MOBILE EMPIRES SEEK GROWTH While MTN is land-grabbing all over Africa, Vodacom is betting on growing subscriber numbers and mobile data ventures and Cell C enlists the help of Sir Richard Branson. We weigh the growth strategies and tech moves of the local mobile giants to ward off competition and speculate how it will all play out this year. THE COMING year looks like a defining one for South Africa`s mobile industry. Vodafone wants a 50% stake in Vodacom through its acquisition of VenFin, MTN is continuing its African and Middle East expansion plans, and Cell C`s partnership with Virgin Mobile is likely to stimulate further competition in the sector.

While speculation is part and parcel of any key industry sector, the deal that has perhaps sparked the most of it recently has been operator Vodafone`s R21 billion offer to buy VenFin`s entire shareholding. This, of course, includes a 15% stake in Vodacom.

With Vodafone already holding 35% in Vodacom, the VenFin deal gives it an equal 50% shareholding with Telkom, leading to much speculation about what it will all mean for Vodacom.

Although some analysts have predicted that it could mean the end of the Vodacom brand, with Vodafone possibly seeking to rebrand the business as Vodafone Africa, Brian Nielson, a director at research firm BMI-T acknowledge, says this is unlikely.

"While that is possible, I would give it a low probability, given the strength of the Vodacom brand in Africa. [Africa] is especially critical at this stage of the game, while the operators are still rapidly acquiring new subscribers," he says.

Another possibility is that Vodafone`s operations in Kenya and Egypt will be moved into the Vodacom portfolio, to strengthen Vodacom`s presence in Africa, where it lags behind local rival MTN.

"At this point we don`t know. Vodafone and Telkom will have to sit down and work [it] out," says Vodacom CEO Alan Knott-Craig.

"Our strategy has been focused foremost on South Africa, the key market in Africa. Although we would obviously be keen to look at any opportunities on the continent, it will largely depend on our shareholders` appetite for other African markets."

Knott-Craig says VOIP is, strictly speaking, voice being run over a data network, so in truth he doesn`t see it as competition.

"The future is not about pushing data over a voice network, it is about building high-speed data networks and voice becoming just one product," he says. "A 3G network is simply the first step in that. Ultimately it will be a broadband connection for voice, data and, in all probability, TV as well."

Knott-Craig says he believes that over the next few years, the sector will change even more radically than it did when mobile telephony first came along 15 years ago. "It`s a whole new philosophy. Operators must run with it or risk being left behind."

THREATS ALL AROUND

Talaat Laham, CEO of Cell C ch recently launched its own 3G service says that although VOIP operators could be seen as enviable rivals of a sort to mobile operators, he believes VOIP will also be offered by the cell providers in the future. "We obviously study any and all technologies and may even provide them to the market," says Laham.

"We are also able to learn from the mistakes of others. A case in point is 3G. It has caused some difficulties for us, but it has pointed out some pitfalls to avoid."

He believes that despite the hoopla about mobile data, voice will still remain the most important revenue generator for some time to come. "We will keep an eye on it," he says, simply.

BMI-T`s Nielson points out that although data revenues continue to grow rapidly, they will still account for less than 10% of total operator revenues at least until 2009.

"[You may also ask about] the relative profits in different types of data services For example, might instant messaging/chat or push-to-talk become so popular that they will replace the currently highly profitable SMS business?"

INCREASED COMPETITION

Undoubtedly one of the most exciting issues for 2006 is Cell C`s partnership with Virgin Mobile. "The venture, in which Virgin will operate in South Africa as a service provider, has both parties bringing something to the table," he says.

"Virgin offers an internationally recognised brand, along with knowledge and experience of other markets, while Cell C can offer a high quality network and strong understanding of local consumers." Laham claims that the deal will be great for consumers, as it will stimulate competition. Knott-Craig says the event will be good for the industry. "It will inject a degree of sexiness into the market and competition is always good for the industry. More importantly, fiercer competition will ultimately mean consumers will get a better deal," he says.

Laham is confident that Cell C will also benefit from another major change in the industry, mobile number portability (MNP), in June. "We have already started working with other operators and Icasa as we begin preparation for it, and as a late entrant into the market, we expect it to benefit us most of all," he claims.

"MNP will lead to churn, which will help us purely due to the numbers game. As has been proven in other countries, the smaller operators inevitably benefit, although naturally it is most beneficial to subscribers."

According to Nielson, although Cell C has the most to gain, MNP`s impact has been overplayed. There won`t be net market share growth for any of the players, he says.

"The jury is also still out on how it will be implemented and what the real cost to the consumer will be, as well as how much of an inhibitor this cost will be perceived to be, in the minds of customers," states Nielson.

Knott-Craig holds a similar view, saying that in every nation that has so far seen it, the experience has been that it is not as simple as seems and involves admin, which mean customers have to be really angry with their existing provider to go through with it. "[Nevertheless] Vodacom is certainly taking the issue very, very seriously indeed," he says.