Neotel opens shop

By Damaria Senne for Neotel
Johannesburg, 16 Nov 2007

Neotel will not use cheap tactics to elbow out the competition, despite the uphill battle it faces to capture market share in the local communications space.

Speaking at a media briefing at the launch of Neotel`s enterprise solutions, in Fourways, yesterday, MD Ajay Pandey said the company did not expect potential customers to move to Neotel exclusively and break their existing contracts with their current providers.

"Neotel is not putting anything on the table for anyone to break a contract. That is not how we do business," he said.

Pandey would not disclose the prices Neotel will charge for its five new enterprise solutions. However, he pointed out that, on average, customers would get these solutions at 25% to 30% less than they current pay.

Neotel head of strategy and products Angus Hay noted Neotel would publish the prices of its products as soon as the Independent Communications Authority of SA has approved them.

However, enterprise business is usually generated through tenders and requests for proposals, and regulations do not require that prices offered to businesses be published, he said.

Pandey also pointed out that geographic number portability, which has yet to be implemented, will not be a deal-breaker. Globally, particularly in the enterprise space, geographic number portability is not the deal-maker or -breaker, he said. "A set of numbers is not going to change the customer`s decision."

Plenty of challenges

Market watchers are divided on whether Neotel is on track to capture significant market share.

Irnest Kaplan, MD of Kaplan Equity Analysts, believes Neotel can offer real competition. The company presented an impressively long list of clients at the launch last night, he says.

However, Neotel was also criticised for taking too long to come to market, and failing to fulfil expectations that were raised at its licensing at the end of 2005.

"Despite their rhetoric and the behind the scenes manipulations of [head of strategy] Angus Hay, Neotel have struggled to get their act together," says Marketworks business advisor Steve Edwards.

This has slowed its entry to the retail market quite a bit, he said. "I think they`ll face some aggressive competition from a wider range of foes than Telkom; though, strictly speaking, Neotel will not be the [major] competition for Telkom, but some competition for the fixed-line operator," he notes.

World Wide Worx MD Steven Ambrose says: "Business, especially big business, whom this is targeted at, is often very strategic and will not change something fundamental to the business, such as telecommunications, in a real hurry."

He adds that Neotel is positioning itself to be seen as a utility by providing solutions. "However, basic telecommunications, including voice and data, is very much a commodity today, with cost, speed and uptime as the real deal-breakers, not so much service and solutions. I see no real industry-changing or market-shaking stuff here."

Dashed expectations

Ambrose says when Neotel was initially launched, South Africans were promised a revolution in cost and access, and service and choice. "The bottom line is that Neotel has had no real impact at all, and all our expectations have been dashed."

He agrees with Kaplan that Neotel has a huge job to set up a new business, establish infrastructure, develop a product offering and go to market. "You can`t fault them for being conservative and going for the easy stuff first, and being strategic and measured in their approach."

However, it was simply not what SA expected from Neotel, and "this is what has left a sour taste in the mouth of most South Africans".

An analyst, who spoke on condition of anonymity, also points to Neotel`s lack of agility in the market: "They need to jack up if they are to deliver services that customers really expect from them."

Talk to us!

Neotel also needs to communicate its challenges and issues to the public at large, says Ambrose.

It must commit to the promises made right upfront, such as a roadmap of services, and how it is going to compete in a market that touches us all, he notes.

"The danger for Neotel in their silence is that they will become part of the plumbing, clever next-generation plumbing, but a commodity nonetheless."

Waiting for consumer services

Yesterday, Neotel announced five solutions for the enterprise market: a national leased-line service (Neotelink), an international leased-line service (Globalink), a virtual private network (NeoVPN), an Internet service (NeoInternet) and a voice service (NeoVoice).

Neotel already offers wholesale services. Pandey said Neotel would launch consumer services in the first quarter of 2008.

The introduction will be phased, initially focusing on major metro areas, he said. Neotel is engaged in a consumer trial programme and the results are encouraging, Pandey added.