Boston, MA -- (SBWIRE) -- 02/27/2014 -- Competition dynamics could change significantly in South Africa's fixed-line sector owing to a number of key regulatory and industry-specific factors, including the functional separation of Telkom's wholesale and retail fixed network services, the implementation of local loop unbundling (LLU), expected in March 2014, and possible market consolidation, with Vodacom still in talks to buy Neotel. These developments have the potential to improve competition and drive growth in the market. Although subscriptions to fixed-line services will remain under pressure from fixed to mobile substitution, we expect greater competition in the market to lead to the introduction of high-value converged services for retail consumers and innovative enterprise solutions for businesses.

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Key Data

- The mobile market grew by 2.9% q-o-q in Q313 to bring total growth in 9M13 to 3.9%.
- Market average ARPU appreciated marginally by 1% in Q313 on the back of strong data usage.
- The fixed-line incumbent operator, Telkom SA, reported a 4.6% y-o-y decline in fixed telephony subscriptions in the 12 months to September 2013, offsetting positive growth recorded by alternative operators.
- Total ADSL subscriptions grew by 6.7% in the year to September 30 2013.

Risk/Reward Ratings

South Africa remained in third position in this quarter's update to BMI's Risk/Reward Ratings for Sub- Saharan Africa. However, its aggregate score of fell by 1pt to 52.2 owing to a sharp drop in its Industry Rewards rating to reflect slow subscriptions growth over our five-year forecast period to 2018. That said, South Africa remains the region's largest economy and operators boast a healthier subscriber mix than much of the rest of the region, keeping its scores above the regional average. However, its more mature mobile market means that growth prospects are slower than many of its neighbours and we expect operators to diversify their revenue streams in order to sustain revenue growth.

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