The multi-billion rand telecommunications industry is the fastest growing sector in the South African economy. It has more than 30 million cellular subscribers and marginally less than 5 million fixed-line subscribers - and is ranked amongst the top 20 telecommunications industries in the world.

Telecommunications is not only big business in South Africa. It is one of the leading industry sectors in transforming our economy through Black Economic Empowerment (BEE) by opening up the benefits of trade in telecommunications to those historically disadvantaged under apartheid.

Fixed-line telephone communication is still dominated by Johannesburg Stock Exchange (JSE) listed Telkom. Although fixed-line subscribers are reducing year-on-year Telkom (with a 50 percent holding in cellular service provider, Vodacom) still made a net profit of 6,807 million rand for 2005 (17 percent of which was from cellular services), but this business arena is set for change when the second licence holder begins operations later this year.

Telkom was rated the most empowered company amongst the top 185 companies listed on the JSE for 2004 and 2005. Last year 67 percent of Telkom’s procurement spend was with BEE suppliers, and Telkom provided training for 1 370 emerging BEE companies.

The South African cellular market has soared since its inception in 1994 and ranks as the fourth fastest growing mobile communication market in the world. Operators Vodacom, MTN and Cell C share a growing market base that is expanding rapidly, mostly in prepaid package subscribers but extending into mobile data communication.

Cell C, the smallest and youngest contenders in South Africa, has 10 percent of the market share with 3 million subscribers, but claims to be the most empowered cellular company.

It has a 25 percent BEE shareholding and employs 2 014 people of whom 87 percent come from previously disadvantaged groups, and 47 percent are women. Cell C states that 51 percent of its senior management positions are filled by those previously disadvantaged under apartheid and women fill 24 of the 94 senior management positions.

Cell C also uses local organisations and contractors to ensure that funds are injected into the South African economy.

MTN had almost 9 million subscribers in South Africa at the end of June 2005. The company has consistently been voted as one of the top 20 companies to work for in South Africa, and spends 6 percent of its payroll on staff development and training. In terms of procurement, 60 percent of MTNs suppliers were disadvantaged under apartheid.

Vodacom has a 58 percent share of the South African market with 19,2 million subscribers at the end of March 2006. Currently 80 percent of Vodacom employees, including Vodacom’s wholly owned subsidiaries in South Africa, are from historically disadvantaged groups.  

Vodacom also supports a preferential procurement programme and during the past financial year spent R3,3 billion (66,2 percent of commercial spend) with BEE businesses. The company scored 65,1 percent, excluding bonus points, in a recent internal rating in terms of BEE requirements for the industry placing it in the ‘Good Contributor’ category.

Voice over Internet Protocol (VoIP) and the imminent arrival of Virgin Mobile (in partnership with Cell C) into the dynamic South African telecommunications market is likely to alter the landscape of the industry, but having set a precedent of competing in the empowerment arena as fiercely as they do for business, it is unlike to cause a drop in the telecommunication industry’s BEE score.

This article appeared in Strictly Business - MTNs Business to Business magazine.