broadband penetration to reach 5% by 2010. Although household
penetration actually passed the 5% goal in 2009, local loop unbundling (LLU) had stil l not
been implemented by January 2013 (see Local Loop Unbundling section), and the lack of
a cost-effective wholesale sector has held back the market. More recently, the five-year
strategic plan as approved by the Parliamentary Portfolio Committee on Communications
in April 2011 addresses, amongst other issues, how ICASA plans to support the DoC in
achieving universal broadband access by 2020.
Suffice to say, the key challenge within the broadband sector is loosening fixed line
incumbent Telkom’s stranglehold over national infrastructure. Despite the firm’s fixed line
monopoly being broken in 2002 when regulators mandated public utilities Eskom, Transtel
and Sentech to leverage their infrastructure to support the country’s telecoms sector, Telkom
retained tight control over the local loop and the majority of transport links. In December 2005 telecoms regulator the Independent Communications Authority of South Africa
(ICASA) granted a 25-year PSTN operating licence to second national operator (SNO)
Neotel. At launch, however, the operator did not own any network infrastructure and was
forced to operate via a wholesale agreement with Telkom for its first year of operation.
In March 2008 Neotel finally acquired its own network infrastructure when it purchased
Transtel in a ZAR256 million deal, although it remained reliant on Telkom for last mile
connection.
Market reform is underway, however, and in August 2008 local telco Altech won a long-
running legal battle enabling it to deploy its own communications networks. The High
Court decision cleared the way for Altech and other alternative carriers to receive individual
electronics communications network services (I-ECNS) concessions and thus begin offering
services over their own infrastructure rather than relying on wholesale agreements with the
handful of firms previously permitted to deploy networks. The landmark case led to ICASAgranting 544 I-ECNS licences in January 2009 to a number of firms, including multi-tenant
properties , gated communities and business parks, allowing the companies to roll out thei r
own local networks.
While it took court intervention to challenge Telkom’s dominance in the local access
sector, the government took a much more proactive stance towards updating the country’s
backbone infrastructure. On 8 January 2008 the DoC published the Broadband Infraco Act,
which revealed plans to combine assets of both Eskom and Transtel to build out new
12
8/13/2019 South Africa 20174133
13/72
fibre infrastructure which would eventually supersede Telkom’s copper networks as the
state’s backbone network. Under the act a new state-owned enterprise was formed, named
‘Broadband Infraco’, with a mandate for boosting the country’s broadband connectivity
and bandwidth availability. Broadband Infraco unveiled its new ZAR1 billion (USD144.1
million) network in mid-November 2010, and a year later it was managing 13,612km of fibre-
optic cable routes connecting Gauteng to the major metropolitan centres of Bloemfontein,
Kimberley, Cape Town, Port Elizabeth, East London, Durban, Nelspruit and Polokwane. The
company had been plagued by licensing issues during the three years in the run-up to its
launch; the Broadband Infraco Act stipulates that ICASA was obliged to issue Broadband
Infraco both an I-ECNS licence and an Electronic Communication Services (ECS) licence.
However, commercial ISPs objected to it receiving an ECS concession, as they claimed it
would give the state-owned company an unfair advantage.
In December 2012 Broadband Infraco was appointed as interim chair to drive the
implementation of Strategic Infrastructure Project No 15 (SIP 15). This SIP’s mandate is
‘expanding access to communication technology’. Infraco chief executive Puleng Kwele
noted: ‘SIP 15 aims to provide 100% broadband coverage to all households by 2020 by
establishing core points of presence (PoPs) in district municipalities. It seeks to extend fibre-
optic networks across provinces linking districts, establish PoPs and fibre connectivity at
local level, and penetrate the network into rural areas’.
The proliferation of I-ECNS licences and the deployment of alternative transport networks
– Neotel and mobi le operator MTN have also deployed a join t fibre backbone network –
has meant that operators have been able to bypass Telkom’s infrastructure for the first time
despite the lack of legislation to unbundle the local loop. Although LLU is still required
to fully liberate the market, I-ECNS concessions have extended the reach of alternative
operators, such as iBurst, which rolled out an ADSL2+ service in November 2009 using
local I-ECNS infrastructure in tandem with its own fibre and microwave links. Prior to the
introduction of I-ECNS licences operators had to rely on broadband fixed wireless access
(BFWA) and WiMAX standards to reach consumers directly and provide competition to the
incumbent. iBurst was the first to launch BFWA services in April 2005, while the country's
first WiMAX wireless broadband services were launched by Telkom in June 2007; iBurst and
Neotel also deployed their own WiMAX networks, although the standard has not taken off in
the mass market.
Local Loop Unbundling
In May 2007 the Department of Communications (DoC) released a report setting a deadline
of 1 November 2011 for the completion of local loop unbundling (LLU), by which time it
expected 80% of Telkom's networks to have been opened up to rivals. In March 2010, when
questioned on the progress of LLU, the director general of the Independent Communications
Authority of South Africa (ICASA), Mamodupi Mohlala, claimed that the regulator would
issue policy directives with timelines to ensure that Telkom met the November 2011
deadline.
However, that provisional deadline passed without any obvious progress, prompting ICASA
to unveil a new deadline, 1 November 2012, for the introduction of bitstream access, a
precursor to unbundling, but this date also passed without incident. In November 2012
industry insiders noted that ‘intense discussions’ were taking place focused on how Telkom
can deal with its so-called ‘access-line deficit’, where the fixed-line operator does not recoup
the cost of maintaining the average line in service through basic telephone line rental. These
discussions, it was understood, were blamed for the delay in introducing bitstream access.
Telkom’s argument centres on the fact that it effectively subsidises its copper network
because basic line-rental fees do not cover the cost of maintaining the network. For its part,
ICASA believes that ensuring fixed line access prices are fairly addressed is a necessary
13
8/13/2019 South Africa 20174133
14/72
precondition to any successful form of LLU. At the time of writ ing (January 2013) industry
insiders revealed that behind-the-scenes talks were ongoing be tween the relevant parties, but
no concrete progress had been reported.
A government paper on LLU, released in 2007, and including contributions from ICASA and
the DoC said of bitstream access: ‘No pricing regulation currently exists for bitstream access.
In order to guarantee extensive access at reasonable prices to subscribers, the regulatory
framework needs to deal with the suitability of prices charged by the incumbent to ISPs
for providing them with wholesale xDSL products. Moreover, regulation needs to address
the issue of margins of service providers to subscribers to guarantee affordability. At this
level regulation should be aimed at creating a ceiling on prices to subscribers and allow
marketplace to autonomously resolve suitable margins which should be below that ceiling …
Bitstream access is not expected to promote a great deal of facility based competition and as
regulation can only set minimum standards, the incumbent should not be compelled to invest
in new technologies. Consequently, in a situation when it is possible, care must be exercised
in setting wholesale prices to make certain that the section of the market stays attractive to
new entrants and is sufficiently profitable to encourage future investments by the incumbent’.
Wireline Regulatory Overview
Regulatory Bodies
Independent Communications Authority South Africa (ICASA)
Private Bag X10002
Pinmill Farm
164 Katherine Street
Sandton 2146
South Africa
Tel. +27 11 3218200
Fax +27 11 4441919http://www.icasa.org.za
Department of Communications
Ministry Office
Pretoria
South Africa
Tel. +27 12 4278177
Fax +27 12 3626915
http://www.doc.gov.za
Dates of Liberalisation
• Local Telephony: May 2002
• Domestic Long-distance Telephony: May 2002
• International Telephony: May 2002
14
8/13/2019 South Africa 20174133
15/72
Wireline Key Legislation
The Independent Communications Authority of South Africa (ICASA) takes an active role in
the resolution of inter-operator disputes, the formulation of policy, and licensing procedure;
with the fundamental aim of promoting competition and technological progression
throughout the country’s telecoms sector. The government’s Department of Communications(DoC) has five core functions: directing and overseeing the development of policy and
legislation; encouraging the expansion of network infrastructure; supporting ICASA,
enabling it to regulate the sector in the public interest; overseeing the operation of state-
owned enterprises, such as wireline incumbent Telkom South Africa; and to fulfil South
Africa’s continental and international responsibilities in the ICT field.
ICASA also has the responsibility of ensuring that operators achieve the government's
access targets, and collects Universal Service Fund (USF) fees on behalf of the Universal
Service and Access Agency (USAASA). The Telecommunications Amendment Act of 2001
made important changes to the USF by bringing the USAASA directly under the control
of the Minister of Communications and expanding the list of programmes eligible for
USF assistance. The fund now covers the provision of internet services in public schools,
the establishment of telecentres and public information terminals, and the deployment of
infrastructure in areas of low teledensity through the issue of under-serviced area licences(USALs).
The fixed line market was officially opened up to competition on 7 May 2002 when
regulators mandated public utilities Eskom, Transtel and Sentech to leverage their
infrastructure to support the country’s telecoms sector. However, Telkom retained tight
control over the local loop and the majority of transport links, while its rivals were not
permitted to provide a full range of wireline services. Subsequently, the DoC and ICASA
introduced a raft of measures to further liberalise the telecoms sector, which came into e ffect
on 1 February 2005. Under the changes:
* value added network service (VANS) providers can offer public voice services, including
voice-over-internet protocol (VoIP);
* any private operator may lease network capacity and resell Telkom's services;
* any company can apply for a public payphone licence;
* wireless operators are allowed to rent capacity on the fixed line network of any operator.
In September 2004 the then-Minister of Communications, Ivy Matsepe-Casaburri, announced
that Telkom would finally face private sector competition with the planned award of a
25-year PSTN licence to a second national operator (SNO). However, the award stalled for
some time, with ICASA unable to issue the concession un til the structure of the new company
had been finalised (see Wireline Market Commentary). Eventually licensed in December
2005, the SNO launched services under the name Neotel in August 2006. However, the
government derailed Neotel’s bid to launch across its own infrastructure by refusing to sell
it network assets belonging to Eskom; as a result, the SNO was forced to use Telkom’sPSTN as backhaul, while also having to rely on the incumbent to provide it with last mile
access. Telkom’s unrivalled dominance in the wholesale sector has been regularly cited as a
major factor behind the country’s relatively low teledensity and poor take-up of broadband
services, and in 2007 ICASA launched an investigation into the market, planning to use its
findings to develop a new competition framework. In January 2008 the regulator published
draft definitions of retail and wholesale markets intended to ensure that each sector was open
to adequate competition and to identify operators with significant market power (SMP).
15
8/13/2019 South Africa 20174133
16/72
Since ICASA opened its investigation, a number of operators, Neotel included, have brought
competition to Telkom’s transport network by deploying their own fibre-optic backhaul
infrastructure. However, the incumbent retains a stranglehold over the last mile, and the
publication of loca l loop unbundling (LLU) regulat ions has been a major priori ty for
regulators. In 2006 ICASA established the LLU Committee to investigate and recommend
appropriate models and processes for opening up access to the last mile. In May 2007 the
DoC released a report setting a deadline of 1 November 2011 for the completion of LLU, by
which time it expected 80% of Telkom's networks to have been opened up to rivals. Despite
promises that policy directives with time-frames would be implemented during 2010, at the
time of writing (January 2013) LLU regulations were still on the drawing board, giving some
operators a cause for concern. (See Local Loop Unbundling section for more details).
In August 2008 a ruling was made against the regulators which could prove vital to achieving
the government’s aims; local telco Altech won a long-running legal battle enabling it to
deploy its own communications networks. The High Court decision cleared the way for
the operator and other alternative carriers to receive individual electronics communications
network services (I-ECNS) concessions and thus begin offering connections across their
own infrastructure and allowing service providers a way to bypass Telkom’s last mile
infrastructure (Altech had argued since 2004 that VANS licensees should have the right
to build out their own communications systems). Subsequently, in January 2009 ICASA
granted a total of 544 separate I-ECNS licences to a number of firms, including multi-tenant properties , gated communities and business parks, allowing the companies to roll out thei r
own local networks. 288 of the licences were issued immediately, while the remaining 256
were granted but not issued pending the submission of relevant documentation.
In March 2010 it was revealed that the second and final stage of introducing fixed number
portability to South Africa had been delayed by around five weeks. The first phase – also
known as geographic number portability (GNP) – commenced in May 2009; the second,
more important phase, which allows individual numbers to be ported, was postponed until
26 April 2010 to accommodate final tests of IT systems. The Number Portability Company,
which already handled number porting for the mobile operators, manages individual GNP
on behalf of the operators. As a result, Vodacom, MTN and Cell C all agreed to dilute their
shareholding in the company to allow Telkom and Neotel to become shareholders, too.
In October 2010, following an extended debate surrounding interconnection in the wireless
market, ICASA also addressed fixed line call termination rates, making the following
decisions: fixed line rates – which are dependent on whether the calls are local or nationwide
– would drop to ZAR0.20 (USD0.02) during peak times and ZAR0.12 during non-peak for
local calls in March 2011, whilst nationwide termination rates would drop to ZAR0.28 dur ing
peak times, and ZAR0.19 during off-peak times. In March 2012 the termination of local calls
dropped to ZAR0.15 and ZAR0.12 respectively, while national calls dropped to ZAR0.25
and ZAR0.19. At the end of the glide path period (March 2013), termination rates for local
calls will drop to ZAR0.12 regardless of the time, with national rates dropping accordingly,
to ZAR0.19.
VoIP Legislation
A provider of voice telephony services utilising numbers from the national numbering plan
is requires an individual electronic communications services (ECS) licence, regardless of
whether the services are ultimately provided to end-users using wireline, wireless or voice-
over-internet protocol (VoIP) technology.
In September 2004 the Minister of Communications ruled that from 1 February 2005 value
added network service (VANS) providers would be permitted to carry VoIP services. A
16
8/13/2019 South Africa 20174133
17/72
whole host of firms have since launched IP telephony services, with take-up strong among
the financial services sector, the retail sector, the government and pr ivate companies.
Telkom South Africa has launched a VoIP-based International Contact Centre Services
division, with a view to turning South Africa into a regional telecom hub for the African
continent and leveraging perceived Business Process Outsourcing (BPO) opportunities.
Wireline Regulatory Timeline
1993 Independent Broadcasting Act comes into force
1996 State adopts the Telecommunications Authority Act No. 103
May 1997 State sells off a 30% stake in Telkom South Africa
July 2000 ICASA succeeds SATRA as regulator
2001 Telecommunications Amendment Bill expands the scope of the USF,introducing USALs
2002 Government begins process to license a second network operator (SNO)
7 May 2002 Market opened up to competition; Transtel, Eskom and Sentech
subsequently given domestic and international operating licences
March 2003 Telkom completes IPO; government's stake reduced below 40%
January 2004 Sentech launches its MyWireless broadband service
February 2004 Government announces details of the draft Convergence Bill
May 2004 ICASA approves first seven companies for USAL licences in areas with
sub-5% teledensity
June 2004 Nexus Connexion disputes the award of a combined 26% stake in the SNO
to two foreign bidders, threatening to further delay competition in the fixedline market
September 2004 National PSTN licence awarded to the SNO by the Communications
Minister, but cannot be issued by the regulator until shareholder structure
and business plan have been ratified
November 2004 First rural USAL operators licensed; BEE consortium, Elephant, buys a
15.1% share of Telkom
1 February 2005 Legislation further liberalises the fixed line market, allowing full service
competition
February 2005 VSNL's SNO stake approved, and Nexus withdraws its objections, paving
the way for the launch of the SNO; several VoIP providers launch
operations
March 2005 Draft Convergence Bill released for consultation by parliamentary
committee; WBS officially launches wireless broadband network
May 2005 Publication of the draft Black Economic Empowerment (BEE) Charter for
the ICT sector
1 August 2005 New price cap on Telkom's services comes into effect
December 2005 SNO licensed
17
8/13/2019 South Africa 20174133
18/72
July 2006 Electronic Communications Act 2005 and ICASA Amendment Act 2006
enacted
August 2006 13 more USAL concessions awarded
31 August 2006 SNO launches first corporate services under the name Neotel
March 2007 Neotel is awarded spectrum in the 800MHz band for FWA networks
May 2007 Department of Communications (DoC) releases a report setting a deadlineof 1 November 2011 for the completion of LLU
July 2007 Competition Commission rules MTN discriminated against Cell-C in the
payphone market by charging it higher interconnect fees than it charged to
Vodacom
August 2007 Neotel agrees to join the Seacom undersea cable project
January 2008 Broadband Infraco Act passed
February 2008 Vodacom announces plans to invest ZAR2.5 billion to expand its fixed line
operations
March 2008 South Africa's Competition Tribunal unconditionally approves the merger
between Neotel and Transtel Telecoms
May 2008 Neotel soft launches residential services
August 2008 Neotel begins full-scale marketing of its residential portfolio
January 2009 544 I-ECNS licences issued allowing operators to run their own networks
March 2009 MTN, Vodacom and Neotel commence deployment of fibre backbone
July 2009 SEACOM launches
July 2009 ICASA releases draft wireless broadband spectrum allocation regulations
September 2009 ICASA publishes draft broadband policy
September 2009 Regulators confirm plans to auction wireless broadband spectrum in
2.6GHz band
October 2009 Broadband Infraco issued I-ECNS licence
November 2009 iBurst launches 20Mbps ADSL2+ service
November 2010 Broadband Infraco launches network
1 November 2011 Initial deadline for the completion of LLU (not met)
March 2012 Telkom reveals that it intends to leverage VDSL2 technology
October 2012 Telkom stages VDSL trials in five areas across three provinces, achieving
downlink speeds of 40Mbps
October 2012 eFive Telecoms awards TE SubCom supply contract for South Atlantic
Express (SAEx) submarine cable linking South Africa and Brazil
November 2012 Negotiations regarding bitstream access (precursor to LLU) reportedly
ongoing between Telkom and ICASA.
18
8/13/2019 South Africa 20174133
19/72
Wireless
Market Commentary
In stark contrast to the sluggish take up in its fixed line telephony and broadband markets,
South Africa’s mobile sector can be viewed as a success story, with sustained growth
meaning that wireless penetration surpassed 131.6% at the end of September 2012. The
country's first cellular networks – analogue C-450 systems – were deployed during the 1980s,
but prohibitive prices, poor coverage and technological fai lings meant that the systems never
reached a mass market. The launch of GSM-based networks by Vodacom and the current
second-placed operator, MTN, in 1994 saw take-up begin to rise and the arrival of a third
player, Cell C, in November 2001 added further impetus. Indeed, annual growth remained at
over 25% until 2006 when the rate slowed as the sector approached saturation point. In the
twelve months ended 30 September 2012 the cellular market grew by around 9.41 million
subscribers – to reach a total user base of 66.56 million – suggesting that the surging growth
within the sector shows no sign of abating in the near future.
Despite the saturated market conditions, October 2010 saw the much anticipated launch of fixed line incumbent Telkom South Africa's own wireless network, branded '8ta', and it has
got off to a solid, but unspectacular, start, signing 1.495 million subscribers in just under
two years of service, equivalent to a 2.2% market share at end-September 2012. At that date
Vodacom remained the dominant mobile operator by subscribers, with a 46.2% market share,
followed by MTN (36.8%) and Cell C (14.7%). While still a minnow in national terms, it
seems likely that 8ta will gear its strategy towards rolling out a data network based on 4G
Long Term Evolution (LTE) technology, with the fast-growing mobile broadband market
arguably representing the next key battleground in the tussle for wireless supremacy (see
below).
With LTE-suitable spectrum scarce at present, concern at the Independent Communications
Authority of South Africa's (ICASA’s) slow progress in auctioning the frequencies has been
a serious bone of contention in recent years, and unfortunately shows no sign of resolutionanytime soon. All four incumbent operators have made no secret of their desire to get their
hands on available frequencies in the LTE-suitable 2.6GHz band, but the watchdog’s grand
plans fel l apart in July 2010 when it withdrew its offer for telcos to submit applications
for the vacant spectrum. ICASA later admitted that it was seeking an overseas auctioneer
to assist it with the process, after struggling to find an appropriately qualified auctioneer
locally, and by the time of writing (January 2013) no new auction date had been set.
Understandably, the slow progress has forced the mobile operators to take matters into their
own hands using existing spectrum resources, and Vodacom stole a march on its rivals when
it initiated a LTE trial in Midrand in June 2010, while July 2011 saw MTN unveil 100 LTE
base stations in the Gauteng province as part of an extensive pi lot project.
It was not until October 2012 however that Vodacom launched the country’s first commercial
LTE network, beating long-term domestic rival MTN to the punch. At launch, the 1800MHz
band 4G service was accessible to customers via approximately 70 base stations inJohannesburg, but Vodacom wasted little time in extending its LTE footprint and in less than
a month confirmed that it had tripled the number of LTE-enabled base stations on its network
to over 200; by mid-December 2012 the network rollout had reached Cape Town, several
weeks ahead of schedule. MTN has been no slouch in the LTE department either, announcing
that its own 4G network went live on 1 December 2012 in Johannesburg, Durban and
Pretoria, with a total of 1,600 1800MHz LTE base stations deployed across the three cities
by end-2012. Cell C’s progress has been far more cautious in comparison, with the carrier
switching on its 4G network in Cape Town, Durban, and a number of unspecified coastal
19
8/13/2019 South Africa 20174133
20/72
holiday resorts in December 2012, utilising re-farmed 900MHz spectrum. The LTE rollout
was expanded to Johannesburg and Pretoria in early 2013, with the company identifying
heavy users of its network and inviting them to join the trial with a Huawei LTE dongle
and 100GB of data offered to all participating subscribers. 8ta has employed a similar tactic,
introducing a free 1800MHz LTE trial in the Gauteng province (including the cities of
Johannesburg and Pretoria) between 1 November 2012 and 31 March 2013. Participants are
permitted to use a 50GB data bundle and an LTE-enabled device. As of January 2013 the
network had been extended to Cape Town and Durban, and is expected to encompass other
large cities in due course.
In July 2006 the Department of Communications (DoC) ratified the Electronic
Communications Act (ECA), which included a raft of measures designed to make the
domestic mobile market more hospitable to new entrants. The act paved the way for the
launch of the country's first mobile virtual network operators (MVNOs) which were not
permitted under previous legislation . UK-owned Virgin Mobile was one of the first to take
advantage of the new regulatory framework, signing a 50:50 joint venture agreement with
Cell C in December 2005, before the legislation was even enacted, creating a Virgin-branded
MVNO using Cell C's GSM network. Virgin Mobile South Africa launched in mid-June 2006
planning to target the high-end market . In February 2011 Cell C sold its 50% stake in the
JV for an undisclosed sum; the deal saw the Virgin Group raise its stake in the business
to 55%, with Bahamas-based Calico Investments acquiring the remaining 45%. Elsewhere,late-2009 saw Econet Wireless South Africa launch as an MVNO – also over Cell C's network
– offering expatriate customers discounted call rates to Zimbabwe and now Lesotho. More
recently, February 2011 saw the launch of the country’s third MVNO when Red Bull Mobile
began offering services, once again over the Cell C network. Energy drinks manufacturer
Red Bull already had live MVNO operations in a number of European countries, and has
endeavoured to tie its mobile brand to its high profile sponsorship deals in sports such as
motor racing.
Despite the saturated market conditions, South Africa remains an appealing prospect for
international telecoms players, and January 2013 saw France Telecom-Orange’s newly
formed ‘Orange Horizons’ unit – which aims to ‘seek out new business opportunities in
countries where the group is not already present as a mass-market telecommunications
provider’ – launch the Orange consumer brand in South Africa, ahead of a projected MVNO
launch further down the line. Interestingly, managing director Sebastian Crozier revealed that
Orange is not averse to acquiring a local network operator if the opportunity presents itself,
saying: ‘We have tried that several times in South Africa already’. Cash-strapped fourth
operator 8ta is likely to be highlighted as the French firm’s obvious target, after being linked
to India’s Bharti Airtel in December 2012. A source close to the Indian telecoms giant –
which acquired 15 companies comprising Zain Africa in June 2010 – admitted that a new
play was being made after the fai lure of Bharti’s 2009 bid for MTN. With question marks
over its long-term viability pushed to the fore during the preceding months, 8ta was strongly
linked to a merger with the better-established Cell C, although no concrete developments had
been confirmed by end-January 2013.
Networks
Provider
Name Generation Platform Evolution Frequency Launch Status
Network
Details
Cell C 2G GSM None 1800 Nov 2001 Live Jan-13: 92%
Cell C 2.5G GSM GPRS 900/1800 Jun 2004 Live Jan-13: 92%
Cell C 2.5G GSM EDGE 900/1800 Dec 2005 Live Jan-13: 92%
20
8/13/2019 South Africa 20174133
21/72
Provider
Name Generation Platform Evolution Frequency Launch Status
Network
Details
Cell C 3G W-CDMA HSPA+ 900 Sep 2010 Live Jan-13:
Unknown;
deployment in
line with
national 2Gfootprint
Cell C 3G W-CDMA None 900 Sep 2010 Live Jan-13:
Unknown
Cell C 3.5G W-CDMA DC-
HSPA+
900 May 2011 In
Deployment
Jan-13:
Unknown;
deployment
contracted to
ZTE in May-11
Cell C 4G LTE None 900 Dec 2012 In
Deployment
Jan-13: Trial
ongoing in
Cape Town,
Durban,
Pretoria and
Sandton(Jo’burg)
MTN
South
Africa
2G GSM None 900 Jun 1994 Live Jan-13: 99%
MTN
South
Africa
2.5G GSM GPRS 900 May 2002 Live Jan-13: 99%
MTN
South
Africa
2.5G GSM EDGE 900 May 2004 Live Jan-13: 85%
(est.)
MTN
South
Africa
3G W-CDMA None 2100 Jun 2005 Live Jan-13: 70%
(est.)
MTN
South
Africa
3G W-CDMA None 900 Aug 2010 Live Jan-13: More
than 150 BTS
in operation
MTN
South
Africa
3.5G W-CDMA HSDPA 2100 Jan 2008 Live Jan-13: 60%
(est.)
MTN
South Africa
3.5G W-CDMA HSUPA 2100 Sep 2008 Live Jan-13: 60%
(est.)
MTN
South
Africa
3.5G W-CDMA HSPA+ 2100 Q1 2010 Live Jan-13: 60%
(est.)
MTN
South
Africa
3.5G W-CDMA DC-
HSPA+
2100 Jan 2011 In
Deployment
Jan-13:
Unknown;
trialled in
Sandton in
Jan-11
21
8/13/2019 South Africa 20174133
22/72
Provider
Name Generation Platform Evolution Frequency Launch Status
Network
Details
MTN
South
Africa
4G LTE None 1800 Dec 2012 Live Jan-13:
Johannesburg,
Durban,
Pretoria; up to
500 BTS byend-12
Neotel
(South
Africa)
4G LTE None 1800 Q1 2013 Planned Jan-13:
Midrand
(testing
commenced
Mar-12)
Telkom
South
Africa
(inc.
Telkom
Mobile
[8ta])
2G CDMA 1800 Oct 2010 Live Sep-12: 2,067
base stations
+ roaming
agreement
with MTN =
96% of
population
TelkomSouth
Africa
(inc.
Telkom
Mobile
[8ta])
3G W-CDMA 2100 Oct 2010 Live Sep-12: 2,067base stations
+ roaming
agreement
with MTN (see
profile)
Telkom
South
Africa
(inc.
Telkom
Mobile
[8ta])
4G LTE None 1800 2013 In
Deployment
Jan-13: Free
LTE trial for
Jo’burg,
Pretoria
residents
between
Nov-12 andMar-13
Vodacom
South Africa
2G GSM None 900 Jun 1994 Live Jan-13:
~99.5%
Vodacom
South
Africa
2.5G GSM GPRS 900 Q4 2002 Live Jan-13:
~99.5%
Vodacom
South
Africa
3G W-CDMA None 2100 Dec 2004 Live Jan-13:
Unknown; 3G
base stations
passed 5,000
mark inFeb-12
Vodacom
South Africa
3G W-CDMA HSPA+ 2100 Feb 2010 In
Deployment
Jan-13:
Unknown;~5,000 BTS
Vodacom
South
Africa
3.5G W-CDMA HSDPA 2100 Mar 2006 Live Jan-13:
Unknown
22
8/13/2019 South Africa 20174133
23/72
Provider
Name Generation Platform Evolution Frequency Launch Status
Network
Details
Vodacom
South
Africa
3.5G W-CDMA HSUPA 2100 May 2008 Live Jan-13:
Unknown
VodacomSouth
Africa
3.5G W-CDMA DC-HSPA+
Unknown Apr 2011 Live Jan-13:Unknown;
passed 3,000
base station
mark in
Feb-12
Vodacom
South
Africa
4G LTE None 1800 Oct 2012 Live Jan-13: Cape
Town,
Johannesburg,
Pretoria, and
Durban (500
base stations)
Subscribers Market Share by Provider
Sources: operators
Market Share History
Provider Name
Jun
2011
Sep
2011
Dec
2011
Mar
2012
Jun
2012
Sep
2012
Vodacom South Africa 46.2% 45.6% 46.2% 46.3% 47.2% 46.2%
MTN South Africa 36.3% 36.7% 36.4% 36.3% 35.9% 36.8%
Cell C 16.1% 15.7% 15.2% 15.0% 14.6% 14.7%
Telkom South Africa (inc. Telkom
Mobile [8ta])
1.4% 2.0% 2.2% 2.4% 2.3% 2.2%
23
8/13/2019 South Africa 20174133
24/72
Market Share History
Sources: operators
Quarterly Subscribers by Operator
Provider
Name Subscribers Sep 2011 Dec 2011 Mar 2012 Jun 2012 Sep 2012
Dec
2012
Cell C Total 9,000,000 9,200,000 9,400,000 9,600,000 9,782,407
MTN South Africa
Total 20,968,000 22,033,000 22,735,000 23,533,000 24,498,000
Telkom
South Africa
(inc. Telkom
Mobile [8ta])
Total 1,140,289 1,350,000 1,483,000 1,490,000 1,495,083
Vodacom
South Africa
Total 26,043,904 28,008,162 28,941,000 30,970,000 30,783,000
Cell C 3G 200,000 275,000 350,000 425,000 550,000
MTN South Africa
3G 5,700,000 6,800,000 7,900,000 9,000,000 10,100,000
Telkom
South Africa
(inc. Telkom
Mobile [8ta])
3G 115,000 150,000 185,000 220,000 255,000
Vodacom
South Africa
3G 4,133,000 4,788,000 4,700,000 4,900,000 5,100,000
24
8/13/2019 South Africa 20174133
25/72
Notes: 3G figures are for number of devices sold rather than number of active users
Annual Country Subscriber Growth
Year Total
Growth
(%)
Pop. Pen.
(%) 3G
3G Growth
(%)
4G
(LTE)
4G (LTE)
Growth (%)
2006 34,930,575 13.7 73.7 390,000 366.5 0
2007 41,280,375 18.2 85.4 1,204,000 208.7 0
2008 47,185,600 14.3 96.5 2,070,000 71.9 0
2009 47,485,086 0.6 96.0 3,320,000 60.4 0
2010 51,374,000 8.2 102.8 6,240,000 88.0 0
2011 60,591,162 17.9 119.8 12,013,000 92.5 0
Quarterly Country Subscriber Growth
Period Total
Growth
(%) 3G
3G Growth
(%)
4G
(LTE)
4G (LTE) Growth
(%)
Jun
2010
46,626,000 -2.0 4,600,000 26.4 0
Sep
2010
48,405,190 3.8 5,405,000 17.5 0
Dec
2010
51,374,000 6.1 6,240,000 15.4 0
Mar
2011
52,291,600 1.8 7,005,000 12.3 0
Jun
2011
54,584,210 4.4 8,469,000 20.9 0
Sep
2011
57,152,193 4.7 10,148,000 19.8 0
Dec
2011
60,591,162 6.0 12,013,000 18.4 0
Mar
2012
62,559,000 3.2 13,135,000 9.3 0
Jun2012
65,593,000 4.8 14,545,000 10.7 0
Sep
2012
66,558,490 1.5 16,005,000 10.0 0
25
8/13/2019 South Africa 20174133
26/72
Subscriber Growth
Sources: operators
Main Players
Vodacom South Africa
47 Wierda Road East
Wierda Valley
Sandton
Johannesburg 2146
South Africa
Tel. +27 11 6535000
Fax +27 11 7840805
http://www.vodacom.co.za
Pan-African cellular communications company Vodacom Group was awarded a licence to
offer GSM-900 services in South Africa in 1993. The then-joint venture between national
PTO Telkom South Africa and UK-based Vodafone made its official launch the following
year alongside rival MTN and the pair enjoyed a seven-year duopoly until a third operator,
Cell C, launched services in 2001. Vodacom has since grown into the market’s dominant
player and by the end of September 2012 had a market share of 46.2%, with a customer
base of 30.78 mill ion, of which 81.3% were using pre-paid plans. The company gained 4.74
million net subscribers in the year ended 30 September 2012, almost as many net additions
as its three rivals combined.
In recent years, with the wireless market reaching saturation point, Vodacom has sought
to promote take-up and encourage higher usage, with an increased emphasis on wireless
data services. The company rolled out its first data service in 2002 in the form of a GPRS
network; launching MMS services the following October. In June 2004 it was awarded
a temporary UMTS licence and launched its 3G network in December 2004 in parts of Johannesburg, Pretoria, Cape Town, Durban and major holiday resorts. In the wake of its 3G
launch, Vodacom revealed plans to pilot 3.5G high speed downlink packet access (HSDPA)
technology, beginning in April 2005, to increase maximum data transmission speeds from
384kbps to 2Mbps. It went on to launch the technology commercially in March 2006. The
entire 3G system had been upgraded with HSDPA technology by March 2007 and in January
2008 Vodacom announced that peak download speeds had been increased to 3.6Mbps across
the entire system. The company further upgraded its networks in May 2008, rolling out
HSUPA technology and raising maximum upload speeds to 1.4Mbps. HSDPA peak speeds
were upgraded to 7.2Mbps in February 2010 and 14.4Mbps by August that year. In August
26
8/13/2019 South Africa 20174133
27/72
2010 Vodacom teamed up with On Demand Group to launch mobile TV subscription on-
demand services to its 3G user base, claiming that the ‘what-you-want, when-you-want-it’
package was the first of its kind in Africa. In February 2010, Vodacom announced that it
had switched on its first 21Mbps HSPA+ site in Midrand, with 43Mbps Dual Carrier (DC)-
HSPA+ technology belatedly given a commercial push in April 2011, by which time the
operator had more than 1,000 base stations upgraded with the high speed technology. More
recently, Vodacom commissioned its 5,000th 3G base station on 20 February 2012, with the
cellco also noting that it had reached the milestone of 3,000 DC-HSPA+ enabled sites by that
date.
Vodacom’s former subsidiary iBurst, which launched its first WiMAX services in June 2008,
signalled the company’s first involvement with 4G mobile broadband, and although the
802.16e network supported full mobility, Vodacom made no secret of its desire to embrace
4G Long Term Evolution (LTE) at a later date. As such, in September 2010 the company
sold its final 24.9% stake in iBurst to co-shareholder Wireless Business Solutions (WBS) to
ensure that it would be eligible to bid in watchdog ICASA’s long-delayed spectrum auction.
Indeed, June 2010 saw Vodacom preside over the launch of a trial LTE network in Midrand,
reputedly the first such trial in Africa.
Concerned with ICASA’s lack of progress in auctioning 2600MHz LTE spectrum, October
2012 saw Vodacom take matters into its own hands when it launched the country’s firstcommercial LTE network, using existing 1800MHz spectrum, beating long-term domestic
rival MTN to the punch. At launch, the service was accessible to cus tomers via approximately
70 base stations in Johannesburg, with other cities scheduled to follow in the near future.
Vodacom wasted little time in extending its LTE footprint and in less than a month confirmed
that it had tripled the number of LTE-enabled base stations on its network to over 200,
while simultaneously commencing testing in Cape Town. The cellco’s progress continued
at pace, and by mid-December the network rollout had reached Cape Town, several weeks
ahead of schedule. Confirming the development, chief technology officer Andries Delport
commented: ‘On average we’ve lit up another seven LTE sites every single day for the past
two months and hit our target of 500 LTE base s tations a month early.’
Back in October 2012, confirming the original LTE launch, Shameel Joosub, CEO of parent
company Vodafone Group, noted that it intended to use its experience of launching LTE
in Germany and Portugal to benefit its South African unit. Following Vodacom’s 2011 re-
branding in line with Vodafone’s corporate iden tity, the parent said that it intended to rotate
executives among its foreign units and allow Vodacom to leverage its global supply chain, as
well as introducing new services pioneered by the UK giant elsewhere in the world.
Vodacom South Africa is a 93.75%-owned subsidiary of Vodacom Group, which is itself
owned by UK-based mobile giant Vodafone Group (65%) and the South African government
(13.9%), with the remaining shares distributed on the Johannesburg Stock Exchange (JSE).
The outstanding 6.25% of Vodacom South Africa is held by a number of Black Economic
Empowerment (BEE) shareholders. In October 2008, as part of the government’s black
empowerment programme, YeboYethu, a company set up solely for Vodacom employees
and suppliers to acquire shares in the cellco, acquired 3.44% of the company’s equity for a
total fee of ZAR946 million. The YeboYethu offer was almost three times over-subscribed,attracting 102,531 valid applications, with 86% of cash received from the black public and
14% from black-run companies and organisations. The total BEE transaction was said to be
worth approximately ZAR7.5 billion, which was the financial ceiling for BEE transactions at
that time.
In April 2011 it was reported that telecoms regulator, the Independent Communications
Authority of South Africa (ICASA), intended to introduce a stipulation that companies
applying for spectrum in the future must have at least 30% of their equity in the hands of
Historically Disadvantaged Individuals (HDI); the definition of HDI differs from traditional
27
8/13/2019 South Africa 20174133
28/72
BEE rules since it includes women of all races and people with disabilities. If approved, the
move would see major telecoms players such as Vodacom and MTN sidelined in ICASA’s
long-delayed auction for frequencies in the 2.6GHz and 3.5GHz spectrum bands unless they
can up their HDI stakes to 30% or above. Whilst HDI stipulations have widely been applied
to ownership in the past, it was believed that this was the first time that the clause had been
linked to radio spectrum. The following month, in May 2011, Vodacom Group was reported
to be considering lodging a bid to buy back the South African government’s 13.9% stake in
the company; redistributing this to HDI investors would go some way to helping Vodacom to
fulfil the required criteria.
MTN South Africa
3 Alice Lane
Sandown Ext 38
Johannesburg 2146
South Africa
Tel. +27 11 912 3000
http://www.mtn.co.za
Licensed in 1993, MTN was, along with Vodacom, one of two original GSM mobile network operators in South Africa when it launched commercially in June the following year. The two
companies held a duopoly over the market until the entry of a third operator, Cell C, in 2001.
MTN remains the second largest operator in the market in terms of subscribers with a market
share of 36.8% at 30 September 2012, equivalent to 24.498 million users, and up from 20.968
million (36.7%) year-on-year. At the same date MTN reported that 82.3% of its customers
were using pre-paid plans.
MTN launched its first data offerings in May 2002 following the deployment of GPRS
technology across its network. Two years later the firm rolled out a 2.5G EDGE network
to further bolster its data services, incrementally expanding the network as it increased its
network’s GSM capacity. In June 2004 MTN received a temporary concession to pilot a
3G mobile network, but initially appeared in no great rush to roll out commercial services.
Indeed, following market leader Vodacom's 3G launch in December 2004, the company
said it did not expect demand for UMTS in South Africa to meet future expectations and
expressed the belief that voice services would continue to be the key market driver, arguing
that other operators were forcing new technology onto the public rather than meeting any
real demand for high speed data applications. Despite these statements, MTN eventually
decided to push ahead with a ZAR500 million (USD56.3 million) W-CDMA rollout, in
partnership with Swedish vendor Ericsson, and launched a commercial 3G network on 26
June 2005 in central districts of Johannesburg, Midrand, Pretoria, Cape Town, Durban, Port
Elizabeth and Bloemfontein. It claims that it allowed Vodacom a six-month head start to
ensure handset availability and equipment reliability. MTN hoped to sign up 100,000 3G
users in the first twelve months, and managed to surpass its target, attracting 133,000 by
mid-2006; this had risen to 513,000 twelve months later, and the total was estimated to have
reached 10.1 million by the end of September 2012. The cellco launched a 3.5G HSDPA
network in January 2008 in major metro areas. By February it announced it was upgrading
download speeds on its HSDPA network to 3.6Mbps, from 1.8Mbps previously; peak speedsof 7.2Mbps are also available in certain areas. HSUPA evolution was launched in September
2008, offering uplink speeds of up to 1.4Mbps countrywide using a phased approach, with
key metropolitan areas getting the faster speeds first. Meanwhile, MTN’s HSPA+ network
went live in early-2010, while the cellco trialled Dual Carrier (DC)-HSPA+ technology in
January 2011 in Sandton using re-farmed 2100MHz frequencies and equipment supplied by
Ericsson. The scale of the DC-HSPA+ network coverage was unknown as at end-January
2013.
28
8/13/2019 South Africa 20174133
29/72
In August 2010 MTN announced plans to build a rural 3G network in the 900MHz band. The
network was designed to better serve consumers in outlying areas; MTN expects significant
growth in demand for broadband services outside of South Africa’s main cities over the
next few years. By utilising the 900MHz bandwidth, MTN hopes to provide wider coverage
with fewer base stations, reducing costs. Previously, both MTN and Vodacom had used the
2100MHz band for 3G services, resulting in a smaller footprint around cell towers. MTN
is ‘re-farming’ a portion of its 900MHz spectrum – previously used exclusively for its 2G
network – for rural 3G purposes; in urban areas 900MHz will continue to be used purely
for 2G. The operator said in November 2011 that it expected to have 150 UMTS-900 base
transceiver stations (BTSs) in service by end-2011, rising to around 1,000 twelve months
later.
In May 2011 MTN announced that it had commenced work on a pilot Long Term Evolution
(LTE) network in Gauteng, aiming to have around 100 base stations operational by the
end of 2011. However, managing director Karel Pienaar warned that it was likely to be
‘several years’ before consumers could expect to experience the fruits of MTN’s labours
for themselves, with LTE-compatible handsets and dongles not yet ready for mass-market
deployment. Further, at that date, MTN was still waiting for regulator ICASA to stage its
long-delayed spectrum auction for frequencies in the 2.6GHz band; in the interim period
MTN said that it was building out its LTE network using spectrum in the 1800MHz band,
which is predominantly used for voice services. In September 2012 MTN revealed that itwas set to commercially launch LTE in Johannesburg, Durban and Pretoria by the end of
the year. MTN chief technology officer Kanagaratnam Lambotharan said that the operator
would have between 400 and 500 base stations equipped with LTE functionality by the end
of 2012, up from around 250 in September. Cape Town was exempted from the rollout
due to spectrum refarming issues. The LTE mobile broadband service went live on 1
December 2012 in Johannesburg, Durban and Pretoria. Ericsson provided LTE infrastructure
and services for MTN’s 4G rollout, including its RBS 6000 family of base stations, Evolved
Packet Core, Home Subscriber Server (HSS) for user data management, Operating Support
Systems (OSS), project management and network optimisation; the rollout marked the first
commercial LTE network built by Ericsson in Africa. At the time of writing (January 2013)
4G coverage reached the following areas: Menlyn, Centurion, Pretoria East, Hatfield and
Midrand (all Pretoria); Sandton, Rosebank, Fourways, Roodepoort, Fairlands, and OR Tambo
International Airport (all Johannesburg); Westville, Pinetown, Kloof, Hillcrest, Tongaat,
Queensburgh, Amanzimtoti King Shaka International Airport and Umhlanga (all Durban). At
that date MTN had deployed a total of 1,600 LTE base s tations across the three cities.
For the six month period ended 30 June 2012 MTN reported total revenue of ZAR19.86
bill ion, up from ZAR18.14 billion one year earl ier and ZAR17.135 billion in 1H10. Data (as
a percentage of revenue) accounted for 26.1% of MTN’s earnings during 1H12, an increase
compared to 21.4% in full-year 2011 and 19.0% in 2010.
MTN South Africa is 100% owned by MTN Holdings, the holding company for all of MTN
Group's investments.
Cell C
150 Rivonia Road
Morningside
Johannesburg 2196
South Africa
Tel. +27 11 324 4000
Fax +27 11 324 4001
http://www.cellc.co.za
29
8/13/2019 South Africa 20174133
30/72
Cell C became South Africa's third mobile operator when it launched services in November
2001, after securing a licence in February that year. The company awarded Siemens a
USD221 million turnkey contract to provide dual-band GSM-900/1800 network
infrastructure in June 2001, including delivery and installation of core switching, base
stations, GPRS, pre-paid platforms, VAS equipment, support and maintenance. However,
Cell C began operations via a 15-year roaming contract with market leader Vodacom and
relied heavily on its rival's network while its own infrastructure was in deployment.
At launch, Cell C stated that its initial goal was to claim a 25% market share in terms of
subscribers by the end of 2008, a target which it missed, with just 12.7% at that date. The
company explained that the rate of growth in the domestic mobile sector had meant that
initial projections were for a much smaller market. Nevertheless, subsequent growth has been
solid, and as at end-September 2012 Cell C had around 9.782 million subscribers, going on
to pass the ten million subscriber mark in October 2012. That said, the introduction of further
competition in the shape of Telkom South Africa’s 8ta operation in late 2010 has arguably
had a negative effect on Cell C’s market share, however, with the latter’s slice of the market
falling from 16.5% in September 2010 to 15.7% a year later and 14.7% by September 2012.
In June 2004 Cell C introduced a commercial GPRS data platform, and three months later
signed an agreement with Nokia for the provision of a multimedia messaging service (MMS)
solution. At the time of launching GPRS the company stated that it did not intend to pursueUMTS plans 'for the foreseeable future' as it believed that demand for the data service was
not high enough to warrant deployment. In December 2004, however, it appeared to have a
change of heart and announced a plan to launch advanced mobile network services before
the end of 2005. Cell C applied to regulator ICASA for a temporary third-generation licence
and put out a tender for technology suppliers to implement an UMTS network rollout. It also
began a programme of 3G testing in Johannesburg, Cape Town and Durban, but a UMTS
launch failed to materialise. In the meantime, Cell C began to upgrade its networks with
EDGE technology. By the end of 2009 Cell C had successfully deployed GPRS and EDGE
across its entire network.
In December 2009 Cel
