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Cellular industry overstated by more than 20%
South Africa's mobile subscriber base has been routinely overstated by at least 20%, and sometimes more, over the last five years, according to research findings released today.
According to "The State of the Mobile and Wireless Services industry in South Africa 2005", produced by World Wide Worx, the size of the mobile subscriber market, widely assumed to have reached the 18 million mark in March 2004, was in fact only around 14.5 million. The 20 million mark, thought to have been passed at the end of September 2004, will not be breached until well into 2005.
"It is still an astonishingly successful industry, but that success can be undermined by over-hyping it," says Arthur Goldstuck, MD of World Wide Worx, who led the research project.
The study is the first of a six-phase World Wide Worx research project entitled "Mobility 2005", the broadest study yet of mobile and wireless technologies in South Africa. The first three phases are sponsored by mobile network Cell C and a new mobile strategy think-tank, the Mobile Institute. The research is designed to produce a better understanding of the industry, and covers cellular, wireless and radio technologies, as well as mobile commerce. The next three phases, sponsored by First National Bank and Sentech, will include market research among corporations, small and medium enterprises, and consumers.
The first phase of the study shows that there has been widespread controversy within the industry around the question of what constitutes "active customers". Most networks use the definition of "Active 3", for subscribers who have generated activity on the network in the past three-month period. However, networks have been "fluid" in their choice of definition, hopping between Active 3, Active 6 (subscribers who have been active in the past 6 months), Active 7, and even Active 9.
"The networks are very honest about their churn rates, as well as their definitions of active customers, but industry observers and analysts tend to ignore these for the sake of talking up the numbers," says Goldstuck. "At the same time, though, we have also identified numerous other factors behind the overcounting - by both networks and analysts."
Subscriber numbers are distorted because:
Interviews with representatives of the mobile networks - all three mobile networks cooperated with the research - suggest that these findings are not seen as all bad news for the industry.
Says Jonathan Newman, head of strategy at Cell C: "The number shows that there is in fact more growth to be had out of the market before it reaches saturation."
The total market potential continues to be estimated at between 26 million and 33 million mobile subscribers, depending on whether industry representatives are making conservative or aggressive forecasts.
"For the market to continue growing at its present rate depends on economic factors, such as South Africa maintaining the present Rand/Dollar environment, favourable inflation and economic growth, and market factors, such as the networks introducing very low denomination recharge vouchers," says Tristao Abro, head of Segment Marketing at Cell C.
"Cellphone innovations per se won't drive growth in users, but are more about increasing penetration among existing subscribers."
The results of phase two of the research, into mobile commerce in South Africa, will be released shortly.
