Will it add to the bottom line? It is official: SA`s fourth mobile operator, 8ta, is here and has been hailed as a catalyst for competition in the mobile industry, ultimately offering greater choice for the South African consumer. By Leigh-Ann Francis

More importantly, however, is whether this compelling mobile play will save fixed-line incumbent Telkom from fading into insignificance.

The mobile operation is said to be the next phase of evolution for Telkom as the company comes under increased pressure due to dwindling fixed-line revenue.

"The majority of global fixed-line incumbents have discovered that a successful operation requires an integrated mobile business. We believe that there is a market opportunity in SA, as mobile voice, and especially mobile data, are still experiencing growth," says Telkom.

"This is particularly so as wireless growth slows and converged data becomes more prevalent. A product range spanning both mobile and fixed value pools will assist Telkom to defend itself more effectively against competitors and to grow revenue," adds the company.

In spite of this of the trend, Telkom's move into the mobile arena was inevitable, particularly after it shed its 50% stake in Vodacom in March 2009. Prior to the sale, SA's largest mobile provider contributed 40% to Telkom's annual revenue.

Hoping to offset this loss, the telco will spend R6 billion, over the next five years, developing 8ta's offering.

"Mobile is a logical and inevitable step for Telkom. The marriage with Vodacom was profitable, but rather uneasy, and the loss of the Vodacom revenue contribution has necessitated deep thought and introspection from Telkom," offers WWW Strategy MD Steven Ambrose.

"Telkom is cash positive as a result of the sale and spending R6 billion on rolling out a mobile network is a logical and smart move on their behalf. All companies must evolve, especially those in the fast moving telecommunications space," he continues.

"Mobile will be an important part of Telkom's strategy going forward, but will not initially be a significant contributor to revenue. What developing mobile capacity will do is enable Telkom to grow, develop capacity, and compete going forward.

"Mobile will not, in the short term, make or break Telkom, they are too significant a company for that, but mobile is a significant long-term strategic play for Telkom, and one in which they must succeed," notes Ambrose.

Only time will tell whether 8ta will make a significant difference to Telkom's bottom line. Nonetheless, 8ta is here and has hit the ground running with some unique offerings.

HEITA! IT'S 8TA

After a mysterious teaser campaign involving the township slang word "Heita", which means hello, Telkom on 14 October unveiled its mobile offering at a glitzy launch event, at Lanseria Airport, in Johannesburg.

8ta unveiled prepaid voice and data at the launch. "We will launch post-paid voice and data in November," said managing executive of Telkom Mobile (branded as 8ta), Amith Maharaj. "This includes one prepaid voice and one prepaid data offering. Ultimately, two prepaid, four post-paid and three data offers; same on-net and off-net rates on prepaid."

8ta also promises simple and transparent pricing. "Simplicity is key," said Maharaj. "To this end, the services will be offered on a flat rate - completely abandoning the notion of peak and off-peak rates."

The company said it is hungry to compete and succeed. Maharaj said 8ta will cause a stir in the market with some unique offerings and competitive pricing.

Maharaj noted that for the first time in South Africa, all prepaid customers will benefit from free talk time to any network every time they receive calls from a mobile phone - one free second of airtime for every three seconds of call received. "This benefit is available all day, every day," he explained.

Additionally, when a user sends five SMSes in a day, 8ta will give him or her 50 bonus SMSes, at no extra cost, to use that same day, continued Maharaj.

Maharaj also took the opportunity to reveal what he says is competitive pricing. He says calls from 8ta to a fixed line will cost 60% less than typical market rates for similar calls. Calls from an 8ta mobile phone to both Telkom and Neotel fixed lines will be priced at 65c per minute, independent of the time of the call (hence no peak and off-peak rates).

There will also be a flat rate of R2.50 per minute for calls from an 8ta mobile phone to over 100 international destinations.

Mobile-to-mobile calls will be charged at R1.50 per minute independent of which network is called or what time of the day the call is made.

8ta prepaid Internet customers will get an out-of-bundle rate of R1 per megabyte, while prepaid data bundles can be purchased for as low as 25c per megabyte.

The prepaid data bundles, which will be available at launch, are: 100MB for R50; 250MB for R100; 500MB for R150 and 1GB for R250.

But compared with similar pricing from other mobiles, does 8ta compete?

Ambrose says the entrance of 8ta will galvanise the industry. "Telkom is a significant player in the telecommunications market in South Africa, and the competition would be remiss to ignore the challenge that Telkom has issued. Greater choice and innovation in terms of services and tariffs is good for consumers and ultimately good for the market," he states.

Despite a positive reception from industry, analysts argue that the newcomer may be biting off more than it can chew, as Maharaj has laid out some ambitious subscriber targets for 8ta.

IMPOSSIBLE TARGETS?

The mobile newcomer aims to capture between 12% and 15% of the local market within five years - almost eight million subscribers, in relation to current market figures.

While analysts are divided about whether Telkom's newly unveiled mobile unit will be able to achieve this, they agree that - at the very least - the target is extremely ambitious.

According to IE Market Research's 2010 SA Mobile Operator Forecast, the current number of mobile subscribers in the country is 51 million. Based on this figure, 8ta's target of 15% market share means the company aims to secure 7.65 million subscribers by 2015.

At the end of June, MTN reported 17.1 million subscribers, while Vodacom reported 23.2 million - giving it the lion's share of the market, at 53.2%.

Both mobile operators have been in the market for close on 20 years, while third operator Cell C, closing in on 10 years in the market, has only recently achieved between 13% and 15% of market share.

Nonetheless, 8ta is confident its ambitious targets are achievable.

Frost & Sullivan industry analyst Spiwe Chireka argues that 8ta's targets are extremely ambitious and even "completely unrealistic".

In addition, Chireka continues, 8ta can expect the mobile incumbents to fiercely protect their market share. She says the mindset of operators will change from growing market share to defending market share.

"It will be a serious challenge for 8ta to take away subscribers in an already mature market," she argues. Chireka notes that unless something drastic happens to one of the other mobile players, she does not believe 8ta is likely to achieve its target.

"The target of 12% to 15% is ambitious, but not completely unreachable, and will take a huge effort on behalf of Telkom to achieve," notes Ambrose. "Consistent marketing and exceptional service delivery, along with innovative services, will be essential for 8ta to get even close to these targets," he suggests.

He concedes that, under normal circumstances, he would not be of this view; however, this is Telkom and the industry can't underestimate it.

"Normally, this would be a completely unrealistic goal, but Telkom has got a lot of resources. Telkom is not a Cell C. We mustn't underestimate them," says BMI-TechKnowledge MD Denis Smit.



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