ICT sector recovery dependant on the macroeconomic environment

12 Aug 2018

The improvement of the macroeconomics environment is expected to boost the recovery of the information communications technology sector expenditure both from the government and the business side.

The June 2018 Consumer Price Index have shown that communication index group moved from 101.4 to 92.0, registering a drop of 9.2 percent between May and June.

This was due to a decline in the constituent section index of Telephone &Telefax Services, which went down by 11.7 percent. The decrease in Telephone &Telefax Services section index was attributed to the revised prepaid voice call tariffs by mobile service providers which effected on the 1st June 2018.

The Stockbrokers Botswana research report this week, alluded that consumption pattern shifts to increasing use of data as opposed to voice and SMS. The research which looked on Botswana Telecommunications Corporation Limited (BTCL)’s performance, shows that  the telecom company continued its investment in LTE infrastructure are based on this shift, as the company looks to further capitalize on consumer’s use of mobile broadband. On a holistic level, successful execution of the company’s strategy will be necessary to ensure sustainable growth going forth.

The growth of the economy looks promising and is projected to reach the highs of 5.3 percent in 2018, and so far the inflation rate has remained within the Central Bank’s range of 3-6 percent. June inflation recorded 3.1 percent declining from 3.3 percent in May and is expected to remain within range going forward into 2018.

The GDP expansion is anticipated to be largely driven by growth in the services sectors, ICT not spared- as well as the recovery in mining activity, in line with the positive global economic prospects.

Despite the optimism in the recovery path for the sector, competition is intensifying across the ICT sector with the potential for further increase in competition on the back of Botswana Communications Regulatory Authority’s execution of its mandate.

The Telecommunications/ICT sector has undergone numerous reforms since the introduction of competition in 1998. Currently three Public Telecommunication Operators (PTOs) provide local, international, national and mobile services. The market structure for local services, domestic long distance services, market for international long distance services and market structure for mobile services has been partly liberalised.

According to BOCRA, the telecommunications sector, sparred by the mobile technology, continues to experience significant growth in terms of the total number of consumers and variety of services.

Liberalization of the ICT sector has culminated in the entry of new Internet Service Providers (ISPs) which has led to increased competition and downward pressure on the pricing of fixed broadband services, in line with the regulator’s mandate.

With the new entrants in the market of internet providers, Board chairperson, Lorato Boakgomo-Ntakhwana , commenting on the company’s financial statements for the year 2017 recently said, “this had an impact on our performance for the year. The overall economic environment for the year was subdued, which led to the reduction in ICT spend from enterprises and government entities, with most entities negotiating for lower prices on new and existing services. The slowdown in spending also impacted the consumer segments as households were faced with prioritizing their income on basic necessities.”

BTCL which has been trading on the down low for weeks, has invested in fixed broadband networks under its Bokamoso project. This has resulted in the company’s launch of broadband products of unprecedented speed in response to the heightened competition of ISPs and market demand for high speed, reliable internet. “A further P90 million in capex has been budgeted under this project for the current financial year as BTC looks to roll this service out to other parts of the country. However, the company will have to accelerate its efforts to turn around its service delivery to ensure customer loyalty lest lose out on volumes to competitors,” reads the research by Research Analyst Donald Motsomi. BTC holds 68 percent market share in the fixed broadband space.

Market trends indicate growth in access and increased usage of fixed broadband, which is expected to be sustained going forth as these services become more affordable and incremental investments in the requisite infrastructure ensure the increased availability of these services. With pressure on pricing of services, growth will come from increased customer volumes, according to the research report.

In the mobile space, Motsomi said a potential game changer could come in the form of number portability, a service that permits a customer to switch network operators while keeping their original phone number. A study on its possible implementation is expected to begin soon with a decision to be taken a year thereafter. Given BOCRA’s focus on promoting competition across the sector and increasing convenience for the consumer, which number portability would serve to enhance, we anticipate that this will eventually be implemented. “This could result in a shift in market share amongst MNOs and would present an opportunity for BTC to gain ground in the market,” he said.