Customers reap the benefits of disruptive communications technologies as loadshedding hastens the decline of traditional voice telephony.
The telecoms voice services sector experienced a steep decline in 2022, with a particularly harsh impact from loadshedding.
According to BMIT’s latest SA Voice Services and UC&C Report which projects a continuing, steep decline in call volumes and revenues across both the fixed and mobile voice services market, whilst anticipating exceptional growth in the emerging Unified Communications and Collaboration (UC&C) services.
Chris Geerdts, BMIT’s Managing Director, says this is because UC&C services are disrupting traditional telephony just as Uber disrupted the metered taxi industry. Customers want the benefits of high definition calls, conferencing, video and multimedia, as well as the ability to send and receive messages and posts when it suits them. Customers hardly think twice nowadays when using over-the-top (OTT) apps such as WhatsApp and Telegram, to communicate individually or with a range of personal, family and business groups. Similarly, platforms such as Microsoft Teams and Slack have become indispensable daily tools at work.
However, from an industry standpoint, the revenue from UC&C is still well below that of voice, as seen in BMIT’s market summary chart for the past two years, shown below, along with a forecast for 2027, highlighting the uneven growth per sector:
BMIT, Voice and UC&C Revenue Overview (Rm)
As the chart shows, the telephony industry has been hard hit in the past year, with mobile cell sites experiencing significantly higher levels of down-time due to power outages and battery theft, which had the effect of blocking both fixed and mobile calling to mobile phones.
However, even if loadshedding was to end, or at least the impact was mitigated by operators beefing up the power resilience in their networks, the disruptive long term trend of ongoing substitution of traditional voice calling by alternative communication styles would still remain intact.
With fixed voice, the legacy PSTN (public switched telephony network) market has been in decline for over 20 years in South Africa, initially impacted by a shift from fixed to mobile usage. Next-generation voice-over-IP (VoIP) services have also been eroding the PSTN market. and these services are slightly more resilient to the longer-term rate of decline. The Fixed Voice category on the chart shows their combined revenue.
Much of the UC&C revenue is attributed to Cloud-hosted PBX and Collaboration platforms such as Microsoft Teams. The category has seen a healthy increase of 21% in CAGR over the past 3 years, but this growth only offsets the rate of decline of the Total by 0.7% in each year, due to its much lower weighting in the overall services ‘basket’ BMIT’s forecast for UC&C is 11.6% CAGR through 2027, reaching 4.0bn.
The Global and Local Technology Disruption Trend
The longer-term disruptive trend of a decline of origination voice traffic in South Africa mirrors the global trend. The UK, for example, already experienced a 14% decline in fixed line and 2% decline in mobile traffic in 2021, as reported by the UK communications regulator, Ofcom.
The sub-trends include ongoing fixed-mobile substitution, and recently also a decline in mobile calling, both of which have been amplified by the acceleration in over-the-top (OTT) voice/multimedia usage during the Covid-19 pandemic.
While OTT voice and multimedia usage are general trends impacting traditional voice calling, especially in the B2C segment, UC&C is having an equally significant impact on the B2B market.
What’s in an App?
BMIT’s own survey of enterprises showed that Microsoft Office and Teams are by far the most widely used productivity tools and collaboration platforms, respectively. However, the big jump in the past two years has been the massive adoption by businesses of WhatsApp as a collaboration platform, underscoring the disruptive impact the app is having on the traditional voice calling market, as seen in the figure below.
WhatApp usage in businesses has grown significantly in a single year, increasing by an average of 18 percentage points, across the Small, Medium and Large company segments.
BMIT, 2022 Enterprise Survey, primary collaboration tools used in the organisation
BMIT notes that usage of this leading app to date has primarily focused on one-to-one communication, including video calling – illustrating the ‘consumerisation of business’ as individuals carry their personal use of technology into the business. However, WhatsApp for Business includes subscription options, with an expanded range of collaboration functionality, which businesses are set to more widely adopt in the future.
Some local UC&C platform players are actively integrating it into their omni-channel communication solutions, notably Telviva with their Telviva One and Telviva Engage offerings. This is a good example of a service provider ‘going with the flow’ of disruption, and exploiting the trend rather than ‘swimming against the tide’.
Cloud Platforms Lead the Way
Cloud-hosted communication platforms have reshaped the tariffed voice routing landscape globally, and are making a similar impact in South Africa. These range from basic cloud-hosted exchanges (PBXs) to systems with a rich UC&C feature-set and, in some cases, integration with other productivity and ERP/CRM platforms (through APIs).
Microsoft Teams, generally procured through Microsoft 365 licences, made a massive impact during the Covid-19 pandemic, stimulated initially by Microsoft offering free Teams usage. Many companies are strongly invested in the Microsoft ecosystem and will have top-of-the range corporate Microsoft 365 licences that include components that enable breakout directly from Teams to fixed and mobile networks.
The largest growth opportunity in Cloud communication platforms, as seen by local players, lies in Cloud-hosted PBXs, this being the largest market in revenue terms currently, and one which is still growing at c. 20% p.a. in respect of cumulative active user licences.
All leading voice players have this type of product offering, the growth of which mitigates, somewhat, the general maturation in their tariffed voice services revenues. However, even for most VoIP-focused players, tariffed voice is still a significantly larger revenue component than their UC&C revenues, and remains the service category that they would most actively need to defend.