BMIT’s latest South African 2022 Wholesale Telecoms report highlights how vibrant the wholesale market has become, with significant growth areas – including wholesale fibre, mobile facilities and data centres. Dynamic players active in these markets have been recipients of sizable investment inflows in recent years, leading to major shifts in the telecoms market structure.
In particular, the Fibre to the Home (FTTH) market has grown to become one of the largest wholesale market categories, and continues to show the highest growth. Rollout has accelerated to the extent that the market added an unprecedented one million new fibre-feasible homes passed in the past year. The BMIT report forecasts continued deployment of access fibre in both the home and business segments. Fibre network operators are combining renewed investment with constant innovation as they move rapidly ‘down the pyramid’ to next-tier towns and customer affordability segments in an intensive ‘land grab’, supported by healthy household uptake rates.
While Vumatel made the largest individual contribution, Openserve expanded its fibre capex massively in the past two years, with a doubling in the financial year to March 2022. Openserve commenced operating as a standalone subsidiary of the Telkom Group from the first of this month.
BMIT expects further consolidation in this industry, following the announcement by Vodacom that it had moved to acquire a strategic stake in DFA and Vumatel and roll them into a new Infraco company, in which it will also incorporate its own fibre assets.
Fixed-mobile broadband, employing LTE and 5G routers, remains a significant gap-closing solution for home and business broadband, and is in fact the primary solution for rural households. Telkom’s mobile division has been a leading contributor to growth in this category in recent years, as a cornerstone of its copper line replacement strategy. While traditional MVNO models exist in this market, notably from Cell C and MTN, BMIT is seeing new wholesale models emerging, one of which more closely resembles a form of ‘naked bitstream’ service. The licensing of High Demand Spectrum (HDS) to the major mobile operators in 2022 both enforces and enables growth in the wholesale mobile market. BMIT’s MVNO report, to be published shortly, unpacks some of the key emerging opportunities.
While the broadband access markets are showing the largest growth, forecast at 9.1% CAGR between 2021 and 2026, other segments continue to grow as well.
Note: Market sizing includes revenues of SA-based players only. Excludes enterprise and hyperscale player spending on local data centre facilities, satellite space segment and IRUs on international subsea cables, infrastructure co-building partnership offsets, project revenue earned from operators and any other self-provision capex.
Mobile facilities sharing and MVNO services will see a growth of 4.8% CAGR, largely due to increased passive sharing as mobile operators carve out their tower assets, as MTN has already done to a large extent by virtue of the 2021 deal in which it sold 5700 towers to IHS.
Active facilities sharing arrangements between players, exploiting spectrum assets that were previously in a critical state of short supply, will become somewhat less essential to the tier one operators in future, due to the sizable assignment of high-demand spectrum they secured in the recent auction.
Transmission services, consisting of international, national, metro and mobile backhaul services, are forecast to grow at 4.3% CAGR over the five-year forecast period, with growth supported, inter alia, by mobile backhaul requirements and Vodacom’s investment in DFA through CIVH, if approved. Conversely, growth in this area will be mitigated by ongoing price declines and substitution by self-provision (including international IRUs), content caching and local peering. The long distance fibre between Cape Town and eThekwini is opening up opportunities all along the east coast of the country.
Cross-connection and Cloud Onramp (hyperscaler direct connect) services are key enablers of the rapidly growing cloud services market. Internet Exchange Points are seeing sustained, exponential growth in traffic volumes, with Teraco’s NAP Africa recording the highest traffic volumes, followed by INX-ZA, which offers an inclusive, multi-site peering model. Excluding the impact of hyperscale players, which is where most of the growth is happening, telco colocation, cross-connection and hubbing services are forecast to grow at only 2.4% CAGR, with content data networks (CDNs) a key driver of traffic growth.
In line with global trends, there is strong investment in local data centre growth, attracting foreign investment. New local data centre players in the past 12 months include Vantage Data Centres – whilst the main current data centre players, including Oracle, are all expanding capacity.
BMIT is seeing emerging investment patterns in edge computing, as a growing wholesale opportunity. Open Access Data Centres (OADC), a subsidiary of WIOCC, is already gearing up to exploit this emerging demand, and the report describes a number of developments being seen globally with tower operators and hyperscalers, which are likely to be replicated in South Africa.