Fixed broadband boom forecast for SA

Growth in fixed-line broadband subscribers in SA is expected to outstrip growth in mobile over the next five years. By Duncan McLeod.

It’s not all bad news for Telkom. That’s if new forecasts published by PricewaterhouseCoopers (PwC) are correct. PwC expects wired broadband to expand faster than mobile broadband over the next five years, growing at a compound annual rate of 32,8%.

“The wired broadband access market is expected to grow at higher rates than the mobile access market over the forecast period in contrast to the trend of the past few years,” says PwC’s SA Media and Entertainment Outlook: 2012-2016.

These figures may appear bullish, especially in light of the fact that Telkom grew its broadband digital subscriber line customer base by only 10% in the year ended 31 March 2012, reaching 827 000 subscribers from 752 000 the year before. But PwC reckons the number of fixed-line broadband users will jump to 6,6m by 2016 from 2,2m in 2012.

At the same time, the number of mobile broadband subscribers is expected to grow to 23,1m from 9,5m in 2012, representing compound annual growth of 31,8%.

PwC expects the market share enjoyed by the mobile operators in consumer spending on Internet access will peak in 2012, at 74%, and decline gradually until 2016, when the mobiles will have 66% of the market.

“In spite of relatively high prices, wired broadband capacity is expected to grow dramatically in the next few years,” the PwC report says.

Not surprisingly, dial-up connections are expected to dwindle to insignificance over the next few years, with compound annual declines of 41,8%.

“Growth in fixed broadband will come in large part from dial-up subscribers trading up. The number of fixed broadband subscribers overtook the dial-up subscriber base for the first time in 2011. We expect the dial-up market to virtually disappear, dropping to only 20 000 subscribers by 2016 from 500 000 in 2011 and nearly a million as recently as 2007.”

The PwC report finds that fibre network roll-outs and the extension of broadband infrastructure into underserviced areas will drive broadband subscriptions and fuel broadband spending.

Internet use in SA rises significantly with income, reflecting the relatively high price of broadband, the report adds. “People in households with monthly incomes of R9 000 or more accounted for 78% of all Internet users, even though this group represents only 27% of the population,” it says. “In contrast, only 3% of households have monthly incomes of R40 000 or more, but people in these households comprise 25% of all Internet users.”

Although growth in fixed broadband is expected to outpace mobile narrowly over the next five years, PwC still expects strong growth in this area, driven in large part by the adoption of smartphones. It quotes research from networking firm Cisco that predicts mobile traffic in SA will expand 49 times between 2011 and 2016. This will put pressure on operators to build more efficient fourth-generation broadband networks to cope with the pressures on their networks.

PwC expects the number of mobile Internet access users to jump from 9,5m in 2012 to 23,1m in 2016.

Total Internet access and advertising spending is expected to grow at a compound annual rate of 20,3%, from R17,9bn in 2011 to R45bn in 2016.  — (c) 2012 NewsCentral Media