Cutting call costs
Enter Yeigo, a service that intends using the 3G data networks deployed by the cellular operators and WiFi networks to offer cut-rate phone calls both between its local users and internationally.
The concept is simple: if a cellphone user makes a call using Yeigo software to talk to another Yeigo user, the cost incurred is only the data transmission cost, which at current rates would be around R10/hour if you don’t have a data bundle with your cellular provider.
Because there aren’t any real benefits in making calls to SA’s cellular networks or local numbers the other area that Yeigo is targeting is international calls.
Rapelang Rabana, CE of Yeigo Communications, says that while its business model does include selling international voice minutes, its primary focus is to increase its user base, both in SA and overseas, with an ambitious target of 1m users.
With a reasonably small pool of users in SA, it’s clear that the company will have to target the international market aggressively. "Size of user base in this kind of market defines the value of a company and once that has reached a critical mass, the company looks at other types of revenue streams. Those alternative sources of income have not yet been defined," Rabana says.
Yeigo has been operating for just over a year, with venture capital backing from, among others, Pastel founder Ivan Ferrer, who is also non-executive chairman.
Rabana, who along with executive directors Wilter du Toit and Lungisa Matshoba founded the company, says that finding the initial venture capital was relatively easy, as the investors had a good understanding of Internet companies and saw the potential in the mobile VoIP market.
The founding members have retained a majority share in Yeigo and while it doesn’t expect to make a profit immediately, Matshoba claims that a business plan is in place to ensure it turns a profit.
The company faces a number of key challenges if it’s to meet its targets, not least the gorilla in the market, Skype. While Rabana glosses over the threat from Skype, saying that it’s a technology that chains users to their PCs, the number of official Skype account holders is close to 200m, with more than 6m users currently online. That’s a sizeable portion of the potential international market and with both Skype and independent developers such as Fring (www.fring.com) targeting the mobile Skype user this field is set to become very crowded very quickly.
Another potential threat facing Yeigo is SA’s cellular companies and their control over data networks. Currently, such companies appear happy to allow voice-over data services to run unencumbered over their high-speed data networks.
However, in response to questions, Vodacom issued a statement explaining that it doesn’t differentiate between ordinary data and voice-over data applications, meaning that it doesn’t block that kind of service or charge differently for it.
But Vodacom did say: "Should the use of VoIP services across our data network negatively impact the quality of service and experience of other data customers, Vodacom reserves the right to charge for VoIP separately."
That creates a situation where the cellular companies have the capability to block Yeigo should its service become too successful. But that’s unlikely, as the cellular networks are desperate to recoup the investments they’ve made in their 3G networks and VoIP services have the potential to generate substantial traffic and therefore revenues on the data networks.
Much of what the company needs to do revolves around the smart marketing of the service. Should it be able to sell the concept of mobile VoIP to the broader market, it has the potential to establish itself as an international brand.
However, obtaining that initial base of users to commit to a new technology from an unknown company may be too much to ask.
Should it reach its targets, it would then become a prime target for a takeover by cash-flush global players, something that Du Toit denies is part of their plan.
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