News and Information
South Africa sees future in 3G
|August 23, 2004
| By Jon Cronin
BBC News Online business reporter
Vodacom has been investing heavily in 3G technology
After much hype - and some setbacks - third generation (3G) mobile phone technology appears ready to sweep the world.
Millions of Japanese phone users have already snapped up high speed 3G handsets, which allow video calling and faster internet download speeds.
In Europe, operators such as Vodafone and Orange are launching their own 3G networks.
Now South Africa's biggest mobile phone company, Vodacom, is preparing to roll-out a 3G service which could rival much of what Europe has to offer.
The company, which is majority owned by South Africa's monopoly fixed-line operator Telkom and British mobile phone giant Vodafone, has set itself the ambitious target of a Christmas launch date.
Vodacom's foray into the world of 3G will be the first such step in South Africa, and indeed anywhere else in Africa.
But it very nearly didn't happen.
"3G was put on hold when we saw what the European operators were paying for their licences." says Vodacom's chief operating officer, Pieter Uys.
South African mobile firms balked as Europe's biggest operators spent billions securing government licences to start 3G services. In the UK alone, Vodafone spent almost £6bn ($10.9bn) acquiring its 20-year 3G licence.
But as the potential benefits of 3G became clear, a decision was taken by government ministers to make 3G licences more affordable in South Africa. Vodacom and rival mobile operator MTN were both awarded licences.
"We paid six million rand for our licence," says Mr Uys. "We are building the network now and all the major metropolitan and holiday areas, such as Sun City, will be covered. 3G will be available by Christmas."
Working closely with Vodafone, which owns a 35% stake in Vodacom, the South African firm has spent 500m rand ($76m; £42m) developing 3G and upgrading its existing network.
South Africa is one of the few countries in Africa where introducing 3G could make commercial sense.
The country's mobile penetration rate - the proportion of the population using mobile phones - currently stands at 40%, compared with an average level across Africa of just 6%.
As well as providing phone services, Vodacom sees 3G as a way of furthering the reach of the internet in South Africa, especially in less wealthy or remote areas of the country.
The company's remit requires it to take mobile technology into poverty stricken areas, and it sees scope for providing subsidised 3G services in schools and community centres.
Africa is a hugely untapped market. I think that mobile Africa will definitely grow, and the future of Africa is a wireless one
Lara Srivastava, International Telecommunications Union
Q&A: 3G mobile phones
However, building a 3G network from scratch is a risky business.
Hong Kong conglomerate Hutchison Whampoa recently revealed it had booked a first-half net loss of $1.1bn (£600m) on its 3G business, despite rising customer numbers.
Hutchison has pumped more than $22bn into its '3' mobile brand in Europe and South Asia, but the service is not expected to make money for some time.
In South Africa, MTN has voiced a more cautious line on the roll-out of 3G. It has been focusing on developing an enhanced version of current mobile technology - known as 'Edge' - and is not expected to launch 3G services until later next year.
"Affordability is going to be the biggest problem. Only a certain strata of society is going to be able to afford 3G phones to start with," says Lara Srivastava, telecom policy analyst with the Swiss-based International Telecommunications Union.
Despite the smiles, 3G has had its share of difficulties
However, as the technology develops - becoming more widely available and cheaper to use - Ms Srivastava believes there could be greater benefits for many South Africans.
"There is clearly a need for internet connection in areas where there is no internet infrastructure. 3G offers the potential of bringing internet access to people who can't afford PCs," she says.
"Africa is a hugely untapped market. I think that mobile Africa will definitely grow, and the future of Africa is a wireless one."
Vodacom plans to attract corporate customers with 3G PC plug-in cards, similar to those recently introduced by Vodafone and Orange in Europe.
At the same time, High Street consumers will be targeted with video mobile phone services.
Such is Vodacom's faith in 3G, it is predicting the service will account for 10% of revenues by 2007. The company has 12.4 million customers, the vast majority of whom use pay-as-you-go services.
"People are very proud in South Africa," says Mr Uys. "They buy the best shoes and the best clothes. It's important to have the best. What mobile communications have done is enable them to empower their own businesses."
Vodacom's bullish optimism for the roll-out of 3G extends to its operations elsewhere in Africa, including Tanzania and the Democratic Republic of Congo.
Mr Uys says the company could launch 3G services across Africa as early as "next year".
"People want to know what's happening in the rest of the world and we don't want to be left behind."
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