Neotel is boosting its business connectivity offerings this year, with the planned opening of two data centres worth a total of R120 million, in Johannesburg and Cape Town, says MD and CEO Ajay Pandey.
Speaking to ITWeb, in Cape Town, yesterday, Pandey said the slowing down of the economy, due to the global financial crisis, has opened up a new opportunity for Neotel. It can now offer sophisticated managed services for corporate clients, allowing them to focus on their core business, he explained.
“Up until now, we have been offering 'vanilla' or basic connectivity services; however, with the development of the data centres, our clients will be able to buy services when they need them,” he said.
The Johannesburg data centre, to be located in Midrand, is scheduled to open on 1 April and will cost R70 million. The Cape Town data centre, to be located in the suburb of Dieprivier, is scheduled to go online on 1 June and will cost about R50 million.
Since obtaining its licence just over three years ago, Neotel has had to build an entirely new telecommunications infrastructure to rival that of Telkom. While it is not offering the depth of services the incumbent has, Pandey is optimistic about the future.
Optimistic sign
“Last year, we signed a R7.2 billion financing deal and this, I believe, is the largest such deal that any telecommunications company has signed in the world. This is a sign of optimism for us, because we did not have to go back to our shareholders for financing,” he says.
The recently announced deal, whereby Tata Communications and Tata Africa bought the combined 30% stakes of state-owned enterprises Easitel and Transtel, to give them a total of 56% in Neotel, consolidates the shareholding and leaves the Tata Group as the dominant player.
“The 26% we originally had did give us a dominant holding already; however, it is better to have 56% than just 26%,” Pandey said.
He does not foresee any further changes to the shareholding structure, leaving Nexus, Communitel and Two Consortium with their established stakes.
Steaming along
Telecommunications is a capital-intensive business and, Pandey says, although the market has been liberalised and there are potentially hundreds of operators, few will have the resources to develop such transmission networks.
Cellular operator MTN and Neotel have joined forces to develop a nationwide transmission network - a project that Pandey first proposed shortly after Neotel received its licence.
“We are not opposed to any other network operator joining this network; however, the train has left the first station and they can get on wherever it is at the time. The train will not go back to the beginning of the line and start again.”
Consumer enthusiasm
Neotel's consumer offerings are beginning to make inroads into the market and eat at Telkom's dominance in the fixed connectivity arena. Total Neotel subscriber numbers are kept confidential, but market talk is that they number over 5 000 since the launch in the second quarter of last year.
Currently, Neotel's consumer solution is based on a fixed-mobile technology, using the CDMA system.
“The Gauteng region has seen remarkable growth for us and so has Durban. Cape Town is a bit slower due to the environmental requirements,” Pandey said.
Netoel has more than 130 base stations around the country and this number is set to double before the year is out. But what gets Pandey and others at Neotel excited is the prospect of fibre to the building, or fibre directly to the home.
Pandey will not set a time line to when this will happen.
“Fibre to the home is fantastic as so many services can be offered over it, such as IPTV and so on.”
Pandey pointed out that the international example is Italian broadband supplier FastWeb, which has the highest average revenue per user rating in the world.
“FastWeb is a fantastic example of how an alternative telecommunications operator can grow when the right government support and incentives are in place.”
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