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Issue Date: June 2007

3Q: state of the telecoms nation

1 June 2007

CBR asked Pierre Holtzhausen, networking specialist at DCC for his opinion on the local telecoms situation.
Pierre Holtzhausen, networking specialist at DCC
Pierre Holtzhausen, networking specialist at DCC
CBR: What is the real status of South African telecommunications in 2007?
Holtzhausen: We are beginning to see some real activity in the local telecommunications industry with a host of service providers, such as Sentech's My Wireless, providing more capacity per month at no additional cost. Vodacom, MTN and iBurst reacted simultaneously and have reduced fees and/or improved services. The market is definitely hotting up.
Telkom is now also providing bulk ADSL to ISPs that have more than 50 000 ADSL subscribers. However, it is estimated that there are currently only 260 000 current ADSL users so the ISP that would qualify to meet this discount structure would need to capture almost a quarter of the market.
It must also be noted that ISPs are not as profitable as everyone seems to believe as they have to pay for the back-end infrastructure which must have interconnection capabilities/agreements with other ISPs as enforced by SA law. This will ensure that local traffic will stay local rather than take up bandwidth on international links to get to an interconnecting point. This paves the way for measuring local traffic versus international traffic and we will hopefully see some meaningful discounts that are actually supported by our incumbent fixed-line operator.
CBR: What prospects are there?
Holtzhausen: Our second network operator (SNO), Neotel, has been allocated a large portion of the WiMax spectrum which will allow it to offer connection services without a wired infrastructure (or make use of Telkom's wired infrastructure).
This will see Neotel being able to expand rapidly, offering competitive services to the local market. ICASA's confidence in the company is reflected in the allocation of the WiMax spectrum, which will allow Neotel to execute what it set out to do without any hindering factors.
A significant investment in telecommunications is seen in Investec and The Development Bank's contribution of R100 million to support local broadband service provider iBurst's nationwide network expansion. In addition, smaller broadband players are receiving support, creating growth, expansion and competition in the local market. This increasingly competitive environment has resulted in a decrease in bandwidth fees with further decreases expected.
CBR: Is it worth waiting for reasonable prices or should we emigrate to countries that understand the benefits of communications?
Holtzhausen: We should support local endeavours and recognise/acknowledge that there is ongoing development in the local market. Although this is not happening as quickly as required, we are still seeing acceleration in broadband affordability.
In addition, Government is investing in other initiatives such as SumbandilaSat, Venda for 'pointing the way' or 'pathfinder'. SumbadilaSat is a South African satellite that will be launching from Russia in June. Although it is specific to stimulating communication for science and space, it reflects the focus and investment in telecommunications.
Gateway to acquire GS Telecom
Gateway Communications, a provider of Pan-African voice and data connectivity services, has agreed to acquire GS Telecom, provider of data connectivity services to corporate customers and telecommunications operators in Africa. The transaction was valued at approximately $37,5 million and is to be financed through a combination of cash and funds from a newly issued bond. The transaction is expected to complete mid-May subject to certain conditions.
GS Telecom provides services in 27 African countries, with a major presence in Nigeria, the fastest growing communications market in Africa over the last five years.
The transaction would strengthen Gateway’s position as the largest provider of voice and data connectivity services in sub-Saharan Africa, boosting Gateway’s customer base with an additional 200 customers to over 1200 customers in over 37 countries in Africa (Gateway’s current network includes 30 African countries). The acquisition would bolster Gateway’s presence in the rapidly growing business communications market and provide access to local infrastructure and support capability.

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