South Africa’s Neotel halves call fees to entice retail fixed line customers to install its phones


Second network operator Neotel is going head-to-head with Telkom in the consumer market by undercutting call fees to entice customers to rip out their Telkom line and install a Neotel phone instead.

The direct assault on Telkom's core territory is part of Neotel's aim to win up to 60,000 individual customers by early next year. But with Telkom serving about 4.5-million homes, the potential market is far larger than Neotel is initially chasing.

Its attack is built around the home phone - it will be delivered within 48 hours and needs no installation as it runs on wireless technology (CDMA 2000). Making it even more attractive are call rates to landlines at about half the fee charged by Telkom, with local calls at 34c a minute or 17c off-peak.

"For the first time ever there will be a clear alternative available in the marketplace," said CEO Ajay Pandey. "We are playing in the voice area now. This is for the common man."

Neotel had "hit the nail on the head" by launching its new product during the economic downturn, said Mukul Sharma, its executive of consumer business. "Communicating will become more affordable for the consumer."

The phone can also send SMSes and connect a computer to the Internet at average speeds of 50Kb to 100Kb a second. That made it ideal for people who mainly wanted voice calls but also needed basic Internet access, Sharma said.

One option will see customers pay R599 for a phone and a monthly fee of R99. A second option does not charge for a phone but costs R199 a month. Users receive 1000 free minutes to other Neotel numbers, which Sharma admitted would only be useful as more customers joined its network.

Neotel launched its first consumers' services in May, chasing wealthier residents who wanted Internet access first, with voice calls as a sideline. It attracted 30,000 inquiries, although Neotel will not say how many actually signed up. "The challenge wasn't the availability of customers, the challenge was to fulfil those requirements," said Pandey. Its constraint is that its network is still limited to major urban areas.

Customers can sign up online, by phone or at Autopage shops, and the sales team was working to add more retailers. "My vision remains that as our coverage expands, people should be able to walk into Pick n Pay, Woolworths and Spars and pick up a phone," Pandey said.

A change of shareholders for Neotel was still on track despite political upheaval that could see a swing to more left-wing policies. The government has already agreed to sell the 30% held by state-owned Eskom and Transnet to Tata, the Indian conglomerate that is Neotel's largest shareholder with 26%. Pandey said the company should be making "some tangible announcements" soon.

Business Day