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Vodacom, MTN look to SMEs for growth

Bonnie Tubbs
By Bonnie Tubbs, ITWeb telecoms editor.
Johannesburg, 04 Jul 2013
Vodacom and MTN are focusing on the SME segment to drive growth in an era of convergence.
Vodacom and MTN are focusing on the SME segment to drive growth in an era of convergence.

SA's two largest mobile operators are increasingly looking to their respective business operations to drive growth, focusing on convergence for smaller businesses.

Vodacom said this morning that it is honing its business operations by extending its focus and convergence offering to small and medium enterprises (SMEs), targeting an increase in its business arm's service revenue by 9% over the next five years.

This comes a week after the operator's main rival, MTN, announced it had entered the enterprise resource planning (ERP) space as part of its ongoing convergence strategy - a move in line with its earlier vow to escalate its business operations and secure market dominance, starting with a focus on the SME sector.

Growth gambit

Vuyani Jarana, chief officer of Vodacom Business, says Vodacom Business could account for 25% of Vodacom SA's service revenue within five years, if the company's new growth strategy pans out.

Created in 2008 to provide enterprise connectivity and communications services, Vodacom Business currently generates R8 billion in revenue. This represents 16% of Vodacom's current service revenue base.

Jarana says Vodacom Business has been pursuing organic growth since the company's original acquisition plans did not work out.

"We went back to the drawing board [and] have spent the last few years building an entirely new platform."

Pursuing a build rather than buy strategy, Jarana says Vodacom Business has invested over R2 billion in the last five years. According to Vodacom, over 90% of Vodacom Business' customers are now directly connected via the operator's own fibre.

Vodacom Business manages four data centres across SA (two in Johannesburg, one in Durban and one in Cape Town), covering over 4 000m^2 of floor space. A fifth data centre is underway at Vodacom's Midrand offices.

Focus shift

Speaking about the group's growth target, Jarana says: "The obvious question is what changed and why do we now expect to deliver such significant growth?"

He says the answer is three-fold. "It boils down to our infrastructure and skills backbone, reaching critical mass, and linking up with Vodafone's enterprise unit to expand our capabilities from pan-African to global."

Building on these factors, says Jarana, Vodacom Business is focusing on opportunities in SMEs, machine-to-machine (M2M) applications, and hosted and cloud services.

Richard Boorman, executive head of corporate communications at Vodacom, points out that Vodacom saw a 23% increase in M2M SIMs in the year to March. Jarana adds that, in SA alone, there are over 1.7 billion connected devices - "and the number is going to grow".

Historically having focused on corporate clients, Vodacom Business did not have the scale or products to tackle what Jarana says is a "huge and rapidly growing" SME sector. Now, he says, Vodacom Business is able to piggy-back off its consumer business to offer enterprise solutions to smaller businesses as well.

Rival's route

In November last year MTN stepped up its business operations by implementing a new structure, introducing three new products and services aimed at the SME market.

Karel Pienaar - at the time CEO of MTN SA - said the business unit's reinvention was largely based on the fact that fixed mobile convergence had materialised.

Pienaar says mobile infrastructure has evolved into becoming the definitive broadband vehicle in SA and Africa at large.

Last week MTN Business announced a strategic partnership with SAP channel and services partner Britehouse, through which it now offers ERP solutions for local SMEs.

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