Peter pan

Rural connectivity presents a strong business case for telecom operators

As rural areas now use more telecom services than before, telecom operators are increasing their investments in building infrastructure, seeking to extract more intrinsic value from the rural market.

This is the view of analysts polled by ITWeb, reacting to recent announcements that MTN and Vodacom have set aside almost R2 billion to build new base sites in some of the deep rural areas.

Analysts say telecom operators have been spurred to seek more value in the rural market, by increasing infrastructure investment targeting outlying areas.

With denser 4G coverage in cities, carriers are focusing more on improving quality of service in rural areas, as they look for opportunities to drive the growth of digital services.

The shift in telecom operators to bolster construction investment is expected, analysts said, as urban areas are largely congested.

Vodacom revealed that it invested over R1 billion in the last financial year, to enable more communities in urban and rural areas of the Western Cape to increase the benefits of connectivity.

This, Vodacom said, is part of its commitment to building a digitally inclusive society, where increased online access can help promote socio-economic empowerment and bridge the digital divide.

Vodacom’s investment includes building 38 new 3G and 4G base station sites, including 16 in townships and six in rural communities, and implementing LTE capacity upgrades in over 75% base stations in the province.

Vodacom has also built 50 new 5G base station sites in the region, which it says are ready for the deployment of next-generation technology.

MTN SA has announced a R700 million investment to “upgrade existing network infrastructure and roll out new infrastructure” in KwaZulu-Natal.

This amount, in addition to the R500 million invested in 2021, will go towards MTN’s modernization project, as well as rural reach extension, 5G expansion and network restoration. vandalized network infrastructure, he said.

“The project will increase network coverage, improve speeds and customer experience in the region. This will allow the broadband platform to access many previously unconnected areas of KZN. »

Commenting on construction investments, analysts point out that the trend is global and not unique to SA.

“There is a change and we are also seeing the same in other emerging market countries. Urban areas are largely saturated as every new entrant into the industry starts there, while there is still room to increase the number of customers and usage per customer in small towns and rural areas,” says Peter Takaendesa, Head of Equities at Mergence Investment Managers.

“The opportunity and profitability obviously won’t match the added value of increasing coverage in urban areas over the past decade, but the rural market is a source of growth in countries with growth of largely saturated mobile customers.

“It is important to also note that the economics of rural coverage will improve as operators receive more sub-1Gb spectrum, which is more suitable for wider coverage at a lower network investment cost. . The results of the current spectrum auction are therefore favorable in this respect. »

Rural activities now use more telecommunications services than before, hence the displacement of telecom operators, he notes.

“The affordability of smartphones and the faster adoption of consumer digital services (social media, etc.) are clearly favorable to improving the adoption and use of telecommunications services in rural areas.

“Telecommunications will also aim to extract more value from the rural market through their new airtime lending and insurance businesses.”

Africa Analysis telecommunications analyst Dobek Pater agrees that rural activities are increasingly digitalised, hence the need for improved networks.

This, he adds, means a viable business case for telecom operators.

“As data prices fall, usage of data services increases and more traffic is generated on mobile networks,” says Pater.

“Furthermore, as the use of adjacent services (such as financial services/mobile money) increases, operators want to ensure that they continue to expand and improve broadband infrastructure in underserved areas to allow their customers to use these services. Traditional (circuit-switched) voice services also continue to be important and coverage is important for this. »