Cellular companies are expected to counteract the possibility of dwindling subscriber numbers.
The operators will lose more subscribers as the RICA deadline nears, says Irnest Kaplan, MD of Kaplan Equity Analysts.
Local cellular operators may try to persuade customers to register their SIM cards through incentives to avoid bleeding subscribers, analysts say.
Yesterday, Vodacom reported its South African subscriber numbers are up – despite the recent implementation of the Regulation of Interception of Communications and Provision of Communication-Related Information Act (RICA).
SA’s largest mobile operator added just over 579 000 subscribers in the six months to September, taking it to 55% of the local market.
However, the company is concerned it will start to see deeper effects of lost subscribers as the RICA deadline draws closer.
Frost & Sullivan ICT industry analyst Spiwe Chireka points out that the company’s figures include a few months before RICA came into full effect in August. She says, as a result, there may be a drop in net additions when Vodacom reports its full-year results.
“Vodacom is including their net additions all the way back to April, of course they will see growth,” she says. Although Chireka expects a sharp decline in subscriber growth, she does not expect RICA to have the same negative effect as it did on MTN.
MTN reported late last month that its South African subscriber base was down 4.7%, as 800 000 users were disconnected due to the Act.
Chireka explains that Vodacom has fared better than MTN, because “Vodacom has realised that RICA is a threat and, therefore, it is best to tackle it head on”. She adds that the company’s loyalty plans in the prepaid segment – which makes up the bulk of the market – will aid it in limiting churn caused by RICA.
As a result, Chireka expects other mobile operators to also look at ways to offer incentives to customers to register – and stay with their networks. “We are likely to see a lot of action where operators offer incentives to get people to sign up.”
This could take the form of better airtime deals, or through the operators simplifying the process, she adds.
Irnest Kaplan, MD of Kaplan Equity Analysts, says there will be a drive to incentivise subscribers, since – come the beginning of Q1 2011 ‑ all operators may see customers dropped from their networks.
“There will be some strange moves with subscribers when the RICA deadline comes along. Operators will not have registered all their subscribers by then and many will drop off the network.”
However, he says it seems Vodacom has handled RICA better than its rival.
Chris Gilmour, an analyst with Absa Investments, says he is unsure whether RICA will be a temporary blip on radar screens, or whether it will continue to slow subscriber growth.
The SIM-card registration Act is expected to slow net gains on networks. MTN has already said it expects flat subscriber growth for the year to December, and even that will be challenging.
RICA’s implementation started in July, with a grace period of a month.
The Act is expected to hit prepaid subscriber numbers hardest. Chireka expects Cell C to be hit as the company targets the lower end of the market. She points out that lower-income earners are less likely to have either an identification book, or a proof of residence.
In the Democratic Republic of Congo, for example, Tigo Congo lobbied regulators to have a similar law delayed as it was reducing the company’s subscriber numbers. Tigo offers services to the lower end of the market, explains Chireka.
Stephen Meintjies, an analyst with Imara SP Reid, says he expects the smaller cellphone operators to be less affected because they have smaller subscriber numbers. However, once the Act is firmly entrenched, it will become “a necessary bit of red tape”.
Virgin Mobile SA spokesperson Jonathan Newman says the company has not felt the impact of the Act, as it does not target the broader prepaid market.
“We have, however, noticed some slowing of prepaid acquisition – RICA is definitely a strong disincentive to spontaneous prepaid connections.”
Newman adds that, although the company has had a difficult first few years, it is now experiencing good growth in its targeted postpaid market, and has more than 200 000 subscribers, of which more than three-quarters are on contract.