End user spending on communications services in South Africa is forecast to total R122 billion in 2017, a 0.7% increase from 2016, according to Gartner, Inc.
“The forecast growth rate is slight, mainly due to shifts to less expensive legacy service offerings as competition heats up,” said William Hahn, Principal Research Analyst at Gartner. “It’s likely to remain fairly flat in 2018 as increased competition in the access services segment erodes prices as fast as, or faster than, adjacent market revenues replace it.”
Enterprise spending holds steady
This slight growth in spending on communications services South Africa in 2017 compares favourably with the global market, which is forecast to show a 0.2% decline. Business customers are applying effective pressure to service providers to get shorter contracts, lower and more accurate pricing, and shifting to software-defined architectures that improve their ability to order only what they need at the time growth occurs. Gartner expects to see increased Internet channels to branch offices, and the development of hybrid WANs as service providers improve fixed coverage and access to public clouds.
Growth in the Internet of Things promises a limited source of additional revenue for service providers, but ecosystems in areas such as automotive, manufacturing, healthcare and smart cities will require extensive expertise in professional services, consulting and support to deliver solid growth. Connectivity alone will become a commodity, just as with legacy subscribers.
Mobile spending is rising but challenges remain
End user mobile data and voice spending is forecast to total R95.5 billion in 2017, a 1.2% increase from 2016 (see Table 1). “Spending growth in this segment is slowing, mainly due to increased competition between the major providers as market penetration increases, as well as decreased emphasis on voice usage,” said Hahn.
In South Africa (just as in the global market), the decline in spending on voice services (5.7% in 2017) offsets gains from an increase in data connections. “Many users engage in substitute messaging, such as IM chat, and the predominance of prepaid billing can accelerate this trend,” said Hahn. “As legacy pricing comes under increased pressure, communications providers must expand the range of devices offered to end users to win the churn battle, incentivising more data use with plans, value-added content and customer service.”
Source: Gartner (August 2017)
South African providers must branch into adjacent areas
South African providers achieved good growth overall in 2017, following some tough years, including a particularly difficult 2015. They achieved overall revenue growth, although growth in the average revenue per user slowed, due to new cheaper devices coming onto the market and legacy offerings encountering fierce competition. “It’s vital that these providers move into adjacent areas that can produce synergies with existing access services. This will enable them to climb the value chain by offering related support, consulting, digital media content and more, either through direct acquisitions or partnerships. The connected home, smart city and automotive sectors are expected to exhibit solid growth, but not every provider will be well-suited to them,” said Hahn.
Gartner clients can learn more in ‘Forecast : Communications Services, Worldwide, 2014-2021, 2Q17 Update.‘
Gartner Symposium/ITxpo
Additional analysis of the disruptive trends and market pressures that local and global communications service providers face will be provided during Gartner Symposium/ITxpo 2017, 18-21 September in Cape Town, South Africa. Follow news and updates from the event on Twitter using #GartnerSYM.
