Telkom’s mobile arm 8ta has stunned the broadband market with an offering so cheap, analysts are predicting that its competitors won’t be able to match it.
8ta’s new wireless broadband offering has undercut all existing wireless offerings and has even undercut the price of Telkom’s ADSL service.
Consumers signing up with 8ta will receive 10 gigs of data for a mere R199 a month.
If customers fork out an additional R100 a month, they can get another 10 gigs of bandwidth to use between midnight and five in the morning.
According to price comparisons done by broadband consumer activist MyBroadband, this offering is 250% cheaper than the previous best wireless broadband offering, which was from Cell C, and 350% cheaper than Vodacom and MTN.
On top of this, the 8ta broadband offering is between 250% and 300% cheaper than its parent company’s ADSL offering, 400% cheaper than iBurst and 500% cheaper than Neotel. No wonder then that MyBroadband is billing the new 8ta offering as the “best mobile broadband deal in South Africa — ever!”
8ta’s executive head of mobile products and services, Vishal Phlad, says it was always the mobile player’s intention to make a “big impact” in the market with this new offering. “We always planned to launch our network with a very aggressive data offering,” says Phlad.
“We did it now because we are comfortable with our network rollout progress.”
Phlad says 8ta has more than 1 000 base stations servicing 30% of the South African population and by March 2012 it plans to have 2 000 base stations servicing 60% of the population.
Consumers will be forgiven for quite reasonably expecting that this new offering from 8ta, which has stunned the market, would result in a price reduction.
But analysts are predicting that the main players in the wireless broadband market, such as MTN, Vodacom and Cell C, will not be able to compete against it.
The reason mooted is that the three established mobile operators have very limited spare capacity on their networks and if they were to drop their prices to match 8ta, they would not be able to cope with the demand.
A recent research report titled “Making a Profit from Mobile Broadband Data” published by analysts Ovum Telecoms addresses these network capacity issues.
“The phenomenal growth in 3G-enabled devices and smartphones has seen mobile broadband data volumes soar and penetration is only set to increase,” says the report. “This is putting intense pressure on limited network capacity and spectrum and profits are not keeping pace with traffic volumes.”
According to forecasts by Ovum, mobile broadband users are set to grow at a compound annual growth rate of 28% over five years to 2015.
The report says 3G dongles and smartphones will drive demand for broadband data applications, and smartphone and tablet users will increasingly use their devices for video services.
MyBroadband’s Rudolph Muller says that the other wireless broadband players will not be able to compete with 8ta’s offering on price as it would destroy their entire wireless broadband business model.
“They will respond, but through added value, not price,” says Muller.
Ovum Telecoms senior analyst Richard Hurst says 8ta had to make a move like this.
“They have all that spare capacity on their new network and they had to pull as many customers on to the network as possible,” says Hurst.
Phlad agrees with Hurst’s views.
“Our network is relatively empty,” he says. “Also, the way it has been set up, the data use will not impact on voice quality.”
Surprisingly, Phlad says that 8ta’s parent company Telkom did not even know of its plan to launch this innovative broadband offering, which would explain why it was left red-faced, charging more for its ADSL offerings, which technically is a cheaper technology with which to deliver broadband.
Phlad diplomatically sidesteps the question, suggesting that he cannot comment on Telkom’s ADSL pricing.
“8ta is a stand-alone business unit and we will compete with everyone out there, including our parent company,” he says.
“Let’s not credit Telkom with this,” says Muller.”8ta is the one with the deal. Telkom is still not competitive. 8ta is not behaving like we expected a Telkom subsidiary to behave.”
Simon Camerer, Cell C’s executive head of marketing, says Cell C set the trend of slashing mobile broadband prices in 2010 and the competition from 8ta is welcome.
“Our offers remain very competitive, not only in terms of value but also choice,” says Camerer. “We have a cutting-edge HSPA+ network operating in the 900MHz band, which provides wider and deeper coverage.”
Vodacom’s chief commercial officer, Romeo Kumalo, says he doesn’t think 8ta’s new broadband offering can be directly compared with Vodacom’s offerings.
“Price is part of the equation, but network quality, speed and reach are equally important,” says Kumalo.
“Vodacom has the largest network footprint in South Africa, with more than 8 000 base stations, almost 5 000 of which are 3G-enabled.
“We have reduced our overall average price per megabyte of data by almost 20% over the past year and are investing R6.3-billion this year in South Africa to increase network capacity. “This will allow us to support the higher data volumes that will come with continued price reductions.”
MTN failed to comment before the Mail & Guardian went to print.