Neo beginnings
SIX MONTHS AGO – when presenting its full-year results – Vodacom CEO Alan Knott-Craig told the audience in his usual relaxed manner that he hadn’t even heard from Neotel. The company called him up the very next day and came to see him, he told the same gathering, for the interim results – six months later.
Although it would be natural for the incumbents to play down the impact that a competitor was having on the market, that doesn’t yet seem to be the case with Neotel. Just yet. Telkom’s acting chief of finance Deon Fredericks told the gathering of its results shortly after Knott-Craig had presented Vodacom’s numbers, that the operator was experiencing increased competitive pressure from the mobile operators, the VANS (value added network service providers), ISPs (Internet service providers) and “to a lesser extent” Neotel.
Meanwhile, Knott-Craig says the jury’s still out on Neotel. Vodacom COO Pieter Uys says Vodacom is looking at Neotel as a potential second supplier and is trialling some of its services.
But although Neotel may have taken longer than the market expected to get out of its starting blocks, its potential impact shouldn’t be underestimated. Particularly with the muscle of global Indian giant Tata behind it.
Launching its enterprise services at a distinctly orange event – Neotel’s brand colours – near Kyalami recently, MD Ajay Pandey said most of the major companies that it had approached had been very keen to try out its services, in conjunction with continuing to use the incumbent.
As a new entrant without a track record, that’s exactly what Neotel can hope to become: a second supplier to corporate SA. However, starting from zero in a tele-coms pie estimated to be worth between R100bn and R120bn/year means that any initial wins for Neotel will be significant and give it the confidence to press on and become bolder.
For example, the R700m over five-year State IT Agency (Sita) win earlier this year was undoubtedly a key milestone for Neotel. Particularly given that Public Service & Administration Minister Geraldine Fraser-Moleketi said at the time that its flexibility in providing it with bandwidth “on demand” meant it was 8,5 times less expensive than the next cheapest offer.
Executive for strategy Angus Hay says one of the reasons it had been able to secure a pivotal contract like that of the Sita was precisely because Neotel’s next generation network (NGN) gave it the ability to offer flexible, scalable solutions.
This suggests that Telkom doesn’t yet have the same flexibility in its network. But if that’s true then it won’t be so for long, with Telkom currently in the third year of the roll-out of its NGN.
Acting Telkom CEO Reuben September says that a few years ago it had been a case of “you’re damned if you do, and damned if you don’t” with regard to deciding to roll out an NGN. But now you’re just “damned if you don’t”.
Neotel must realise that it needs to make hay while the sun shines. Clients that it’s signed up so far include Standard Bank, Internet Solutions, Bloomberg and Tenet. And although Neotel has insisted from the word go that it won’t engage in a price war, it does claim to be able to offer clients savings.
Pandey said customers were saving between 25% and 35% on a “derived value” basis. In other words, Neotel was able to provide them with more – through a bundled combination of products over the same “pipe” – for the same money they’d have paid for fewer products previously.
Neotel’s enterprise products range from dedicated leased lines (SA and global; NeoLink and NeoLink Global), to voice (NeoVoice), Internet (NeoInternet) and virtual private networks (NeoVPN).
Its consumer offering is ready to go but won’t be launched until first quarter 2008 or, at the latest, the second.
Pandey said it was already trialling its consumer offering, which will include voice and data on its CDMA-2000 (EVDO) network. It will also use WiMax. Pandey said those services would be launched using a phased approach, as is the case when launching a new wireless offering anywhere worldwide.
Although the consumer side of the business won’t be Neotel’s bread and butter, in the eyes of the greater SA its launch will be pivotal. To most consumers Neotel remains a nonentity. Like it was to Knott-Craig six months ago. But that won’t be the case when they can swap the blue for the orange. As long as the orange doesn’t disappoint…
Finweek
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