Operators should consider increasing their investments in emerging growth areas such as the Internet of Things (IoT), next-generation fixed networks and other business services to offset the considerable declines in legacy services.
Revenue growth in the South African enterprise market remains weak; however, while legacy services are in rapid decline, enterprises are increasing their use of IoT and other business services, such as the cloud and security, as the improved quality and affordability accelerate the adoption of fixed broadband services.
Enterprises are expected to increase their spending on other business services, such as the cloud and security, by over 7% each year.
The changes, however, are not yet leading to strong revenue growth for all operators, explains Analysys Mason research analyst Terry van Staden.
“This will create a significant revenue growth opportunity, but we expect operators to receive only a slim portion of this growth and the market is relatively nascent,” he says, noting that this is despite the expectation that fixed and mobile data services and IoT will become primary sources of revenue growth in the enterprise market.
Revenue in the South African enterprise market will grow only marginally between 2018 and 2023, by less than 1% each year, driven by several key but often contrasting trends and the continued impact of the decline in legacy services, namely fixed voice, narrowband, mobile voice and messaging.
“Legacy services currently account for 47% of enterprise revenue, but we expect this figure to change significantly in the short term, falling to 35% of total enterprise revenue by 2023,” he says.
The number of fixed broadband connections to enterprises will increase by 7% each year and will reach over 600 000 by 2023.
There will also be shifts in use of broadband technology, with the number of fibre-to-the-premises/businesses connections more than doubling to 100 000, and the replacement of Asymmetric Digital Subscriber Line (DSL) as the most common broadband access type with Very High Bitrate DSL.
“IoT and other business services will be the main drivers of overall revenue growth. We expect that the number of IoT devices on mobile networks to reach 29-million by 2023, resulting in connectivity revenue of almost R3-billion for operators,” Van Staden says.
The market for other business services, such as the cloud and security, will grow at a compound annual growth rate of 7.4% and will reach R7-billion by 2023.
“Operators that are still highly dependent on revenue from legacy services face a considerable threat, but there are significant growth opportunities in fixed and mobile data services, IoT and other business services,” he says.