Cold to consumers

FOR MOST SOUTH AFRICAN consumers and small businesses, Telkom remains the only serious option for always-on reliable broadband connections. Cellular providers such as Vodacom and MTN offer good connectivity options but those are too expensive for all-day, everyday use. And while other providers have risen in the effectively deregulated market, none of them have placed a serious focus on consumers and small businesses.

The most serious of all competitors to Telkom should be Neotel, with its second network operator (SNO) licence. But on the fourth anniversary of its operations in SA, the company has snubbed the consumer market, saying it has little interest in anything other than corporate and middle-sized companies and its wholesale customers.

Neotel’s SNO licence came with a firm mandate to tackle the monopoly of Telkom in SA, including the consumer market. Neotel’s licence remains unique and makes it a Tier 1 telecommunications operator.

Neotel CEO Ajay Pandey says only 10% of its customer base consists of consumers. Enterprise customers make up 60% and the remaining 30% from wholesale customers. “The consumer segment is a young business and a small contributor,” says Pandey. He adds the consumer market isn’t a priority and insists Neotel isn’t behind target in meeting the consumer sector. “We’ve focused on specific needs from consumer customers and we have a steady focus on niches in that market. This is a young business for us and a small business consciously.”

However, independent research and consulting firm World Wide Worx MD Arthur Goldstuck insists Neotel has a responsibility to serve the consumer market, which was part of the premise underpinning its SNO licence. “Neotel has fallen down on that responsibility,” he says. “The only reason Neotel has any semblance of consumer services is because that’s what’s required and expected of it. It has a pittance of consumer services and it’s clear that, if it could, it would abandon them altogether.”

Goldstuck adds Neotel and other telecoms operators in SA are targeting low-hanging fruit in the form of corporate enterprise customers. “There’s a lucrative corporate market and no ownership of that market outside of Telkom’s monopoly. But with that monopoly vanishing, it’s like a gold rush. Everyone wants a slice of that pie and there are two major issues here.

“The first is that profit for the sake of profit has become a rising ethos for corporate SA and telco companies and they have forgotten that the intention of reinventing and revitalising telecoms in this country was to change the consumer environment. The core intention of all licences offered [to telecom companies and service providers] was to benefit the people of SA. Instead, what we’re seeing is a rush for the corporate wallet.”

Pandey estimates Neotel has managed to capture between 10% and 12% of SA’s corporate market and says the mid-market is a key focus for this year. Neotel was started with R7,4bn in funding and has since spent R3,5bn on infrastructure.