Neotel is changing the way South Africans connect.

 

BEING FIRST AND BEING BEST

 

Being first and being best was the philosophy that inspired the shareholders of Neotel to launch South Africa’s first converged communications network operator on the 31st of August 2006.

 

They did not want to be just another low-cost provider of the same old services. “When Neotel does something, it’s always with the intention of leading the market in terms of timing and quality. This philosophy is applied to every new product Neotel launches,” says Dr Angus Hay, Neotel’s chief technology officer. Initially, the brand was limited to the wholesale market – servicing other telcos and largely flying under the radar as far as the man in the street was concerned. The wholesale business was followed by the enterprise business launched in November of 2007.

 

“The market needed a radical shift, so instead of just competing we decided to develop a new landscape and force our competition to follow us into that market,” he explains. “Before November 2007, nobody was claiming to have a new generation or converged network – now they all do,” Dr Hay quips. “Whether it’s the technology we employ or the services we offer, we always try to launch first. We aim to help our customers reduce the cost of doing business by enhancing their operational efficiencies using advanced communications technologies.”

 

ENTERPRISE BUSINESS BOOM

 

It seems the philosophy has paid dividends. Dr Hay says Neotel was first to market in terms of just about every aspect of its enterprise offering. Since Neotel is not publicly traded, Dr Hay reveals only tantalising estimates when it comes to revenue figures. “When we started the enterprise business in 2007 our revenue was in the tens of millions – relatively small. The end of 2008, our first full year as a trading entity, saw us crossing the billion rand threshold,” he says.

 

BIG GROWTH – BIG CHALLENGES

 

This rapid growth comes with enormous operational challenges. One of the biggest is building a network. “Network construction is expensive, and comes with significant environmental concerns,” he explains. Crossing streets and getting appropriate approvals from local authorities takes time and effort.”

 

Then there are the challenges of servicing the customers you acquire, implementing the billing and financial systems you need to raise an invoice. “An order book is meaningless until you raise an invoice, but we’ve definitely succeeded,” he says. “We are now almost halfway into the current financial year and we have an annuity base that makes us the largest enterprise telecoms business in the country outside of Telkom – larger than all other ISPs and VANS.”

 

Possibly more important than network expansion, finance functions and customer service combined is the intellectual capital required for growth. Without the right skills, none of these other areas would be sustainable. “Tata, our international shareholder, has a 56 percent stake in the company and certainly jumpstarted the process of acquiring intellectual capital,” Dr Hay admits. While there have been challenges associated with finding local expertise, Dr Hay says the fact that Neotel has grown so quickly means that some competitors have lost some skilled personnel. “We all draw from the same pool, so as they lose staff, we gain access to more skilled people,” he explains.

 

GO BIG AND GO HOME

 

Big business is no longer Neotel’s sole source of income. The initial wholesale and enterprise offerings have been augmented by consumer services in the Gauteng, Durban and Cape Town metropolitan areas. The consumer offering includes basic voice and highspeed Internet, and is growing to include true broadband access. For SMEs, these services extend to virtual private networks, network management and hosting. “We are aiming at the sweet spot – bundled voice and data offerings,” says Dr Hay. “But the consumer market is a coverage game, unlike the enterprise market where all the customers tend to be geographically bunched together.

 

Network deployment is challenging in terms of finding enough high sites to provide access to everybody. We have focused on the three biggest metros for now, and we have received good feedback from customers in areas where we have rolled out our services.” But while Neotel’s consumer business is doing very well, it will take some time to grow to the same sort of proportions as the enterprise business. To bring some perspective to the discussion, Dr Hay points out that it’s taken the mobile network operators some 16 years to establish the network coverage they have today.

 

One advantage Neotel does have is that services are offered only where coverage can be guaranteed. “We check that there is coverage where you are before we sell you a service. Our rates and data caps are very aggressive if you compare them to the competition”, Dr Hay adds.

 

RADICAL MINDSET CHANGE

 

One of Neotel’s trump cards is its relationship with SEACOM, which is bringing in ten times the carrying capacity of previous cable systems terminating in South Africa. While it may not be SEACOM’s only customer, Neotel’s role as SEACOM’s South African backhaul provider extends the cable to Neotel’s new Data Centre in Midrand, providing a distinct cost advantage to customers.

 

“One mindset change we’re trying to achieve in the minds of customers is that real broadband can enable many applications that previous, limited connections couldn’t. Most of our enterprise customers are used to buying 2 Megabit per second (2 Mbps) lines. We say let’s start talking about 100 Mbps and more.” Dr Hay points out that in the past, business and IT executives were effectively taking business decisions about the applications they were using, for technical reasons like bandwidth constraints. “Today we’re delivering 1 Gigabit per second connections as standard at very competitive prices, and have customers using a hundred times this on custom services – so business and IT executives no longer have to worry about bandwidth-related quality of service issues. And this doesn’t just apply to corporate users. We’re already running trials on home connections up to 20 Mbps and more. Once again, the challenge is the time and cost of building a fibre-optic network. However, it is exciting to consider that home users can realistically expect to run bandwidth-intensive content-related applications like movies on demand in the foreseeable future.”

 

What movies are to home users, disaster recovery is to enterprises, Dr Hay believes. The ability to replicate data immediately – rather than in asynchronous batches – is a key improvement in companies’ ability to withstand unforeseen disasters. The cost of international traffic has also come down a lot, so companies don’t have to try and run multinational operations via 2 Mbps lines anymore. ”You don’t have to re-mortgage your business to get the bandwidth you need, or fine tune applications to run on 2 Mbps link. Telecoms is no longer a barrier. IT people used to spend a lot of time on nonvalue- adding activities due to bandwidth constraints, and we’ve taken all of that away,” he says.

 

LOOKING AHEAD

 

Tata Communications gave Neotel the ability to offer a worldwide network from the start, which is important for South Africa’s future growth as a member of the global economy. Local providers with local infrastructure aren’t good enough anymore if you’re running a global business, and Tata Communications has one of the largest global footprints. “In the next few years, Neotel intends to leverage this strength as a global challenger to become the preferred provider in South Africa.

 

“Saying we are the first converged network in the country, and the only one, is not just a glib statement. We think we are redefining the South African telecommunications market.” It’s fighting talk, and the gloves are certainly off if you compare Neotel’s pricing to the competition. As long as Neotel continues to be responsive to the needs of customers and make its service offerings flexible, without compromising on quality of service and reliability, it should score a technical knockout.

 

C O N T A C T

 

website: www.neotel.co.za