While Vox Telecom continues to launch a steady stream of offerings to consumers, since its delisting more than two and a half years ago, the telecoms operator has been somewhat quiet at a corporate and strategic level. Now, the strategy is clear, says CEO Jacques du Toit. After holding the role for 12 months, and having finalised the consolidation of various operating units, he's ready to lead the next phase in Vox's story.
He notes that there has been deflation at a headline earnings level in recent years. Various factors have seen the costs of bandwidth and telecoms interconnect fall, slicing data and voice revenues ever more thinly. It's a dynamic that his colleague Shane Chorley, Vox's executive head of network and operations, describes as 'a race to the bottom'.
Transforming the business will mean increasing the 'share of wallet' among its client base, notes Du Toit, by ensuring that everything from traditional PBX, to voice and data, to CCTV, to unified communications and secure document management is provided by Vox. As these applications move towards a hosted cloud model, this convergence becomes easier.
"The world of communications has become one. Everything is just data," he says.
Furthermore, as plummeting bandwidth costs and the latest generation of smart devices pushes millions of new potential customers onto Vox's radar, Du Toit says Vox will be actively pursuing new markets
Currently, the telecoms operator has 120 000 consumers, as well as 16 000 business customers ranging from enterprise to small businesses. Du Toit reports some 100 of the top 250 corporates on the JSE are using Vox services in some capacity. It now employs just over 840 staff in SA and Namibia.
And while it's no longer listed, he tells Brainstorm that EBITDA (earnings before interest, tax, depreciation and amortisation) has been steady at ten to 15 percent over the past couple of years.
Once the darling of the JSE's junior bourse, AltX, Vox's name was tarnished in the infamous 2008 Dealstream debacle, where it lost millions in the collapse of the derivatives trader.
Positive signs
But Spiwe Chireka, program manager for telecoms at the IDC, acknowledges the strong efforts by Vox executives in recent years to rebuild its reputation and position the company for the future.
Chireka says that while voice and data will remain 'flagship services' for some time to come, Vox is showing it can transform the business and enter new growth areas, which will become increasingly important in counteracting the negative effects of thinning margins on voice and data.
Vox needs to complement its product portfolio with more IT services, since SMEs are increasingly staying away from standalone offerings.
Spiwe Chireka, IDC
She points to the smart bundling of voice and data services, targeted at specific segments. "A case in point is the provision of YahClick, a satellite broadband service in the Ka-band to users in areas where traditional coverage is a problem."
She further notes that Vox has improved the stability of its client base. "Three years ago, 80 percent of the customer base came from multiple partners and only 20 percent was its own customers. Today, this picture has significantly changed, with only 20 percent of customers coming from partners."
Building a sizeable direct customer base is key to sustainability, consistency and creating cross-selling opportunities, she adds.
Chireka says Vox has already begun its foray into IT services with things like managed cloud-based services, and backup and disaster recovery solutions. "Vox needs to complement its product portfolio with more IT services, since SMEs are increasingly staying away from standalone offerings."
Du Toit underscores the importance of diversity in its products and services. "For companies that are single service oriented - their days are numbered," he quips.
Now that IP and cloud architecture make convergence possible, managed services set to tight service level agreements becomes the new playing field. He says in Vox's case, it looks at broad SLAs encompassing uptime commitments, upgrade cycles, configuration management, health and safety checks, system monitoring and, of course, punitive clauses.
Chireka believes Vox has built up strong levels of expertise in a number of specialist technical areas (notably PBX, SIP trunking and telephony management). "In addition to that, it also has a robust understanding of consumers and SMEs, and has developed expertise to sell directly into both segments," she says.
"This is quite a differentiator as most incumbent service providers are still trying to figure out how best to target the SME segment."
Vox's Chorley notes that the broadband landscape is changing rapidly. He refers to evolutionary leaps in the four key access technologies - DSL (fixed line), HSPA/LTE (mobile), fibre (corporate infrastructure) and WiFi (corporate LAN).
"LTE, for instance, is enabling users to run applications on their phones that they've never been able to before," he notes.
The biggest impact of the advances in these four protocols is that true unified communications and video-conferencing is finally becoming a reality, he adds.
Two interesting economic effects emerge, he notes. Firstly, as costs plummet, the 'race to the bottom' effect emerges, where operators undercut each other until there's nothing left to cut. "Eventually the model has to be in charging for the applications that run over the data networks. Data will just be built into the application cost."
Secondly, Chorley foresees more consumers moving from an uncapped to a capped arrangement - with generous, but defined limits. With faster networks, he says operators are exposed to greater financial risk in an uncapped environment. With pressures on both sides of the coin, it will be interesting to see if this 'uncapped to capped' dynamic becomes the reality.
Access technologies
In fact, there are many uncertainties in the local telecoms environment. At the time of writing, Vodacom had announced its intention to acquire Neotel. To some extent, there seems to be a reversal of the deregulation and liberalisation that has been opening up the market to new entrants since 2004.
Eventually the model has to be in charging for the applications that run over the data networks. Data will just be built into the application cost.
Shane Chorley, Vox
With the tie-ups between mobile and fixed-line operators such as this, the convergence of mobile and fixed just accelerates. Du Toit sees consumer and business services comprising blended on-premises and remote services, delivered by various access technologies.
He and his team have outlined many burgeoning areas - from CCTV and video-conferencing solutions, to evolving the trusty fax into secure electronic document management. It's testing new economic models that involve advertisers footing the bill for WiFi access in underserviced areas; it's thinking long and hard about how the incoming POPI Bill will create new opportunities; and it's looking at new datacentres to provide full geo-redundancy.
Maybe not all of these strategies will pan out the way they're hoping, but there are enough irons in the fire to give confidence that Vox won't be swept away by the massive changes that South Africa's telecoms environment is experiencing.
First published in the February 2014 issue of ITWeb Brainstorm magazine.
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