TelFree hopes to shake up SA telecoms

By Leon Engelbrecht for Telfree
Johannesburg, 16 Nov 2006

International telecommunications operator TelFree went live in SA this week.

The company says it will make an immediate impact on the local telecoms market by offering "dramatically reduced" call rates using a virtual voice over Internet Protocol (VOIP) network, over a variety of sales channels.

CE Walter Betschel says fixed-line and cellphone calls will cost an average of 15% to 35% less than existing Telkom rates, while international calls will be more than 75% cheaper than current rates.

"It may sound premature, but we believe we are already the de facto market leaders in the South African VOIP sector," says Betschel. "We already have a waiting list for our initial batch of 50 000 lines, and we believe our combination of cheap technology, top quality and a good pricing strategy is going to be irresistible in a market that is tired of high telecoms fees."

However, Arthur Goldstuck, MD of World Wide Worx, says some caution would be in order. "Every VOIP vendor that has entered the local market has made similar claims. What they are offering is part of the overall VOIP picture already, and more of a marketing and positioning exercise than a real breakthrough," he says. "Only deregulation will shake up the market."

TelFree CTO Ruan Malan promises the quality of service will be equal to that of the normal telephone networks, "thanks to sophisticated modern VOIP technology, combined with a carrier-grade telecommunications switching system located on the backbone on the Internet in SA and directly connected to all the telephone networks in SA through SS7 links".

Corporate market

Betschel says his company, an ICASA-licensed BEE operator, took "the time and diligence" to invest the money required to put in place the technology that provides a "corporate solution people can use and say it is as good as Telkom or better. With us, everything is the same, as it would be with a Telkom line, except the service is better and the bill at end of month is much cheaper."

TelFree is for now concentrating on the corporate market and Betschel says it is tying up with least-cost routing providers to deliver an even cheaper service. "They are waiting for us to say we are operational. I expect we will wrap up 70% of the corporate market in six months."

In February, the company plans to enter the public phone market, first concentrating on university campuses where few students can afford the high cost of existing options. It is already speaking to the universities of Cape Town, Limpopo, Pretoria and Stellenbosch, all of which have significant on-campus Internet infrastructure. "They love the idea; it is a service they can give to their students," Betschel says. "We are also talking to the mines. There are lots of people there who need communications."

The home market will follow in May, he says. "We have a window of a year... It takes a year to set up a system like this, so no-one can copy us in a year," he says. "We're not going in there to make the maximum profit; we are going in and saying at how reasonable a rate can we do it?"