The Hindu Business Line : Cell phone airtime is most traded product in S. Africa

In value terms, the largest traded commodity within South Africa today is not, as one may imagine, a mined product or an agricultural product but cell phone airtime. This is the outcome of the exponential growth of mobile phone users in the country from 5 million in 2000 to 40 million in 2009, said Mr Alan Knott-Craig, Consultant to the Vodacom Group CEO, at a recent briefing to the international media in Johannesburg. Less than a year ago Mr Knott-Craig, ended a 15-year stint as CEO of Vodacom Group, the holding company for all Vodacom companies. He was, in fact, largely responsible for the rapid rollout of mobile telephony across the country, presiding over the widespread growth of private cellular services even during his previous avatar as head of the state-owned Telkom.

Under Alan Knott-Craig's leadership, Vodacom grew from a company with an initial Rand 1.15-billion (US$150 million) investment by three shareholders to a conglomerate with an annual turnover of some R50 billion (US$6.47 billion) and more than 35 million subscribers in five countries (South Africa, Tanzania, Lesotho, Mozambique and Democratic Republic of the Congo) by 2008.

The company has an estimated market value of R150 billion (US$19.4 billion). Across Africa, it employs 6,500 people directly and another 30,000 people indirectly. Brandmetrics values the Vodacom brand at R21 billion (US$2.7 billion), making it the most valuable brand in South Africa.

Mr Knott-Craig listed the fundamental drivers of telecom growth as robust and fair competition, adequate sector regulation and an intelligent allocation of scarce spectrum. Describing the surge in the number of people using cell-phones in South Africa, he said there was a clear correlation between telecom expansion and GDP growth.

While South Africa does not yet have the equivalent of a USO (universal services obligation) clause that is mandatory for telecom service providers in India, there is a focus on enabling access to all categories of users, via the community services phone-shops set up by Vodacom across the country, he said. Usually set up in refurbished shipping containers, these facilities are equipped with five or six phones and charge calls at 25 per cent less than the prevailing call rates. There is a high density of such kiosks across the country, though largely around the metros. Vodacom operates about 50,000 of them while its competitor Cell-C has about 30,000, said Mr Knott-Craig. These facilities have been especially useful to small businesses, he said, and have had the effect of forcing some of the bigger operators to lower their call rates. Sometimes, a kiosk operator may take one wireless phone out to a street corner and stand there for a while, selling calls.

Asked how the country’s telecom sector was gearing up to meet the potential demand that could arise from the FIFA World Cup 2010, Mr Knott-Craig said good solid infrastructure was already in place for mobile telephony, though there were bottlenecks in providing better quality, higher-speed broadband connectivity because of the lack of adequate optic fibre infrastructure. This was being addressed as a priority, he said, and the private sector had to buttress the government’s efforts in this area.

Referring to the MTN-Bharti deal, he said the stake acquisition was significant as the collaboration with India would help provide insights into Indian talent in this area, apart from creating shareholder value. On its part, he said, South Africa could bring to an Indian partner important learning on spectrum allocation. South Africa’s flexible and responsive spectrum allocation regime has given that country’s telecom sector a headstart of five-seven years over India, which did not initially have that advantage.