The second network operator is finally here, and it’s called Neotel. Managing director Ajay Pandey announced its first offerings in the wholesale market last week and said consumers and businesses could expect services by early next year. Pandey is a telecommunications sector veteran of 23 years, having honed his skills and expertise in the Indian telecoms sector that is now hailed as a major success story.
He was previously the president of Tata Teleservices Limited and the CEO of Tata Internet Services. He had been working for Tata subsidiary VSNL when he was appointed to head up Neotel. “I was very fortunate that I got involved in the telecoms sector right at the time when privatisation in India was starting,” says Pandey.
“In the past decade, I have had three or four opportunities to start businesses from scratch, so I have gained a lot of experience.” This experience is going to prove vital to Neotel as it enters a South African telecoms sector that is crying out for affordable pricing and competition.
Pandey has witnessed first-hand what a strong independent regulator and competition can deliver. “I remember a time when people paid 32 rupees for a minute-long call between Deli and Bombay,” says Pandey. “Today it is one rupee 20 for a three-minute call.” Although telecoms prices have dropped 15-fold in India, he cautions against similar expectations in South Africa.
But Pandey cannot see any reason why prices should not fall to about a quarter of the current rates.
The role of the regulator is vitally important, however, he explains. Competition alone will not deliver the desired results. “Even though there are three or four players in the [local] mobile sector, the prices have not really come down as they should have,” says Pandey. He says Icasa, the communications authority, has a lot of work to do with regard to regulating interconnection between operators and the unbundling of the local loop.
Pandey describes interconnection between network operators as a fundamental right in the telecoms sector, and says Icasa needs to make sure that all parties come together and are willing to interconnect with mutually beneficial terms. “The whole interconnection thing needs to be regulated. I don’t think it is regulated enough.”
As for unbundling the local loop, or the last piece of infrastructure between a telecoms company and its customer, Pandey says the policy is not “holistically clear”. Although it supports the intent to unbundle, Icasa needs to make sure it happens effectively.
“It can’t happen by just making a statement,” says Pandey. Neotel has already begun to sign up wholesale voice and bandwidth customers such as MTN, Vodacom, Cell C, Arivia.com, Internet Solutions, MWeb and Telecom Lesotho.
He says that although Neotel has not launched its retail services yet, South African consumers should soon see some respite from excessive telecommunication prices, provided their wholesale customers are passing down the benefits of the favourable rates to the consumer. “We are targeting to hit the retail sector early next year,” says Pandey.
When quizzed on the market share that Neotel is aiming for in the next five years, Pandey chuckles. “Telkom’s CEO told analysts that in three to four years we would get 15% of their market share. I don’t want to contest that.
“Instead of me setting a target, he has – and it is my job to make sure that we take that market share.”
VSNL is set to play a major role in the success of Neotel. Not only does it provide vast telecoms experience, it also owns about a third of the bandwidth on the SAT-3 undersea cable.
The exclusivity agreement for the landing rights of this capacity is set to expire in the first half of next year. Pandey expects to be able to utilise this capacity for Neotel. “We have represented to the SAT-3 consortium to treat us as an associate company and, if they do, we can use the capacity next year.”
Pandey says Neotel is engaging with those municipalities that, out of sheer desperation, started building their own telecoms infrastructure to bring down telecoms costs and the cost of doing business locally.
“You have to look at why these municipalities got into telecoms. My sense, and it may be wrong, is that, if we come up with a very strong option, I don’t think the municipalities will go forward and duplicate infrastructure.
“They were doing it because no one else was doing it, but hopefully with us coming in it will give them the confidence that there is a player that is willing to come forward. That is probably what every consumer in the country has been waiting for: a telecoms player to step up to the plate.” Let’s hope Neotel is part of the answer to our telecom woes.