A COMPREHENSIVE MARKET STUDY

PRESENTATION
ON
SCOPE FOR
ANOTHER MOBILE
PROVIDER
IN SOUTH AFRICA
AGENDA:
1. Introduction
2. Customer Loyalty
3. Market Need
4. Costs
5. Revenue
6. SWOT Analysis
7. Food for Thought
Introduction to current mobile
network setup in South Africa
• Total population in South Africa is about 51.77m: Source: Census 2011
• Current / Potential mobile users is around 69.2m.
• Currently the market is split between 4 Cellular Network Companies:
Vodacom: 31.5million subscribers: Source: www.vodacom.co.za
MTN: 24.9million subscribers: Source: IT News Africa 24/04/2014
Cell C: 10.8million subscribers: Source: ictindicatorportal.icasa.org.za
Telkom Mobile 2.0million subscribers: Source: ictindicatorportal.icasa.org.za
• It is clear from the above that there are more active sim cards than
the population in South Africa. This is evidence that South Africans
would subscribe to any cellular network operator who offers the best
deal at that point in time.
Introduction to current mobile network
setup in South Africa
High Tariffs: Lack of Network:
Actual costs cents per minute/MB/SMS 1. Network is concentrated in the ‘quick return
MTN Vodacom CellC 8.ta
areas, large part of the country is not covered.
Voice 0.79 0.79 0.66 0.75
Data/MB 1.00 2.00 0.15 1.00 2. Networks congested due to lack of optimisation
SMS 0.21 0.21 0.21 0.21 3. Uneven distribution structure
4. Poor maintenance of equipment and lack of
These rates are for pre-paid customers. Post-paid qualified engineers
rates vary as clients get discounts and/other 5. Still using old technology, costly LTE roll out slow
features 6. Unreliable or no service in rural areas

Lack of Customer Service: Customer Abuse:

1. Suitably qualified engineers are very few hence 1. Structuring tariff plans such that they look
very expensive to hire cheap whereas they are actually very expensive
2. Not knowing the customer needs and business 2. Validity of data bundle is only 30 days
strategy 3. Unsolicited calls and SMSes, like adverts
3. Lack of qualified technicians to service 4. Not building awareness among customers
customers needs 5. Overcharging or wrongly charging clients due to
4. General lack of man power. a lot of hidden costs that add up. e.g. CLI,
itemised bill, service charge on airtime advance.
Customer Loyalty
• There is no customer loyalty.
• People move with 4 SIM cards.
• They will switch to which ever service has
the best deal at that point in time.
Market Need
» People need Data packages that will make the
use of technology an integral part of their lives.
» Technology like video calling, streaming, cable
tv, isp services (web, mail, datacentre)
» Other services like dstv, promos, sms services,
USSD, fax-2-email, money transfer etc.
Costs – Infrastructure & Licensing
Key Infrastructure requirements:
Cell Towers
MSC – Mobile Switching Centre
NOC – Network Operations Centre
GOC – Global Operations Centre
Data Centre
Admin Office, Call/Service Centre and Warehouse

Licensing:
Individual Electronic Communications Network Service License
(IECNS)
Individual Electronic Communications Service License (IECS)
Spectrum License (2.6GHz, 3.5GHz, 800MHz, 1800MHz, etc.)
Costs - Infrastructure & Licensing
Cellular Towers:
» There are a facilities leasing, a co-location and a spare capacity selling
regulations in South Africa all of which are designed to promote
sharing of infrastructure in order to mitigate costs of network roll out.
» Where there are no towers, the new operator needs to install own
towers. Average cost for putting up 1 Tower is $800,000/-
» Number of required towers can only be ascertained after conducting a
detailed market survey
» Implementation of a cell tower in areas not have range also includes in
ascertaining Environmental Impact Assessment (EIA), availability of
electricity, technology in the area, security (to avoid vandalism)
Costs - Infrastructure & Licensing
MSC,NOC,GOC:
» Network switches, gateway routers, small capacity servers are calculated at
$1800/sqm.
» We would need to establish where we can share with encumbent operators and
where we need to build our own.
» We can build over time as and when need arises

Admin Office:
» General requirement of office space to conduct business.
» Personnel to form the NOC team, field team and general office administration.

Licensing:
» We have IECNS License.
» We also have IECS License
» By virtue of having these licenses we qualify for spectrum of our choice.
» The only reason we have not applied for spectrum is to avoid the ‘Use it or lose it’
regulatory policy.
Revenue
A small mind calculation:
» The 4 Cellular Network Operators in South Africa enjoy the combined annual revenue of R98 993 000 000:
» Vodacom makes R61 806 000 000
» MTN R39 707 000 000
» Cell C R10 200 000 000
» Telkom Mobile R 770 000 000
» Because of asymmetric interconnect we are able to enter the market with more competitive rates thus rapidly grow our
market share to 12.63%.

Inside information:
Cell C and Telkom Mobile have not turned any profit so we shall leave them out in this analysis and analyse only Vodacom-
SA and MTN-SA
VODACOM-SA MTN-SA OUR PROJECTIONS
Outgoing Voice28 135 000 000 25 499 000 000 06 000 000 000
Incoming Voice03 848 000 000 04 470 000 000 03 000 000 000
Data 10 974 000 000 06 013 000 000 04 000 000 000
SMS 02 675 000 000 01 593 000 000 01 200 000 000
Devices 12 526 000 000 01 594 000 000 00 700 000 000
Other 02 684 000 000 00 537 000 000 00 100 000 000
TOTAL REVENUE 61 806 000 000 39 707 000 000 15 000 000 000
Expenses 38 566 000 000 22 596 000 000 08 750 000 000
Margin 23 240 000 000 17 111 000 000 06 250 000 000
Margin as a % 60.26% 75.73% 71.43%

Total assets 37 930 000 000 30 164 000 000

CAPEX Injection/Year 07 000 000 000 05 835 000 000
Staff Compliment 4829 4000
SWOT ANALYSIS
STRENGTHS
• Mthinte has the requisite licenses for operating a telecoms company in South Africa
• Mthinte is 100% Black owned which is a huge advantage since South African Regulator requires companies
that need highly sought 2.6 and 850 spectrum to have a minimum black ownership of 30%.
• Profound knowledge of the market landscape and licensing regime

WEAKNESSES
• Lack of funding whereas telecoms projects are highly capital intensive
• Lack of technical skills which is linked to lack of funding since these skills come at a huge cost

OPPORTUNITIES
• Opportunity to obtain highly sought after 2.6 and 850 spectrum thus have a huge competitive advantage as
we provide roaming services to those that will not get this spectrum
• Opportunity to roll out our own broadband infrastructure and provide unique and affordable call
termination services to international operators
• Opportunity to take advantage of asymmetric interconnect rate thus make a lot of money effortlessly

THREATS
• The fight that the incumbent operators put up in a bid to force the Regulator to act in their favour
• The abuse of position of dominance (anti competitive behaviour) by big operators
Food for Thought
The project requires time for implementation.

To speak of phasing out tasks….

• Licensing, Procurement of hardware, construction of premises,
recruitment of people, infrastructure setup, testing, marketing
and actual roll out will each require its own time.
• Each phase is interlinked with the other.
• Each phase requires qualified technical personnel.
• The overall project needs people with good managerial skills in
the respective areas.

Putting all these points in place will guarantee the success of the
project
QUESTIONS?