1. SA fixed line market overview
Dobek Pater
Analyst BMI-TechKnowledge
SA fixed line market overview

2. Situation in the future
Telecoms market
Situation now
Public network operators
Telkom
Private network operators
Transtel
Sentech
VANS & ISPs
Teledensity = 11.5%
Situation in the future
Public network operators
Telkom
SNO
Sentech
SMME operators (10-29)
Private network operators
VANS & ISPs
Teledensity = ???

3. Future competitive environment
International gateway – 3 competitors
National backbone and metro networks – 3 major competitors
Access network - competition in urban areas (parts of urban areas)
rural areas may see limited competition
“under-serviced areas” = contentious issue
SNO market share
depends on FEP/SEP, branding, marketing, market regulation
depends on Sentech, VANS/ISP strategy
optimistic scenario - ±15% (5 yr)
could be <10% (5 yr)
best case in the world – 22%
Fixed line market growth
CAGR:
telcos: %
other data: 17.0%
total market: 6.4%
Total market to be worth R90 bln in 2006

4. Strategies Telkom SNO Sentech
- medium-term contracts with corporates/large businesses
concentrate on areas of profit as much as possible
strong go-to-market strategy: branding & services; rely on SEP
- Use multimedia licence “creatively”
- technology for small companies/SOHOs
- Form strategic partnership with another market player
- debt reduction and funding through IPO; R30-40bn now, down from R70-125bn (Vodacom 50% of value)
- roll out limited access network (depends on sharing agreement with Telkom)
- apply state-of-the-art technologies
- Leverage its international gateway licence, high sites in SA, government ownership?
play across all sectors
roll out of ADSL too close to SNO, no time to gain economies of scale
- form strategic alliance in local market
Excellent knowledge of market and monopolist player
Strategy influenced by final FEP/SEP
Has lost competitive advantage against SNO since May

5. Issues influencing competition
New technologies
Multiprotocol Label Switching (MPLS)
Local Multipoint Distribution System (LMDS)
Digital Subscriber Line products (xDSL)
Leading to more efficient use of networks & wireless networks
Other issues affecting competition
number portability
carrier pre-select
VoIP regulation
interconnect agreements – far more complex than cellular
convergence of networks, devices, services
Regulatory authority – no experience with fixed line competition (only cellular)

6. The cost of delay Economic cost Social cost Technological cost
bandwidth limit + high prices = slower business processes
limited telecoms market development = limited opportunities for auxiliary industries
Social cost
limited access to ICT services in parts of the country = retarded development of under-serviced regions, education
growing gap (digital divide) between urban and rural areas
Technological cost
retarding introduction of new technologies
Financial cost
we estimate that delay of SNO will cost South Africa ±R900 mln in lost potential savings

7. Thank you !