Is Neotel failing the consumer? PDF Print E-mail

SA`s second national operator fails to offer consumers a competitive alternative to Telkom, say industry experts.

Introduced as the second national operator (SNO) in the telecommunications market, Neotel`s initial focus was a competitive alternative to Telkom`s fixed-line offerings for consumers and small business.

However, the operator has failed to deliver, say industry experts.

WWW Strategy MD Steven Ambrose argues that the operator`s focus has been on the corporate space rather than on the consumer, which can be seen when reviewing Neotel`s consumer products versus its corporate and wholesale products.

The operator offers only two converged voice and Internet consumer products and two Internet consumer products. This compares to an extensive range of convergence, mobile and wholesale managed solutions for the enterprise.

“It may be true that we`re not yet offering an alternative to Telkom products and services specifically for consumers, because of various reasons – for example, our network is smaller than theirs, because we`re still rolling out fibre-optic to various parts of the country, and dare I say we`ve only been in the market for three years, going for four in August,” retaliates Wandile Zote, executive head of corporate communication at Neotel.

However, Ambrose argues that the SNO was meant to offer SA an alternative to Telkom in the fixed-line space, more specifically in terms of voice and data services. “In this area, Neotel has completely under-delivered.”

Instead, he adds, Neotel is far more competitive with Internet Solutions than Telkom, and now with the new self-provision elements available to all ECNS licences, even more so.

“Neotel is playing the role of a competitive wholesale provider of connectivity and international voice minutes, and leaving the entire domestic and consumer market, including most of the SME space, to Telkom,” he explains.

Missed target

But Zote argues: “It`s not true to say we`ve chosen to concentrate on the enterprise market segment instead of the consumer segment. The two segments require different business approaches and our approach for enterprise has been more successful. But – having said that – we`re working around the clock to address the challenges we`ve identified for our consumer business.”

In April, Neotel claimed it had signed up in excess of 600 business customers, including the big four banks. But the operator also noted at the time that it failed to reach its target of 50 000 consumer customers. Instead, Neotel reported having roughly 43 000 consumer sign-ups.

BMI-TechKnowledge research director Brian Neilson explains that Neotel may have opted for the corporate focused route due to the intensive competition in the mass market, which has come from the mobile operators with their widely adopted cellular broadband offerings.

Ambrose notes that Vodacom and MTN have done a far more comprehensive job in this space than Neotel. However, he argues that Neotel`s failure is one of investment and capacity.

“It is clear that Neotel has focused far too little investment in this area, preferring to focus on the corporate space. In this they have completely failed to become the SNO, which was envisaged initially.”

Despite this, Neilson argues that Neotel has achieved most of the obvious things, which related to building infrastructure, namely building out metro fibre links right up to the pavements within the most densely populated business areas in Gauteng, Cape Town and Durban.

“They have established Seacom backhaul links and have brought a first-tier global point of presence right into the heart of Gauteng. They have also built out a wireless access network, albeit under-utilised at present,” he adds.

“What they still need to do is sign up more customers,” advises Neilson.

Zote explains that Neotel is focused on this objective, pointing to the upcoming introduction of Neotel`s prepaid services for its consumer customers at the end of July.

Staying in the race

As an infrastructure-based competitor, Neotel can reinforce its position as a viable alternative enterprise infrastructure provider, and tap into the consumer and SME markets through channel partners, explains Neilson.

However, he warns that Neotel will have to pick its territory carefully since it no longer has a significant lead over emerging ECNS licence-holders in the retail data services market.

“In the fixed-line voice market, they can be a viable alternative to Telkom, especially now that number portability is a further competitive enabler,” notes Neilson.

Ambrose disagrees: “Even the recent advent of fixed number portability will do little to assist Neotel, as long as they fail to offer similar fixed-line services to Telkom.”

Instead, Neotel would have to invest heavily in last mile technologies such as fibre to the home, and or small businesses, to begin to compete with Telkom, he continues.

On this point, Zote is in full agreement: “As far as we`re concerned, gaining access to the `last mile` via the local loop unbundling is very important for our fixed-line strategy.”

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