Vodacom launches 5G in South Africa as broadband market looks vulnerable

With some lockdown protocols still in place and low broadband penetration, launching 5G with a fixed wireless access (FWA) spin is telecoms opportunism at its finest.

Having recently assigned temporary spectrum by regulator ICASA, Vodacom is making use of 50 MHz in the 3.5 GHz band to launch 5G services in Johannesburg and Cape Town. Mobile subscriptions will of course be on the radar of the company, but with the Huawei 5G CPE PRO FWA router also available to purchase, there is an opportunity to disrupt the traditional broadband market.

“Vodacom’s 5G launch in South Africa comes at an important time as it will help us improve our network efficiency during the COVID-19 national state of disaster,” said Shameel Joosub, Vodacom Group CEO.

“During this difficult and unprecedented period, we are proud to offer world class network technology to South Africa, and all of its associated benefits, as we provide an essential service to keep the country connected. This is largely due to the allocation of temporary spectrum by ICASA which has already mitigated the network congestion we have experienced since the start of the lockdown period.”

Over the course of the coronavirus pandemic, mobile traffic on the Vodacom network has increased by 40%, while it has surged 250% on fixed networks. This presents a risk due to network strain and congestion, but an opportunity to launch an alternative to traditional broadband products while demand is at its highest.

South African broadband market (2019-end)
Internet service provider Subscriptions
Liquid Telecom 169,927
MTN South Africa 279,531
MWeb 119,400
Others 462,918
Rain 68,750
Telkom South Africa 2,165,000
Vodacom 235,337
Vumatel 15,042

Source: Omdia World Information Series

“We have talked to CSPs in emerging and also mature markets,” said Dario Talmesio, Practice Leader for mobile at Omdia. “FWA sales have doubled even in highly penetrated fixed broadband markets.”

With traditional broadband penetration down at 28.38% during the first quarter of 2020, Talmesio pointed out a significant opportunity for the right FWA proposition in South Africa. Its fast to deploy, affordable devices are emerging, and the demand is currently present under current circumstances.

With FWA, you don’t have to dig up roads, lay cables, seek planning permission from local authorities or cause major disruption to communities with construction. It is fast, simple and cheaper. And with the low broadband penetration, Talmesio suggests there is a very interesting opportunity.

The question of longevity and sustainability of FWA products in more mature markets have of course come under question, but in rural environments and nations where the economics do not drive ROI for traditional broadband deployment, FWA is a viable alternative.

Vodacom might be the first to launch services on the temporary spectrum licences, but there is certainly more potential considering what ICASA handed out to telcos in April. Some will of course be allocated to improve resilience of existing services, but the stage has been set for a FWA disruption in South Africa.

Allocation of temporary spectrum licences in South Africa
Service provider Spectrum band Block
Telkom 700/800 MHz 40 MHz
2300 MHz 40 MHz
2600 MHz 20 MHz
3500 MHz 12 MHz
MTN 700/800 MHz 40 MHz
2300 MHz 50 MHz
3500 MHz 50 MHz
Vodacom 700/800 MHz 40 MHz
2300 MHz 20 MHz
2600 MHz 50 MHz
3500 MHz 50 MHz
Liquid Telecoms 3500 MHz 4 MHz
Rain 2600 MHz 30 MHz

Vodafone transfers m-Pesa control over to new joint venture

A joint venture owned by Safaricom and Vodacom has been handed the reigns for money transfer, financing and microfinancing service m-Pesa from Vodafone.

The transaction was first announced in 2019, the aim is to accelerate the growth of m-Pesa by giving both Safaricom and Vodafone-owned Vodacom full control, including product development and support services, as well as decided to which markets it will be expanded to in the future.

Financials for the transactions are unknown, though Safaricom suggested it could be worth about $13 million last year.

“This is a significant milestone for Vodacom as it will accelerate our financial services aspirations in Africa,” said Shameel Joosub, Vodacom Group CEO. “Our joint venture will allow Vodacom and Safaricom to drive the next generation of the M-PESA platform – an intelligent, cloud-based platform for the smartphone age. It will also help us to promote greater financial inclusion and help bridge the digital divide within the communities in which we operate.”

“For Safaricom, we’re excited that the management, support and development of the M-Pesa platform has now been relocated to Kenya, where the journey to transform the world of mobile payments began 13 years ago,” said Michael Joseph, outgoing Safaricom CEO. “This new partnership with Vodacom will allow us to consolidate our platform development, synchronise more closely our product roadmaps, and improve our operational capabilities into a single, fully converged Centre of Excellence.”

Launched in 2007, the popular mobile money service is currently being used by 40 million customers, operating in Kenya, Tanzania, Lesotho, Democratic Republic of Congo, Ghana, Mozambique and Egypt. m-Pesa was also launched outside Africa in Afghanistan. Currently, only 25% of m-Pesa customers have access to a smartphone, though this number is increasing by 10% each year. The more customers who are on a smartphone, the more complex and varied services which can be offered by Vodacom and Safaricom.

KaiOS shows why it is critical to Africa’s digital ambition

Working in tandem with Vodacom, KaiOS has brought another smart-feature phone to the market, this time in Tanzania for the remarkable price of $20.

With an install base of 80 million already, the alternative operating system is proving to be a very viable and attractive alternative for the development markets. The latest push forward is in Tanzania, with the $20 Smart Kitochi connected-feature phone, which has sold out already. Vodacom said 5,000 devices were sold in the first four days, while the team is waiting for another shipment to land next week.

The device is built on the MediaTek chipset and powered by the KaiOS operating system, enabling 3G and 4G connectivity, access to a new KaiOS app store and many slimmed-down features which we take as commonplace today.

The emergence of KaiOS, and the enthusiasm of the telcos to embrace a new dynamic, is helping the team tackle a major hurdle for shrinking the digital divide in Africa; affordability of internet connected devices.

When you consider the monthly take home salary of an individual in Africa could be as little as $100, the internet becomes an unachievable dream. Who can spare money to invest in a smartphone when you have to pay the rent and feed your family? This is where KaiOS fits into the equation; it has driven the creation of an ecosystem to manufacture feature phones with 3G and 4G connectivity features. It is a compromise. A no-frills device which allows some of the world’s poorest individuals to benefit from the digital economy.

What is worth noting is this is not a direct threat to the dominance of Android in the operating system segment. KaiOS should be seen as complementary to Google’s efforts.

Firstly, what is always worth bearing in mind is that Google is a KaiOS investor. It was one of the four companies which funnelled cash into the business to drive development in the early years.

Secondly, Google services will continue to run on KaiOS devices. The team has no intention to create alternative products in-house, such as mapping or messaging features. Although it is a different operating system, the more successful KaiOS is, the more exposure Google products get.

Finally, the monetization model at KaiOS is completely different to Android. Whereas the Google team drive revenues by placing products as default applications on Android devices, KaiOS generates cash through revenue sharing models and commission earned through in-app purchases.

Like Android, KaiOS is free of license fees for the telcos, an important aspect of the model. As soon as licensing fees are introduced, there is a risk of telcos charging more for the devices, which will lead to a smaller install base for KaiOS. Charging licensing fees would undermine the very concept of the business.

Google has once again invested very intelligently. To drive future revenues, Google needs to gain exposure to more individuals. Unfortunately, Android is a smartphone OS and not entirely applicable to the developing markets. It could be re-imagined, but then again it might be much more efficient to simply invest in a company which can specifically build an OS for smart feature phones. The slimmed down version of Android looks to be living on limited time and it would not be surprising to see the OS culled.

With more and more affordable devices flooding onto the market, more people are taking into the digital economy. If KaiOS continues to grow its user base, Google’s products such as Maps and YouTube, which are installed as default on the devices, are used by more people. By investing in KaiOS, Google has gained an extra 80 million customers, and these are still the early days.

KaiOS has already launched in several markets, though India is the most successful to date. In partnership with Reliance Jio, the Jio phone has proven to be very popular allowing KaiOS to surpass Apple iOS as the second most common OS in the market. There will be launches in the near future, but this all depends on the appetite of the telcos.

KaiOS highlighted during a press conference that it is the telcos who decide future launches, as they have the retail presence to push the smart-feature devices out to the market. Although handing over control to a third-party is not the most comfortable position to be in, there is drive from the telcos.

If the telcos are going to secure additional revenues, they will need more people to be connected. Device affordability is one of the biggest challenges to connect the unconnected, so expect to see some aggressive moves forward with new device launches. Vodacom is a very good partner for KaiOS, with the telco maintaining a presence in 32 African nations.

Connecting the unconnected is still a monumental challenge in African, though the creation and aggressive deployment of new ideas is generating momentum. Underpinning all of this success is the emergence of affordable, internet-connected devices, and an operating system which is perfectly designed for the unique connectivity landscape in Africa. KaiOS has a very bright future and the importance of this business should never be undervalued.