Technology Sector Overview

Connecting The Country: Rising Investment In Telecommunications

By Koketso Mamabolo

Innovation and developments in the tech industry can have far reaching impacts on all other industries. The products and services which emanate from the sector have the power to change how businesses operate and how consumers live their lives. We all use technology, whether directly or indirectly, and in the last decade the pace of change has created a host of opportunities for investors to get involved and for businesses to take their operations to the next level.

The Digital Landscape

With much of the focus in the last year being on the incredible developments in artificial intelligence, the progress in other sub-sectors has gone under the radar. The world is changing before our eyes. E-commerce has come to the fore; digital payments are democratising access to financial services and over 70% of South Africans were using the internet in some form at the beginning of 2023:

• 72,3% - Percentage of SA population using the internet

• 42,9% - Percentage of SA population using social media

• 27,7% - Percentage of SA population not using the internet

(Sources: Data Portal Digital Report 2023)

Telecommunications

The International Mobile Telecommunications (IMT) spectrum auction, which was concluded in March last year, raised almost R15-billion and will decrease communication costs, enhance competition in the telecommunications sector and ultimately open the opportunities for greater connectivity. The telecommunications industry is a perfect example of the growth the technology sector is experiencing and it could be argued that connectivity underpins much of the economic activity in, similar to primary sectors such as mining.

Telecommunications Revenue & Investment

• R200.2-billion - Total Revenue in 2021

• R208.1-billion - Total Revenue in 2022

• R14.4-billion - Amount raised in IMT Spectrum Auction in 2022

(Sources: ICASA’s State of the ICT Sector in SA report - March 2023)

In 2022, the telecommunications industry saw its total revenue rise by 3.94% from the previous year. Despite a decline in 2021 the last five years has seen consistent growth in the sub-sector, exceeding the R200-billion mark in three of the last five years. Mobile services contributed more than 50% of the revenue in 2022.

Fixed Internet and Data Revenue 2018 - 2022

Total Fixed Internet and Data Revenue:

• 2018 - 19 078 304 740

• 2019 - 26 790 096 707

• 2020 - 25 335 440 726

• 2021 - 23 493 901 812

• 2022 - 20 915 629 887

Investment in the sub-sector saw a significant increase from 2021 to 2022, sitting at R39.7billion in the latter, albeit in the context of a 4.03% decrease over the same five-year period which has seen revenue rise. Mobile communication services is where the majority of investment has been (over R15-billion last year) with infrastructure investment coming in at just under R7-billion, increasing 4.27% over the last five years.

According to Deloitte’s global 2023 Telecom Industry Outlook: “With high demand, strong competition, and the need to optimise costs and risk, more CSPs [communications service providers] are partnering with private investors to accelerate deployment of fibre networks. These partnerships can be mutually beneficial – and reinforced with government funding that can further incentivise build-out.”

The report also highlights that CSPs are looking to lower energy costs, increase the use of clean energy and avoid the reputational damage that could come with not reaching net-zero targets or decreasing emissions.

Revenue From Fixed Broadband Services

• 2018: R11 003 085 498

• 2019: R13 918 376 242

• 2020: R13 540 003 128

• 2021: R13 262 951 804

• 2022: R12 782 037 634

(Sources: ICASA’s State of the ICT Sector in SA report - March 2023)

Sources: Data Reportal | Offer Zen | My Broadband | Deloitte