Is Neotel scared of Telkom?
In a recent ITWeb article, Department of Public Enterprises deputy director-general for legal affairs Sandra Coetzee is quoted as saying that “we believe that Neotel would not necessarily compete directly with Telkom”.
Neotel’s failure to compete is given as one of the reasons for the creation of InfraCo – the state owned broadband bandwidth company – which aims to provide affordable bandwidth in South Africa.
These developments raised concern among some observers, especially since many consumers have put their trust in Neotel to compete head on with Telkom to ensure lower prices and better service offerings.
Neotel has previously indicated that it is aiming to differentiate itself from Telkom on more than just price, but without any residential offerings from Neotel, consumers are growing impatient with the second national operator.
Even Telkom has indicated that it has adjusted its view of the effect that Neotel will have on its operations. Telkom recently told analysts that that the market has lagged on the competitive front and that it will not implement drastic price cuts any time soon.
According to Reuters, Telkom CFO Kaushik Patel said that the company “now expects to lose about 10 percent of its fixed-line market share over the next 3-5 years – at the bottom end of an earlier forecast for about 10-15 percent.”
Neotel trying to avoid direct competition with Telkom?
With this growing concern regarding Neotel’s ability to compete, one would expect the company to set the record straight, but rather than promising to take Telkom on it focused on a more holistic strategy.
When asked whether it will compete directly with Telkom and whether it feels it has a mandate to do so, Neotel did not want to commit itself to competing directly with Telkom.
Instead Neotel said that “it is the new national operator and is licensed to provide telecom services – domestic and international, fixed and wireless, voice as well as data. Neotel is accordingly gearing itself to provide a variety of services, offering customers for the first time ever, true choice in infrastructure based services.”
Neotel did however promise to introduce competition across all sectors of fixed and wireless telecom services, bringing greater choice of innovative products and better value to customers.
The new operator cited the recently awarded SITA project as an example of its ability to compete with established players like Telkom through innovative and cost effective solutions.
The new telecoms operator may also be hamstrung by problems surrounding InfraCo on which they trust for national backhaul. Neotel downplays the impact of InfraCo on their operations, but without a fully functional national fiber network it will always struggle to take on the incumbent.
Commitment needed
While Neotel’s strategy may encompass far more than merely competing with Telkom on its current service offerings, consumers and companies need to know that they can trust the second national operator to break Telkom’s monopoly.
While holistic views and behind the scenes developments may be of value in strategic meetings, consumers want to know that Neotel will offer them better services at lower prices.
Trying to evade the obvious need to compete with Telkom in the fixed line arena may serve to create mistrust among consumers and damage the reputation of a company which has consumer support merely by virtue of its promise to break the incumbent’s long standing monopoly.
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