William Stucke[William Stucke Ispa*] Government should treat the news that the country is growing its Internet penetration at a much slower rate than any other country in Africa as a serious wake-up call about the need to accelerate deregulation of the telecommunications market.

The country’s dismal annual single-figure rate is an indictment of the government’s failed “managed liberalisation” of local telecoms.

The only country in the Africa and Indian Oceans region that is growing Internet penetration at a slower rate than SA is Reunion, which has twice our Internet penetration. Growth in the SA market has stagnated over the past five years thanks to a lack of meaningful competition in the market.

Internet growth statistics released in Hyderabad, India during the recent Internet Governance Forum Meeting show that SA has fallen a long way in the African Internet rankings since 2000, when it had 2,4m subscribers representing 53% of Internet users across the continent.

Today, SA represents only 9% of Africa’s total Internet subscriber base, with 5,1m users.

Between December 2000 and 2008, the country added only about 2,7m subscribers to its Internet user base, compared to the 10m added by Nigeria, the 8m added by Egypt, the 7m added by Morocco and the 3m added by Kenya.

Over the past 10 years, the rest of Africa has grown its Internet subscriber base at 10 times the pace of rich, industrialised SA. We’re a long way off from having satisfactory Internet penetration, and must ask ourselves what has gone wrong. Continue reading ‘Low Internet penetration an ‘indictment’ on SA gov’t’

Android attack

Android logo[Duncan McLeod Financial Mail] In what would be its most direct challenge to Microsoft to date, Google is said to be planning to offer Android, an operating system it developed for smartphones, on a new generation of mini laptop computers. Can Google unseat Windows on PCs?

The market for netbooks — small, low-powered and low-cost notebook PCs — has mushroomed in the past 24 months. Ever since Taiwan’s Asustek introduced the Linux-based Eee PC in October 2007, all the big PC makers, from Hewlett-Packard to Acer, have introduced their own low-cost laptops. The machines typically cost less than R5 000.

The new market segment, which is more than doubling every year according to some estimates, has given Windows rival Linux its first significant market share outside the server computers that power companies’ back-office systems. According to research from Gartner, about 15% of netbooks sold run Linux, against less than 1% for other PCs.

The rise of netbooks has given Microsoft a headache. It has been forced to continue selling Windows XP, now eight years old, because the resource-intensive Windows Vista won’t run well on the low-powered devices. The software maker has worked hard to ensure that the upcoming Windows 7, due out later this year, will run on netbooks.

But Google, which is already a serious threat to Microsoft in Web search and has an array of products that threaten Microsoft’s applications business, is now rumoured to be planning to get into the PC operating system business with Android. Continue reading ‘Android attack’

Pieter Uys[Edward West Business Day] Vodacom Group said it would list on the main board of the JSE on May 5 and seek new growth opportunities in the media, entertainment and mobile advertising sectors as well as in mobile financial services.

The group, which is 50% owned by Telkom SA and 50% by UK-based Vodafone Group , issued its prelisting statement yesterday before what is likely to be one of the biggest listings on the JSE this year.

Last year Telkom accepted R22,5bn from Vodafone for an additional 15% of Vodacom, to bring its stake to 65%.

This would theoretically value all of Vodacom at R150bn, but a premium for control was paid and current stock market conditions are weak so the market capitalisation at listing may be lower.
The listing is part of a number of inter-conditional transactions, including the sale of the 15% stake in Vodacom to Vodafone, and, following the listing, the unbundling by Telkom to its shareholders of its remaining 35% of Vodacom.

When asked whether it was a good time to list given the very weak and volatile equity market conditions, Vodacom CEO Pieter Uys said the listing wasn’t to raise cash and the listing procedures had not taken market conditions into account specifically. “We want to give Telkom shareholders direct access to Vodacom.”

He was loath to guess a potential listing share price because of the volatile market.

Uys said the listing of Vodacom would offer investors direct access to a well established communications company with a unique platform for growth. He said there was likely to be a roadshow for potential investors locally and in Europe in the next month. Continue reading ‘Vodacom set for listing, names new board’

Mobile phones sales tanked in Q4 2008[Staff Reporter FM Tech] Cellphone sales slumped 4,6% in the fourth quarter of 2008 over the same period in 2007 as the economic crisis starts to bite into the telecommunications industry.

Worldwide mobile phone sales to end users totalled 314,7m units in the fourth quarter of 2008, according to analyst firm Gartner. Manufacturers continued to struggle against low consumer confidence in both emerging and mature markets.

The firm says the top five mobile phone vendors all experienced a decline in sales in the fourth quarter of 2008. The industry did experience growth for the year, with worldwide mobile phone sales to end users surpassing 1,22bn units in 2008, a 6% increase over 2007 sales.

Mobile phones have traditionally been one of consumers’ preferred presents for Christmas. However, in the fourth quarter of 2008 consumers were concerned about taking on the contract associated with the most attractive products on the market, says Carolina Milanesi, research director for mobile devices at Gartner. Consequently, mobile devices in both emerging and developed markets experienced the lowest quarter-on-quarter growth (2%) ever recorded in a fourth quarter. Continue reading ‘Cellphone sales tank as economy bites’

All eyes on MTN

MTN CEO Phuthuma Nhleko[Sure Kamhunga Business Day] When cellphone group MTN reports its annual results on March 12, analysts will be keen to hear from group CEO Phuthuma Nhleko (pictured) how he intends keeping a distance from aggressive competitors snapping at the heels of Africa’s largest cellphone company.

MTN has already whet shareholders’ appetites for a hefty dividend payment following its recent announcement that basic headline earnings per share would be up by 38%-43%, while adjusted headline earnings per share would be up by as much as 34% in the year to December.

Analyst Irnest Kaplan says the numbers are not entirely unexpected and the “growth rates seem in line with what was expected”.

Kaplan says the key things to look out for when MTN presents its results will be growth achieved in SA, given the fact that it is now regarded as a maturing market with little room for growth.

But it is the company’s future growth strategy in the face of competition that will be of interest. “We have to see how much MTN is spending on capex and their outlook for the future,” Kaplan says.

Heading the pack of competitors giving MTN a run for its shareholders’ money are Vodafone and Vodacom, fixed network operator Telkom and Kuwait’s Zain.

They are scrambling to expand in sub-Saharan Africa, which analysts at Rand Merchant Bank say posted economic growth of more than 5% for the fifth year last year and “should still be one of the best-performing regions” this year. Continue reading ‘All eyes on MTN’

Inside the Twitter phenomenon

[Richard Waters, Chris Nuttall and David Gelles Financial Times] At first glance, Twitter has all the hallmarks of an Internet fad. The microblogging service, which limits posts to 140 characters, has become a favourite of celebrities and the restless digerati who always seem to be “discovering” some hot new thing. Britney does it and so does Lance. Barack, of course, has been at it for ages.

It comes with its own quirky language. Messages are known as tweets and people who read your messages are called “followers”. Then there are the particular Twitter culture and modes of behaviour: sociability is enhanced by “retweeting” messages you find particularly illuminating — rebroadcasting them to your own followers. Among hardcore users, gratuitous self-promotion is frowned on.

Twitter logo

Yet there is more to this new Internet fashion than meets the eye. For in its deceptively simple way, Twitter has stumbled on a formula that a whole generation of recent Web start-ups has been searching for: a way for people to connect with friends, express themselves and find information that stands a chance of one day becoming as popular as other mass online trends such as blogging and social networking.

Twitter itself — a service run by a tiny Silicon Valley company with only 29 employees — has yet to prove that it has true mass-market appeal, or that it can find a way to make money from the idea. But even if it falls short, the new forms of behaviour that are developing around it point to an entirely new area of online interaction that others will rush to exploit. Continue reading ‘Inside the Twitter phenomenon’

Cellular cleans up its act

Kirsi Sormunen[Duncan McLeod Financial Mail] The world has 4bn cellphone users, according to the latest industry figures. That could mean that thousands of tons of electronic gadgets, many of them containing toxic chemicals, will end up in landfills within a few years.

Kirsi Sormunen, head of environmental affairs at Nokia, the world’s largest handset manufacturer with about 40% market share (and more than 1bn handsets in use worldwide), says the industry is working hard to clean up its act.

That means not using chemical compounds that are harmful to the environment, and encouraging recycling. The company is phasing out antimony trioxide, a toxin used in the manufacture of cellphones, as well as harmful brominated and chlorinated compounds.

It is also working to remove the trace amounts of lead still found in its handsets.

It has created 5 000 handset recycling facilities in 85 countries worldwide, including SA. Sormunen says Nokia plans to step up marketing efforts so more people know about the programme. “Up to about 80% of the materials in mobile phones can be reused,” she says.

Nokia is piloting incentives for people to recycle their handsets. In northern Europe, it donates money to nature conservation for every phone handed in. In others, such as the US, it plants a tree for every phone returned. In China, Nokia offers its users free airtime.

But convincing people to recycle is a big challenge. A recent survey commissioned by Nokia shows the vast majority of people who upgrade their handsets put their old phones in a cupboard or sock drawer and forget about them. Continue reading ‘Cellular cleans up its act’

Blue Label Telecoms[Thabang Mokopanele Business Day] Technology and telecommunications company Blue Label said yesterday it would continue pursuing the growth of its global footprint as it rolled out its expanding range of secure electronic tokens.

The group, which yesterday posted solid results for the six months to November, said that in spite of the global economic meltdown, the products and services it provided remained appealing to its clients.

Blue Label, which distributes cellular airtime and other electronic services via point-of-sales terminals, cellphones and the internet said its transactional point of sale (POS), mobile systems and products and services were being integrated into Microsoft’s mobile and advertising service platforms.

The group said that during the course of this year these services would be rolled out into emerging and developing markets through Microsoft Unlimited Potential Group and its global partners, utilising POS and mobile channels.

“This in future will translate into the monetisation of mobile and POS advertising in these markets.”

Revenues increased 23% to R7,6bn from R5,8bn, while profit increased to R199,7m from R40,7m. Continue reading ‘Blue Label on a roll, despite downturn’

Pieter Uys[Sure Kamhunga Business Day] UK cellphone group Vodafone has received competition tribunal approval to acquire a further 15% of Vodacom from Telkom, which forms a key plank of its African growth strategy.

The world’s largest phone company by revenue could pay more than R22bn to increase its stake in Vodacom, SA’s largest cellphone company by subscriber numbers. Vodafone and Telkom each own half of Vodacom.

The tribunal brushed aside last-minute oral submissions against the sale by the Communications Workers’ Union yesterday.

Among other reasons, the union, represented by first deputy president Karthi Pillay, said that Telkom would lose an important source of revenue, and that the domination of foreign capital would create an economic and security risk.

A few hours after the union’s submissions, the tribunal then issued a statement saying that it had decided to approve the deal unconditionally, which analysts said was now a mere formality.

Vodafone, which last year acquired 70% of Ghana Telecom for about US$900m, is keen to grow its African footprint as it diversifies revenue streams from maturing markets in Europe. Continue reading ‘Vodafone gets nod to buy Vodacom stake’

Spending by telecom carriers[Duncan McLeod Financial Mail] Mobile operators are better placed than their fixed-line counterparts to weather the economic storm that is engulfing the planet. This is because they have greater flexibility in their cost structures and capital expenditure programmes, and because of ongoing substitution from fixed to mobile phones.

That is one of the key findings of a new research report, Confronting the Crisis: Its Impact on the ICT Industry, published this month by the International Telecommunication Union (ITU).

Mobile operators in emerging markets are also better placed than their rivals in advanced economies. The report quotes MTN CEO Phuthuma Nhleko as saying the African telecom market may not be too adversely affected by the crisis. MTN said last week it expected headline earnings per share for the year to end-December to rise by about 40%, a remarkable achievement given market conditions. MTN reports its results on March 12.

Not everyone’s doing as well as MTN, though. The picture “varies considerably by country and company”, the ITU report says. “Any prediction as to how the crisis will affect future investment plans is fraught with uncertainty.”

Nevertheless, operators and equipment manufacturers remain bullish about growth prospects, especially in emerging markets. Last week in Barcelona, at the annual Mobile World Congress telecom confab, senior industry executives spoke bullishly about connecting the 2,7bn people worldwide who do not yet use a mobile phone. Mobile subscriptions topped 4bn for the first time in December 2008, meaning that about three in five people now have a cellphone. Continue reading ‘As economy sinks, it’s better to be mobile’

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