It could well be the end of the second national operator (SNO) as we know it, if Vodacom has its way and buys Neotel. This, me thinks, is precisely why the deal won't be allowed to go through, which is actually a pity.
Frankly, Neotel has failed to live up to its promise of being the SNO, a competitor to Telkom's monopoly, an alternative for disgruntled consumers. Instead, by fate or design, it never managed to be the shark that fought for unhappy consumers, as it ended up swimming in the enterprise pool.
That decision was rather silly; that's the one area that Telkom is really good at servicing. Even Telkom accepts it needs to work a lot harder on customer service. Being at the receiving end of a line that always hums and falls down as soon as it rains, and takes weeks to fix, I can attest to this. I've heard stories of the months it takes for a new line, and the technician who rocks up unannounced when no one is home, after failing to pitch at the previous appointed time.
Telkom's non-service has been the butt of many a joke, and not without justification. It's a legacy issue that has endured the test of time. In the 80s, it took a few years before my folks finally had a line; at least now it's down to weeks. Some comfort.
This is why, when government decided there should be two players, many rejoiced. The build-up to the launch of the SNO was a bit like the crescendo in a soapie... and it took ages before the SNO got to the meaty part.
There were issues with it acquiring Transnet's network (which is now in Broadband Infraco's stable), and then hold-ups over licensing. Finally, after several delays and press roastings, it launched.
Much promise
I covered the launch at the time. It was all hush-hush stuff because the SNO was going to reveal its top-secret name and logo - the same one it uses to this day. That was seven years ago. At the time, it was a liberalisation dream come true - a fixed-line competitor that promised to take 15% of Telkom's market away.
Even Telkom felt threatened and started putting out compelling contracts, so as to lock in subscribers. Yet, Neotel failed to live up to that promise and has hardly made a dent in the consumer landscape.
Frankly, it should have been eating Telkom's lunch, but the fixed-line incumbent has been losing market share all by itself. Sadly, this has been caused by the mobile operators, which have turned out to be more of an alternative than Neotel.
Blame game
Sure, it's not all Neotel's fault. While government pushed the idea of an SNO and finally created the framework to make it happen, it lagged in other vital interventions.
Take local loop unbundling, for example. If Neotel had access to the last mile from day one, things may look very different now. Yet, it didn't, and - despite a lengthy wrangle - it still doesn't. That's government's fault.
Neotel does carry the can, though, for not getting going fast enough. Perhaps it underestimated just how much money it takes to put a network in the ground? I believe it's R5 billion in the hole, and Neotel has sunk another R11 billion into its network.
That sounds like a lot, but it isn't. Vodacom spent R7 billion in the last year alone just on local infrastructure, and that's after it had already rolled out billions getting up and running.
Too little, too late
Frankly, Neotel has not invested enough to be a contender in the consumer space. It may have been able to cut back on infrastructure spend if the local loop was available, instead of having to go wireless. This point is moot now.
Neotel is in no way, shape, or form a fixed-line alternative, and it never will be.
Neotel focused on the enterprise segment, to the detriment of consumers, and that is now its core. It is in no way, shape, or form a fixed-line alternative, and it never will be.
And that is precisely what Vodacom will argue - the mobile giant's proposed purchase of Neotel will not limit competition, because there isn't any, at least not in the consumer space. Instead, bundling Neotel into Vodacom Business will strengthen competition against Telkom in the enterprise space, the one area in which Telkom excels.
Vodacom has an uphill battle to wage. Not only does it have to persuade the competition authorities of its argument, but also the Independent Communications Authority of SA. The regulator and the competition folk need to work together on this one. That process alone will take ages.
Add to this the amount of people who will want to be heard, like the Wireless Access Providers' Association, which has already said the deal should not go through because it will stifle competition. Government is also likely to have a say, and it won't want to admit its liberalisation plans have failed.
The hearings will be long and drawn out, and the only winners will be the lawyers. Vodacom is unlikely to succeed in its bid.
And that is a pity, because Telkom needs a wake-up call. Granted, the company is doing better, and its new CEO, Sipho Maseko, is making all the right noises about a turnaround plan and fixing what is a vital asset for SA.
But, if Neotel is deeply in debt, Vodacom's offer may be the only sane option for it, short of either business rescue or liquidation.
That tinkling sound you heard in the background a few years ago? That's SA's shattered liberalisation dream; Vodacom's purchase of Neotel (if it does, by some miracle, occur) won't change that.
Share