Rooftops of Marrakech

With a population of just over 50 million people, South Africa is one of the world’s most interesting DTH markets as operators battle for new business there. Two operators looking to take advantage of this situation are MultiChoice and On Digital Media. Both are present in South Africa and MultiChoice is also in a number of sub-Saharan African markets. While conversations in developed markets talk about the potential for 4K, in African markets such as South Africa, the key will be much more about HD and ramping up the channels here.

“We do plan to introduce HD services in the future, but this will be dependent on the availability of our next generation STB, the company’s financial growth and welfare over the next few years, as well as more satellite capacity,” says Frans Lindeque, senior vice president, technology and broadcasting, On Digital Media. “We have decided to run SD widescreen services, which is an excellent and cheap alternative to 720P HD services. We have found that with a very good quality source, SD widescreen is not that far off from 720P HD.”

Colins Khumalo, CEO, MultiChoice South Africa says the operator is likely to add to its HD channel line-up in 2013. “Up until the end of September, we had 6 HD channels. In October, we launched a further 8 HD channels. I think there is room to expand our HD offering. At the moment, our HD offering is mainly available to our premium subscribers. Part of our strategy will be based around our ability to offer more HD channels. We are still in discussions with channel providers to add to the channel line-up. Over the next two years, the numbers of HD channels on our platform is likely to increase,” he says.MultiChoice has more than four million subscribers in South Africa. Interestingly, in terms of market dynamics, Khumalo believes growth is now coming from different parts of the market. “According to recent research there will be more growth coming from the lower end of the market. The lower end of the market is the fastest growing market available in South Africa. We believe there is a good macro-economic growth that is underpinning the South Africa market. We believe this will continue to underpin the market at least for another two years. GDP will give them good growth in terms of their disposable income. That would enable them to spend on things such as pay-TV,” he says.

On Digital Media, which is a later entrant into the market has around 200,000 subscribers. The company has recently launched a TopTV Prepaid voucher payment offering, which Lindeque says is a first in South Africa. This offers customers instant accessibility to TopTV, and no reconnection fee if they come back to the service. Lindeque believes the operator is targeting a market in South Africa that has previously not been exposed to pay-TV. “Being the first pay-TV operator in South Africa to offer a prepaid voucher payment option resonates well with the market segment we are targeting, as they are extremely prepaid-savvy consumers, and it is a convenient, quick and easy way to pay for the next 30 days of TopTV viewing. Obviously, the current state of the world economy has had an impact on various fronts including pay-TV,” he says.

In terms of reaching profitability, On Digital Media would need a stable base of between 320,000 to 350,000 active, paying subscribers for the business to become lucrative. The company launched in mid-2010, and there are already 400,000 TopTV decoders in the marketplace. The key for the company over the next year is to convince those lapsed or disconnected subscribers who already have the hardware installed to come back to the service. “The company has already had a major impact on the industry, with the established, incumbent pay-TV operator having to change the way it does business and its pricing model,” Lindeque says. “Of course, the real winners are the consumers who have benefited from having an alternative option and more choice, with another player in the market. We don’t consider our offering as a direct competitor to the incumbent, as we are targeting a specific sector of the market – those people who are not currently subscribed to any pay-TV service.”

Capacity Requirements and OTT

With more of a demand for pay-TV capacity, the good news for satellite operators is that the demand for satellite is likely to be on the increase. This spells good news for both SES and Intelsat, who could be major beneficiaries here. “We anticipate that we will obtain more capacity on SES-5 and probably two additional transponders,” says Lindeque. Khumalo adds, “We have, together with Intelsat, launched a new satellite earlier in 2012, and the satellite became live in October. I think the demand for capacity will continue to grow, it will continue to be the prime method of distribution for us in South Africa. I think this will give us all the capacity we need over the next few years. The satellite has a life of 15 years but we think the demand for more capacity might come sooner rather than later. On the Southern Africa beam, we are sitting on about 24 transponders right now. We have access to about 20 of those transponders, and depending on what happens and the demand, we may well need more capacity.”

Both pay-TV operators could look to OTT services to supplement what they are doing with DTH. “We will definitely be looking at IP and multi-screen viewing, as well as OTT,” says Lindeque. “In addition to this, we will follow trends such as push VOD, PVR facilities and will consider other technology that will add value to our current linear TV offering. While we are urgently awaiting more bandwidth, it will not prevent us from preparing for the time when these technologies, such as LTE, are implemented.”

Khumalo admits MultiChoice could look to do something here in the next two years. He adds “I think they will definitely have some impact over the next couple of years. However, a lot of this depends on the wide availability of broadband. Right now, the availability of high-speed broadband is very limited. It would make it difficult for any of those players to get in the market right now. For the short term, there will be no impact, but in the medium term, there might be an impact on the market.”

Broader Horizons and Broadband

While MultiChoice is present in South Africa, the company has a much broader play in Africa. “We are looking to expand our footprint in the rest of sub-Saharan Africa. We have launched DTH services in Nigeria, Kenya, Uganda and Zambia, and we are launching into other markets,” Khumalo says. “We have been looking to lower the cost of entry into these markets. A significant amount of investment is going into the rest of Africa. Our sister organization is available in 46 territories across Africa at the moment. But, we are not in North African markets such as Morocco and Egypt. We are launching specific bouquets in this part of the market. This will be a major push for us. At a South African level, there is not enough terrestrial capacity. Satellite will still be key for us when targeting this market.”

The company, which has one of the most recognizable pay-TV brands in Africa, has even toyed with the idea of launching a satellite broadband service in South Africa. Khumalo does not rule out doing something here in the future. “I think there are in pockets in the market which could be available for satellite broadband, but I think the key here is to have steerable beams to focus on specific markets,” he adds. “The big challenge is the cost of equipment, as well as the installation costs. You need a different kind of dish. There is definitely the potential there. We have had ongoing discussions with our satellite providers about this. We did look at is seriously one to two years ago, and at that time, it was not viable. But, we will look at it again to see whether it is viable. At the moment, there are no firm decisions to go in this direction.”

Yahsat Ready for South Sudan Broadband Challenge

Yahsat, the Middle East satellite operator, is playing a key role in bringing satellite broadband services to South Sudan, a country with a population of just over ten million people. This is a key project for the company. It has teamed up with ISP RCS-Communication as a service partner for South Sudan. The service is expected to go live in the first part of this year. RCS Communication has been servicing the South Sudan market since 2003.“

As the world’s youngest country, South Sudan is facing multiple infrastructure building priorities,” Shawkat Ahmed, CCO, Yahsat says. “YahClick brings affordable and instant Internet connectivity to the population, irrespective of access to local terrestrial infrastructure. YahClick therefore fast tracks connectivity to this young country beyond what is possible with the time and expense it would take to expand fixed or wireless Internet solutions. We see huge potential for the country in further developing its socio-economic growth. YahClick is a game changing technology that provides broadband services to everyone from government, businesses, education institutes, NGOs to personal home users.”

The company has already selected a number of partners in the African market. The YahClick service is offered by Vox in South Africa; Hyperia and Coollink in Nigeria; Sistec and NetOne in Angola; Simbanet in Kenya, Uganda and Tanzania; TruIT in Uganda; and Raha/Infinity in Tanzania. Ahmed admits the company has strong ambitions for Africa. “Yahsat is committed to be the leading regional satellite operator and global partner of choice in all our markets. Our goal is to achieve a high fill rate for our current satellite Yahsat 1B within the first year taking us to the middle of next year, with a view to expand our coverage area and provide more capacity over existing markets to meet demand,” he says. “Our number one priority is making sure that our satellites are 100 percent operational and that the end user gets the highest quality service we can offer.”

The Middle East and Africa could be a hotbed for satellite broadband services. “There are several countries in the Middle East where rural or remote regions are still not sufficiently covered by terrestrial services, despite the proliferation of wireless and fiber infrastructure in major cities. In addition, the IMF has highlighted that growth in Africa is expected to continue over the next five years and between 2010 to 2015; nine out of the top 20 fastest growing economies in the world are expected to be in Africa,” says Ahmed. “We strongly believe that our YahClick service can bring added benefit to the regions socio-economic growth, particularly when you resolve affordability issues.”

K-Net CEO Believes Africa Offers Rich Pickings for Satellite

K-Net is one of the key providers of satellite-based communications services in Africa, and has a significant presence in markets like Ghana, its home market, which counts with a population of around 25 million people. The company is playing a key role in bringing satellite-based communications services to Ghana.

K-Net was formed in 1996, and has its headquarters in Accra, the capital of Ghana. Serving rural communities is key to the company’s strategy. Mike Darcy, CEO, K-Net says, “We have deployed 10 sites in Ghana already. We are working with one of the mobile operators here. The levels of traffic we are getting here is amazing, when you consider the number of minutes being used. A lot of rural communities have never had any telephony whether fixed or mobile before. Some of the sites are carrying 300,000 voice minutes a month, and it is growing very strongly; that is another area, which is driving the business. We have big, big plans in this area.”

Darcy sees satellite as “absolutely crucial” for the business case in Ghana, particularly in the area of telephony, where satellite can make an impact. “While a number of areas are now served by mobile, most urban and suburban areas have very good coverage,” he says. “But, 60 percent of Ghana (143,000 square kilometers) does not have this access. Only 40 percent of the land area is covered by at least one of the six mobile operators, and you have 3.75 million people living those areas. While a huge number of people are now well served, this is still a significant number of people who can gain access to telephony services. There are communities, hospitals, schools, in rural areas and we are doing our bit to bring mobile services into these areas. We have developed a solution that has low capital expenditure and very low operating expenditure, and uses VSAT to deploy a low capacity site, which is self contained with a solar-power system. There is no reliance on grid power. The total cost of ownership is about 35 percent of that of a conventional solution.”

The company has a strong presence in Ghana across many verticals including DTH. K-Net is a major TV uplink partner for a DTH platform in the country. The company currently carries 20 TV channels using the Astra 2F satellite at the 28.2 degrees east orbital location, and it expects the number of channels to increase significantly over the next few months. K-Net is working very closely with the Ghana Independent Broadcasting Association (GIBA) in order to standardize a common DTH platform in Ghana, which had just fewer than 30 TV channels by the end of the year.The company has been on a growth curve over recent years, and expects that trend to continue over the next year. It is forecasting a double-digit increase in revenues and profits in 2013. Outside of Ghana, K-Net will look to generate more revenues. In terms of the potential hot markets for satellite in Africa, Darcy adds, “Nigeria still has the most potential of all the countries in the sub-Saharan region. That is one of the main countries we are targeting. While Ghana is our home base, we are very much looking to leverage the broad coverage we have got. So, you have countries like Senegal in the west, to countries like DRC, Rwanda in the central parts of Africa; there are several large countries in that footprint. Nigeria is by far the biggest. However, the GDP per capita is three times higher in Ghana than it is in Nigeria. We have done a lot of work in Benin, for example, which is a much smaller market, but it is less well developed in terms of infrastructure.”

However, despite the potential for the company to better monetize the markets in Africa, Darcy believes the industry could do more and says the VSAT market in Africa is an example of where there could be potential for industry to improve. “Satellite technology is a lot more mainstream than it is in other parts of the world. But, what always staggers me is the relatively few number of VSATs in Africa compared to other parts of the world. If you walk around in Accra or Lagos, you will see a lot of VSATs on hotels and ATMs etc. But, it is interesting, there are 2.8 million VSATs in the world in a market that is worth $8 billion a year. Of those 2.8 million VSATs today, only 65,000 of them are in all of Africa,” he says.

With GDP growth happening all across the region, the potential is for K-Net and others to really exploit this. “Fixed line penetration is still relatively low. The overall communications infrastructure is poor. GDP per capita is a tenth of what it would be in countries in Europe. So, the pace of some of these projects is so much slower. But, I think what you are seeing is the potential for tremendous growth, but it is not all in one place. While Europe and North America are showing declines in economic growth, Africa is seeing double-digit GDP growth year-on-year,” says Darcy. “While there is a lot of catching up to do, the economic development combined with poor infrastructure, will lead to an increased uptake in different communications technologies, of which satellite is a part of. I think the demand for satellite capacity will grow a lot. You are seeing increased demand for VSATs and infrastructure.”