Neotel prepaid offering under fire

Converged telecoms operator Neotel recently unveiled its prepaid offering, specifically aimed at consumers, but industry analyst have criticised it for being too expensive, lacking choice and being late to market.

The company's prepaid offering sets the voice tariff at 50c per minute for Neotel-to-Neotel calls and Neotel to other fixed-line operators. The rate for calls from Neotel to mobile operators is R1.50 per minute for peak time calls and R1.20 for off-peak calls. National SMS rates are 20c per SMS and data will be charged at 20c per MB.

The NeoConnect Lite requires a device, which costs R599 and vouchers are currently offered only in R100 amounts.

While the operator's offerings are approximately on par with those offered by SA's mobile operators, as well as a similar product from Telkom (the Waya Waya service), industry analysts say Neotel's prepaid offering is simply too little too late.

“SA has pioneered the concept of prepaid for years now and the South African consumer has come to expect it,” explains Frost and Sullivan industry analyst Protea Hirschel.

She argues Neotel's apparent focus on the corporate market has meant that South Africans have become accustomed to living without a second national operator. Thus, the operator's prepaid offerings are late to market.

“If they had been released three years ago they would have created a stir, but today they are essentially irrelevant,” opines WWW Strategy MD Steven Ambrose.

Not only is Neotel prepaid late to market, but analysts say the high cost of the product makes it unattractive.

“The call costs are high, the Internet access is far too slow, and the devices are archaic by today's standards. The overall cost structure is also not very attractive, with minimum charges of R100, one device at R599, and although the call charges appear low, the lack of mobility does not offset the savings,” argues Ambrose.

“There is absolutely no reason to go with one of these offers in preference to a fully mobile, easily accessible, and totally ubiquitous offering from any one of the mobile operators,” adds Ambrose.

However, Neotel maintains that its product has been positioned as a voice solution for the home user.

“This product competes directly with Telkom's Waya Waya service and is, therefore, not comparable to mobile prepaid voice services. It is also not a high-speed data solution. However, the product is capable of handling basic connectivity requirements such as basic browsing, Internet banking and it has SMS functionality,” says Neotel.

But Ambrose contends that comparing products is not relevant, as people are looking for communication solutions not products per se. “And it's about convenience, access, and cost. Neotel scores poorly in all these respects,” he maintains.

Hirschel agrees and argues that the high cost of the prepaid voucher means that the consumer who is likely to opt for the R100 prepaid option will likely be in a position to opt for the monthly subscription just as easily.

She also criticises the lack of choice offered by the product, pointing to Telkom's offerings, which include vouchers in R35, R60 and R100 denominations.

Ambrose has previously criticised Neotel for failing the consumer market in SA. He has been quoted as saying: “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.”

Now he stands firm in his belief, arguing that Neotel's unattractive prepaid offering and lack of mobile offering will cost the company the consumer market.

“With Telkom also entering the mobile space shortly, Neotel appears to be fading into complete insignificance in the consumer market,” he concludes.