The future of internet capacity in South Africa is showing immense promise, in light of a recent fibre explosion coupled with the race for 5G dominance by local telecommunication companies (telcos).
Last week, MTN – South Africa’s second largest mobile network operator – announced the upcoming arrival of its private 5G networks for big companies in the mining and port industries. This came four months after Liquid Telecoms announced that it would be building enterprise 5G networks to enable automation in manufacturing and mining industries.
As for the consumer market, Rain, MTN, Vodacom and, soon, Cell C are already in the running for 5G dominance.
All 5 telcos, with the addition of Telkom, acquired a high-demand radio frequency spectrum from the Independent Commissions Authority of South Africa (ICASA) auction in March. ICASA reported that the proceeds from the auction totalled over R14.4 billion ($798.6 million).
However, the real factor that will determine which telco player comes out on top is access to fibre.
The Role of Fibre in 5G Networking
Ironically, wireless network technologies depend on a lot of wireline in infrastructure in the backend to operate.
5G wireless networks make use of high-frequency millimetre waves (mmWaves) to provide a significantly higher bandwidth with lower latency, compared to older 4G networks. However, mmWaves can only transmit over short distances, usually around 75 metres. Hence, the use of fibre is necessary.
To make 5G as widely accessible as possible, telcos have to move from large cell towers typically located in densely populated urban areas to cheaper small-cell sites to transmit and receive signals from within small, sparsely populated areas.
Another reason the incorporation of fibre is necessary for 5G network connections is that fibre compensates for the low penetration qualities of the network. Signals which operate at the higher frequencies in the 5G band are unable to penetrate buildings and trees, but the inclusion of fibre eliminates this shortcoming.
Essentially, 5G networks can only achieve far-reaching accessibility and projected performance goals when they work hand in hand with – a lot of – fibre backhaul.
The Race for Dominance
At the Southern Africa Telecommunication Networks and Applications Conference (SATNAC) in August, CEO of Telkom Serame Taukobong stated that the company was, at the time, more focused on providing fibre infrastructure to enable deployment of 5G networks by other telcos. This was cited as the reason Telkom was yet to rollout its 5G network, despite having been part of the ICASA auction since March.
Telkom’s wholesale and networks subsidiary Openserve takes up a significant share of the country’s fibre network operator market. Some have even argued that MTN’s move to acquire Telkom is a strategic play to use Openserve to assert the former’s 5G dominance.
Rain, South Africa’s only data-only mobile network operator, is also very interested in sinking its teeth into Openserve. The telco announced in August that it was planning to submit an offer to Telcom’s board for a possible merger, a move that was motivated by a desire to rival the MTN-Vodacom duopoly.
Shortly after the announcement, Rain was ordered by the Takeover Regulation Panel (TRP) to retract the announcement. Rain had violated the country’s Companies Act by releasing the statement without receiving prior approval from TRP. Notwithstanding, the telco stated that it would make a more formal and non-binding offer to Telkom soon.
Vodacom, South Africa’s foremost mobile network operator, made its play in fibre by acquiring a 30% stake in Infraco last year. Infraco owns Dark Fibre and Vumatel, the country’s leading fibre network operator.
Vumatel builds, owns and operates a high-speed fibre-to-home network that covers over 1.2 million homes and utilises over 31,000 km of fibre infrastructure across South Africa. Dark Fibre, on the other hand, builds, installs and operates a national fibre network spanning 13,000 km which supplies fibre products to the enterprise market.
The telco which manages to secure a significant presence in both the 5G and fibre markets will be at the forefront of high speed internet connectivity in South Africa. The possession of a strong fibre network will enable the telco’s 5G network to be self-supporting, while also enabling the telco to lease out its fibre network to other operators for their 5G services.
The most untapped potential in the market lies in the under-served areas. As of January 2022, South Africa had 41.19 million active internet users – more than half of its population. Providing ample fibre infrastructure to enable both consumer and network providers built the 5G networks could potentially open the doors of internet connectivity to the unserved millions.
International Fibre Network Players
Recently, South Africa has seen an abundant presence of foreign-owned submarine fibre cable systems.
Equiano landed in the country in August, while 2Africa is slated to go live in the last quarter of 2023. The latter will span a length of 45,000 km, the largest of any fibre network in South Africa. MTN is already one of its investors.
According to BluNOVA CEO Suveer Ramdhani, Google-backed Equiano and Facebook-backed 2Africa will serve to improve internet capacity in the country while also letting their backers acquire more customers onto their products.
‘Big players for consumer-facing companies are investing in these cables to facilitate the connectivity of more consumers onto their app or ecosystem to get more [retained profit] per subscriber,’ said Ramdhani.
Ramdhani explained that Facebook uses a metric of ‘so many dollars per subscriber per month’ to account for its profit retention. In North America, Europe and Asia.
‘So, the reason that they are investing in these cables — and it’s exactly the same mindset with Google — is that, if they can facilitate the connectivity of more consumers onto their Facebook app or towards the Google ecosystem, they have more subscribers,’ he further explained.
The more subscribers they have, the more revenue they can generate from sponsored ads and other products, thus increasing its profit per customer.
Thankfully, Google and Facebook’s plan is a win-win for them, the local companies who will make use of the fibre networks, and the consumers or enterprises who will have access to super-high internet speeds.
Ramdhani said there will likely not be any other significant cable systems to be announced soon, as there is usually a five-year cycle to launching new cable systems.
Sources: MyBroadband, Techcabal