Vodacom plans ZAR2.5 billion move into business market in South Africa


It is not going to be easy taking on the likes of parent Telkom, but Vodacom believes it can restructure the connectivity market. The cellular operator revealed this weekend that it would spend R2.5 billion over the next five years on newly launched subsidiary Vodacom Business. This capital investment is in addition to the R700 million already spent.

Group CEO Alan Knott-Craig explained this unit would be a next-generation network service provider delivering on the mobile and fixed voice, video and data requirements of businesses. “In a playing field that has quickly become crowded, we will differentiate ourselves with the services that are provided on top of the network infrastructure layer,” he said.

However, Vodacom Business executive director of corporate and converged solutions Wally Beelders said the company was “under no illusions”.

“We know it's not going to be easy, but we think we can restructure this market. As broadband becomes more available, at better costs, we can start to look at additional services. Somebody has to take the lead in challenging the market. I don't think the others in this space can do that; they're too locked into their revenue streams,” he said.

Beelders contended that by 2010, the market would have consolidated down to three leading “new age telcos”. Vodacom Business would be one of these, he noted.

“Real broadband is going to reshape the market and Telkom will have to change. Right now Telkom has around 400 000 ADSL customers; we have 350,000 on our 3G services alone. Telkom is also keeping the price of international bandwidth artificially high by locking down access to SAT-3, but that will change once the new undersea cables arrive,” he explained.

Vodacom will begin offering services to business clients next month. Telkom leased lines, Internet service provision and MPLS-based virtual private networks will be the first offerings to go live during March. In April, the company will start offering Telkom ADSL lines, WiMax and microwave solutions and its own fibre solutions for those businesses in Gauteng.

“We are almost finished rolling out our fibre ring between Sandton and Midrand. In those areas we are already installing overlays to service 22 customers who have said they will be interested in our services. Ultimately we will roll-out 11 fibre rings in the next few months,” said Beelders.

Over and above these access facilities, Vodacom Business is to offer managed network services, converged application services and managed hosted services. “We intend to be class-leading in the hosting environment. In my opinion, the current players are not getting it 100% right. Our abilities in mobilising services will also help us in the future to get strong growth in the application space. The constant is our focus on service and quality offerings – that's how we will make our mark on the market,” Beelders revealed.

While it may be “challenging” to overcome market perceptions that Vodacom is a mobile company, Vodacom COO Pieter Uys said the company has the right people on board.

“This is why we appointed people with skills and fixed-line and business networking. If you look at Beelders and Johann Pretorius [managing executive of managed services], these people have decades of experience in their hands. Having the right skills makes a big difference to how effective you can be.”

Uys also revealed that Vodacom's corporate clients would move to the new subsidiary.

“We've always had corporate services within Vodacom, now we have a place that deals with all of our business offerings. We've done a lot of building in the last two months, what we are talking about is not vapourware. Everyone is putting fibre in the ground at the moment, but it will come down to who does it first and who does it best.”