South Africa’s telecommunications industry is at a crossroads, at which the operators face grave new competitive challenges and exciting opportunities that will ultimately decide their fate.

These megatrends can largely be attributed to digital convergence and the changing digital landscape.

For many years, the operators have been dealing with network and service convergence. The new wave of change, however, is far broader. It is a global marketplace dynamic in which not only the base technologies but industries themselves are overlapping and colliding, value chains are being redefined, and players are being brought together as both competitors and collaborators across traditional boundaries of industry and technology.

Below are seven of the major trends that are causing dramatic changes in this industry in South Africa.

1. Colliding pressure systems of revenue and cost
For operators, economic headwinds are accelerating a divergence between revenue and cost. Ovum reports that South African operators’ revenue growth has shown signs of stagnation since 2010 — from 25% year on year in 2010 to a projected 5% in 2016. Mobile voice average revenue per user (Arpu) has been on a downward trend since 2012 and is expected to continue to decline until 2016, with the overall decline ranging from 10% to 30% over this period.

Mobile data revenue has proven insufficient to make up for the decline of legacy services such as voice and SMS, which are rapidly being supplanted by “over the top” applications like WhatsApp — which in turn can diminish operator revenues by as much as 50-90%. Furthermore, market saturation is increasing competitive pricing pressure.

Meanwhile, an expected mobile data penetration rate in South Africa of 121% by 2016 is accelerating demand for network investment. As cost pressure mounts, even with the advent of new technologies such as cloud and digital, operators will be forced to consider their spending carefully.

2. Affordability: unlocking broadband growth
Broadband prices in South Africa have dropped steeply over the past few years, but the services continue to be out of reach for the average consumer.

3. Rise of the ‘super platforms’
Yesterday’s technology giants are evolving into tomorrow’s vertically integrated “super platforms”. Companies such as Google and Facebook are encompassing operator-agnostic devices, communication and entertainment services, direct-to-consumer channels, and extensible cloud platforms that support rapid innovation.

As operators look to develop non-traditional revenue streams, super platforms and the over-the-top innovators they enable represent the new face of competition, exploiting new multi-sided business models. With their legacy cost structures and Arpu expectations, operators will face huge challenges in creating both compelling experiences and competitive economics.

4. The digital customer
Operators today are catering to the needs of an increasingly diverse group of digital customers who demand the best experience at the best price. The digital customer places increased importance on a personalised customer journey, evolving from a linear purchase path to one that is much more dynamic.

The digital customer is more demanding, knowledgeable, mobile, empowered, interactive and diverse. Digital customers use various ways to interact with brands and expect an integrated treatment. Operators are reacting to these needs and have started transforming into more customer-centric and integrated organisations. The pace of change may, however, not be enough to keep up with the competition.

5. Avoiding disintermediation
Super-connected consumers want a wide range of services and don’t necessarily care where they come from.

6. Government: roiling the waters
Governments around the world are increasingly viewing operators as “network utilities” and have introduced new policies, designed to foster competition, expand access and reduce prices. In 2013, the then minister of communications Yunus Carrim announced the department’s draft strategy and programme, which contained many important projects, including the country’s broadband and LTE spectrum policies.

The next few years will be critical for operators as they navigate the complex web of next-generation network policies — some providing subsidised opportunities to improve services and capital efficiency, and others taking those opportunities away by enabling new and non-traditional competition.

7. Consolidation and globalisation
As operators come up against their regulatory and footprint limitations, they are pursuing growth through international service offerings and alliances. The impetus for global growth is increasingly evident between emerging markets, marking a deviation from traditional expansion patterns (from developed markets into emerging markets) into new directions (from emerging markets to emerging markets).

By 2016, hyper-growth markets will add nearly a billion new mobile connections and account for 56% of all mobile connections worldwide. However, these markets also pose challenges that go beyond cross-border execution and cultural conflicts. Operators will need to transform themselves into leaner, more industrialised companies, managing different strategies and goals across their domestic and foreign operations.

Disruptive challenge and opportunity
As these trends fundamentally challenge the telecoms industry by accelerating legacy business model erosion, disrupting established value chains, and both creating and challenging new growth prospects, the industry will need to move carefully to capitalise on their impact.