- Language: English
- 663 Pages
- Published: August 2012
- Region: Global
South Africa Telecom Market Forecast - Mobile Apps, Mobile Ads and Cloud Services to Drive Growth Through 2017
- Published: November 2012
- Region: Africa, South Africa
- 39 Pages
- Pyramid Research, Inc
The South African ICT market is dynamic, strategic and growing fast. It is one of the key markets in the Africa & Middle East (AME) region because of its size and wealth and because it is the home of several important regional telecom players. Its low fixed broadband adoption is a major contributor to the dynamism of the mobile data segment, while the increase in bandwidth afforded by new international connections such as WACS (West African Cable System), which came online in May 2012, is enabling lower data pricing and higher bandwidth.
The growth in the adoption of data services, which Pyramid forecasts on a quarterly basis, is supporting the development of a range of other opportunities and it is here that this report will focus, looking specifically at mobile apps, mobile advertising and cloud services. Not only do these emerging segments afford new revenue streams, but they also provide strategic opportunities in terms of competitive positioning and differentiation.
South Africa Telecom Market Forecast analyzes the South African telecom market in some detail, highlighting a number of key areas of growth now that traditional voice services revenue is flattening. The report focuses on three main areas of growth: mobile apps, enterprise cloud services, and mobile advertising and their influence on the South African market.
Key findings include:
Traditional voice services are plateauing in South Africa and will decline in coming years. Fixed voice services are already declining, and fixed incumbent Telkom reports falling volumes of minutes as well. Fixed-to-mobile substitution is partly to blame as the premium cost of mobile voice continues to decline; this trend is exacerbated by the lack of significant competition in fixed voice markets. Between 2012 and 2017 we expect that there will be a decline of almost US$2bn in total traditional voice services. SMS revenue also beginning to stagnate with the continued migration to IP-based messaging services.
Mobile apps, mobile advertising and cloud services are three of the fastest growing areas in the South African market. Despite continued strong growth in the broadband markets, there are new, long-term growth opportunities emerging that are also of strategic importance for service providers. The unique characteristics found in some emerging markets — such as low PC and/or broadband penetration, limited penetration of the more closed smartphone platforms and the dominance of mobile operator branding and device distribution — gives rise to opportunities not always available in developed markets.
Leading operators can leverage new opportunities to both defend their positions and find new areas of revenue growth. Vodacom has its own advertising business unit which is able to generate new revenue streams and provide additional value to its client base. It has also launched its own app store to defend against the growth of Apple and Android as well as to enhance the positioning of its smartphone and feature phone propositions. MTN also plans to launch its own app store: regional operators can leverage their experience and investments when expanding such services across their footprint.
Mobile app revenue is expected to show very strong growth, with a CAGR of 48%. The huge growth in the adoption of smartphones, the increasing availability of apps and the introduction of new payment methods are the key drivers. Carrier billing is becoming increasingly available, making app purchases easy and quick, and it also facilitates the adoption of in-app billing models that are becoming popular. Total spending on mobile apps is forecast to increase from $31m in 2012 to $220m in 2017.
- Paid and subscription-based apps dominate revenue, but are expected to be overtaken by in-app payments in 2013. In 2017 in-app payments are expected to generate 72% of total mobile app expenditures.
- A full 95% of mobile app downloads are unpaid, and mobile app-based advertising revenue is increasing rapidly. Recent efforts by Facebook to further monetize mobile advertising are having a positive impact on the industry, while mobile advertising networks are reporting rapid growth.
Vodacom's app store launch is finding some success. This is driven by a number of factors, including the dominance of BlackBerry and Symbian platforms, Vodacom's powerful brand, its strong position in device distribution and its focus on the development of local apps. Furthermore, it is also helping to drive data usage on feature phone devices. We expect that it will take almost 20% of mobile app revenue in 2017, although this does not make a big impact on its overall revenue. However, it strongly supports the operator's smartphone and feature phone propositions and also opens up other opportunities, such as providing targeted advertising for apps developers and cloud services to enable them to set up at low cost.
Cloud services are enjoying strong growth, and we expect revenue to grow to $245m in 2017, up from just $72m in 2011. In addition to the growth of broadband, other key drivers include the overcapacity in data centers — which increases awareness of cloud services — and increases in the penetration of devices such as computers, smartphones and tablets. Cloud service revenue as a portion of total data center revenue is expected to increase from 16.3% in 2011 to 27.5% in 2017.
- Infrastructure-based services dominate the cloud opportunity, and large companies in particular are taking advantage of opportunities to lower costs by using cloud services in those areas where internal computing power is underutilized, such as in testing environments and decision support software systems.
- Systems integrators dominate the cloud and data center markets because they can understand the complex requirements of large businesses such as banks and the public sector. These entities are focused on large projects that require specialty skills, partnerships and capabilities.
- Carriers are best positioned to offer cloud services that are more network- and communications-centric, such as security, backup, and communications and collaboration software.
- Software as a service and platform as a service are still small emerging opportunities in South Africa. However, a complete office in the cloud and desktop-as-a-service offerings are attractive in a market with low PC penetration.
Mobile advertising revenue is forecast to grow at a CAGR of 20.5% between 2012 and 2017, from $101m to $257m. Digital advertising expenditure makes up just 5% of total advertising in South Africa currently, but we expect this will grow to nearly 10% in 2017. Online and mobile advertising revenue is expanding rapidly and is each expected to generate similar revenue in 2017.
- Messaging-based advertising is currently the largest mobile advertising format, generating over half of all revenue, although we expect this to fall to around a third in 2017. Vodacom's successful Please Call Me service continues to grow, but its scope is limited. Other sponsored messaging services are also developing, but the trend to IP-based messaging limits future growth.
- Display-based advertising is the fastest growing segment, and it is expected to increase its share of revenue from 34% in 2012 to over 50% in 2017. Mobile websites continue to increase traffic, in particular with the growth of feature phones. However, it is the increasing adoption of smartphones and free apps that will be the key driver. Recent developments in advertising on mobile social networks such as Facebook suggest a promising future, but there are still some uncertainties about the degree of success.
- Mobile search is the smallest segment, generating 14% of revenue in 2012, which we expect will increase marginally to 16% in 2017. Google's dominance is being challenged by alternative free navigation services as well as by local search engines and information apps.
Key questions answered
- What is the state of traditional voice services in South Africa?
- What are three of the fastest growing areas in the South African telecom market?
- How can leading operators leverage new opportunities to both defend their positions and find new areas of revenue growth?
- What is driving the growth of mobile app revenue?
- What are the secrets to the success of Vodacom's app store?
- What are the growth trajectories for cloud services and mobile advertising in South Africa through 2017?
The report is targeted at a range of industry participants requiring an overview of the market and an analysis of the different players, including:
- Mobile network operators
- Service providers
- IT managers
About the author
Jan ten Sythoff
Analyst at large
Now an Analyst At Large for Pyramid Research, Mr. Sythoff used to be Manager of Pyramid's Research EMEA practice with over 10 years of experience in market forecasting and analysis of competitive strategies. He has authored a number of reports including a recent analysis of mobile payments and financial transfers in Africa.
Jan has managed different consulting projects including a detailed business demographic analysis and mobile adoption projections by segment in select emerging markets as well as supported due-diligence analysis across the Middle East. He also leads Pyramid's research in the area of mobile enterprise services at the global level including broadband applications and M2M.
Prior to joining Pyramid, Jan was a senior analyst with Frost & Sullivan, where he developed reports on EMEA's mobile content market, fixed-mobile convergence trends, wireless LAN and messaging platforms.
Jan has a Postgraduate Diploma in Business Management from the University of Barcelona and graduated from Exeter University with a degree in Economics. SHOW LESS READ MORE >
Acronyms and abbreviations
Section 1: Introduction and context
1.2 South Africa in context
1.2 Voice revenue in decline
1.3 Data growth supports new opportunities
Section 2: Mobile apps
2.2 Development of app stores
2.3 In-app payments to drive mobile app revenue
2.4 Vodacom's App Store
2.3 Mobile apps for business
Section 3: Enterprise cloud services
3.2 Cloud services growth
3.3 Cloud trends
3.4 Positioning and recent developments of key industry participants
Section 4: Mobile advertising
4.2 Mobile advertising growth
Table of exhibits
Exhibit ES: South Africa ICT growth overview
Exhibit 1.1: Emerging markets SIM penetration and GDP/capita, 2012
Exhibit 1.2: Emerging markets fixed broadband penetration and GDP/capita, 2012
Exhibit 1.3: Leading operator voice revenue, actual, 2008-2011
Exhibit 1.4: Growth of different ICT segments in South Africa, 2011-2017
Exhibit 2.1: Subscriptions by device type, 2010-2017
Exhibit 2.2: Development of app stores, 2008-2012
Exhibit 2.3: Breakdown of data subscriptions by device, 2011
Exhibit 2.4: Mobile app revenue flows
Exhibit 2.5: Mobile app revenue forecasts by segment, 2010-2017
Exhibit 2.6: Breakdown of Vodacom's app store revenue, 2017
Exhibit 3.1: Total IT service and data center service revenue, 2010-2017
Exhibit 3.2: South Africa cloud services revenue and as a percentage of total IT services, 2010-2017
Exhibit 4.1: Total and digital advertising expenditure, 2010-2017
Exhibit 4.2: Mobile and online advertising revenue growth
Exhibit 4.3: Mobile advertising revenue breakdown, 2012
Cloud services, mobile advertising and mobile apps will be some of the highest growth segments in the South African market, contributing half a billion dollars in new revenue from 2012-2017, according to a new report from Pyramid Research.
South Africa Telecom Market Forecast analyzes the South African telecom market in some detail, highlighting several key areas of growth now that traditional voice services revenue is flattening. The report focuses on three main areas of growth – mobile apps, enterprise cloud services and mobile advertising – and their influence on the South African market.
“South Africa is a key market in the AME region not only because of its size, level of income and maturity, but also because it is the home for key players in the market, MTN and Vodacom in particular,” says Pyramid Research Analyst at Large, Jan ten Sythoff. It is also the landing place of many submarine data cables connecting Africa internationally, which is lowering the cost of broadband and increasing the bandwidth both locally and across much of the continent. Data is the key driver for telecom operators in South Africa, and it underpins three major areas of growth: mobile apps, cloud services and mobile advertising. Each of these three areas is relatively small, but demonstrate attractive growth rates; furthermore, often times operators see these areas as strategic, having additional benefits such as as enhancing the brand and supporting growth in other areas and improving their competitive positioning, he notes.
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